Bill Introduced to Clarify Receiver’s Duties Relating to Real Property in Ohio

by David W. Cliffe, Attorney

On January 30, 2013, House Bill No. 9 was introduced in the Ohio General Assembly.  Sponsored by Representative Peter Stautberg of Cincinnati, the goal of the legislation is to clarify and add to the powers of a receiver as it relates to real property.  If enacted, the legislation creates the most substantive changes to Ohio law concerning receivers since the 1950’s. 

The proposed bill includes changes to who must consent to the appointment of a proposed receiver who happens to hold an interest in the property, an expansion and clarification of the duties of a receiver and the establishment of a procedure for the receiver to sell the real property, subject to court approval.  With regard to the appointment of an “interested” receiver, the statute widens the pool of those who must consent to that appointment to include all parties in the action as well as those persons holding either a recorded ownership interest or a financial lien on the premises.  Another modification is that, in addition to a corporation, the statute now specifically provides for the appointment of a receiver for a partnership, limited liability company or related entity created under Ohio law.  Although the court is not bound to appoint the person nominated by the movant for the receivership, that individual will receive priority consideration for the role.

Along with the statutory changes concerning the receiver’s appointment, the legislation further broadens the situations in which a receiver may be appointed.  In some ways, this legislation constitutes legislative recognition of powers that courts in some jurisdictions have already provided to a receiver.  This legislation, however, allows for a more uniform process, county by county.  One specific change includes the empowerment of a court to appoint a receiver for purposes of enforcing the contractual assignment of rents and leases.

In addition to an expansion of the situations in which a court elects to appoint a receiver, the proposed statute also clarifies the powers that the receiver enjoys upon appointment.  Those powers include the prosecution and defense of actions as a specific party, the control of any real or personal property and the right to receive rents, collect payments and negotiate both receivables and payables.  Moreover, the receiver may execute contracts of sale, lease or improvements to receivership property, including deeds, leases and other conveyances for real or personal property.  Finally, the receiver, whose fees are charged as court costs as a priority administrative expense, may establish and maintain deposit accounts as receiver and otherwise act as specifically empowered by the court.

Under one of these specified rights of the receiver, namely court-sanctioned sales of the real property, the receiver could sell that receivership property by means of a private sale free and clear of liens through a private auction, public auction or in a manner deemed by the court to be fair and reasonable to all parties.  The receiver shall seek to maximize the return on sale while considering the ongoing costs of property maintenance.  The decision of the receiver to sell the premises is subject to judicial review and approval, with or without condition, and the court may then deem the premises sold free and clear of all liens.  The statute’s proposed “free and clear” language will assist with insuring that good title passes to the buyer of the premises from the receivership. Finally, the court’s order approving the sale must set a date, at least three days hence, at which point the owner must exercise its right of redemption or be barred from asserting that right. 

Upon the bill’s passage, Lenders will more likely utilize receiverships as they benefit from the increased uniformity as well as the greater efficiency and certainty that good title will pass to the buyer at the end of the process.  Given that this proposed legislation would represent the most substantial changes to this area of receivership law in at least a half-century, interest groups will likely provide significant input in the coming months as the legislation works its way through the process.  Hopefully, the resulting statutes will provide a clearer, broader and more uniform role for receivers appointed in the various common pleas courts in Ohio. 

David is an attorney focused on foreclosure and eviction services within the Real Estate Default Group of Weltman, Weinberg & Reis Co., LPA located in the Cincinnati office. He can be reached at 513.333.4064 and dcliffe@weltman.com.

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