District Of Columbia 2023 2023-2024 Regular Session

District Of Columbia Council Bill B25-0485 Introduced / Bill

Filed 09/19/2023

                     
 
Government of the District of Columbia 
UNIFORM LAW COMMISSION 
 
 
 
 
 
September 19, 2023 
 
The Honorable Phil Mendelson 
Chairman 
Council of the District of Columbia 
The John A. Wilson Building, 
1350 Pennsylvania Avenue, NW  
Washington, DC 20004 
 
RE: Request for introduction of the Uniform Commercial Real Estate Receivership Act 
of 2023. 
 
Dear Chairman Mendelson: 
 
 Pursuant to Rule 401(b)(1) of the Rules of Organization and Procedure for the 
Council, this is to request, on behalf of the District of Columbia Uniform Law 
Commission, that you introduce the proposed “Uniform Commercial Real Estate 
Receivership Act of 2023.”  
 
 A receiver is someone appointed by a court to take possession of another person’s 
property and manage it. Receivers of commercial real estate are used in a variety of 
situations, including: (1) when the property is the subject of a lawsuit and its value must 
be preserved while the issue is litigated; (2) when the property includes an operating 
business, to sell its assets in an orderly manner and maximize the return for its owners 
and/or creditors; and (3) when requested by a creditor, to collect, preserve, and distribute 
the property of an insolvent or defaulting debtor.   
 
 Presently, receivership law in the District is made by judges on a case-by-case 
basis. Every receivership case is unique, and in every such case, there are lingering 
questions about whether a broad appointment order from a court of equity can override 
other laws governing liens, debt-collection remedies, and foreclosure procedures. 
 
The Uniform Commercial Real Estate Receivership Act is designed to fill this 
legal vacuum and, thus, to reduce litigation costs regarding receiverships.  The Act 
provides comprehensive rules regarding the appointment and powers of commercial real 
estate receivers. In particular, the Act authorizes a receiver to use, sell, or lease 
receivership property in the ordinary course of business, and to take such actions outside 
the ordinary course of business with court approval. The Act thus allows a mortgagee,  2 
 
through a receiver, to assume control of the mortgaged property, operate the property as a 
going concern, and sell the property in an arms-length transaction.  In addition, the Act 
allows a receiver to conduct a unified sale of encumbered real estate and related personal 
property, such as equipment, a franchise agreement, and intellectual property. This 
process will likely yield a higher recovery than a distressed foreclosure sale would, 
thereby benefiting both the mortgagee and the owner. 
 
The Uniform Commercial Real Estate Receivership Act was completed by the 
National Conference of Commissioners on Uniform State Laws in 2015 and has been 
enacted, thus far, in 12 states, including Maryland. 
 
 A proposed “Uniform Commercial Real Estate Receivership Act of 2023.” is 
being filed with this letter. In addition, the following documents have been filed:  (1) a 
summary of the Uniform Act; (2) a statement as to why the Uniform Act should be 
adopted; and (3) the official version of the Uniform Commercial Real Estate 
Receivership Act with comments. 
 
 I would be pleased to answer any questions and to provide any additional 
information requested. 
 
 Sincerely, 
 
 
 
 
 
 
 James C. McKay, Jr. 
 Chair 
 D.C. Uniform Law Commission 
 
cc:  Uniform Law Commissioners  2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
~Phil Mendelson at the request of the 
District 
of Columbia Uniform Law Commission 
A BILL 
14 	IN THE COUNCIL OF THE DISTRICT OF COLUMBIA 
15 
16 To enact the Uniform Commercial Real Estate Receivership Act 	to establish uniform standards 
17 under which a court may appoint a receiver; 	to give any interested parties the right 	to 
18 notice and an opportunity for a hearing before a court issues 	an order under this act; to 
19 require a receiver to be independent; to give a receiver the status of a lien creditor with 
20 respect to receivership property, subject 	to pre-existing perfected security interests; 	to set 
21 forth the receiver's presumptive powers and those the receiver may exercise only with 
22 court approval; to set forth the duties of both the receiver and the owner 	of receivership 
23 property; to authorize receivers to use or sell receivership property 	in the ordinary course 
24 of business, but require that they obtain get court approval for uses or transfers 	of 
25 property outside the ordinary course 	of business; and for other purposes. 
26 
27 BE IT ENACTED BY THE COUNCIL 	OF THE DISTRICT OF COLUMBIA, That this 
28 act may be cited as the "Uniform Commercial Real Estate Receivership Act 	of 2023". 
29 Sec. 1. Short title. 
30 This act may be cited as the Uniform Commercial Real Estate Receivership Act. 
31 Sec. 2. Definitions. 
32 In this act: 
33 ( 1) "Affiliate" means: 
34 	(A) With respect to an individual: 
35 	(i) A companion of the individual; 
36 	(ii) A lineal ancestor or descendant, whether 	by blood or adoption, of:  2 
 
 (I) The individual; or 37 
 (II) A companion of the individual; 38 
 (iii) A companion of an ancestor or descendant described in clause (ii); 39 
 (iv) A sibling, aunt, uncle, great aunt, great uncle, first cousin, niece, 40 
nephew, grandniece, or grandnephew of the individual, whether related by the whole or the half 41 
blood or adoption, or a companion of any of them; or 42 
 (v) Any other individual occupying the residence of the individual; and 43 
 (B) With respect to a person other than an individual: 44 
 (i) Another person that directly or indirectly controls, is controlled by, or 45 
is under common control with the person; 46 
 (ii) An officer, director, manager, member, partner, employee, or trustee or 47 
other fiduciary of the person; or 48 
 (iii) A companion of, or an individual occupying the residence of, an 49 
individual described in clause (i) or (ii). 50 
 (2)  “Companion” means: 51 
 (A) The spouse of an individual; 52 
 (B) The domestic partner of an individual; or 53 
 (C) Another individual in a civil union with an individual.  54 
 (3)  “District” means the District of Columbia. 55 
 (4)  “Executory contract” means a contract, including a lease, under which each party has 56 
an unperformed obligation and the failure of a party to complete performance would constitute a 57 
material breach. 58  3 
 
 (5) “Governmental unit” means an office, department, division, bureau, board, 59 
commission, or other agency of the District or a subdivision of the District.  60 
 (6)  “Lien” means an interest in property which secures payment or performance of an 61 
obligation. 62 
 (7)  “Mortgage” means a record, however denominated, that creates or provides for a 63 
consensual lien on real property or rents, even if it also creates or provides for a lien on personal 64 
property. 65 
 (8)  “Mortgagee” means a person entitled to enforce an obligation secured by a mortgage. 66 
 (9)  “Mortgagor” means a person that grants a mortgage or a successor in ownership of 67 
the real property described in the mortgage. 68 
 (10)  “Owner” means the person for whose property a receiver is appointed. 69 
 (11) “Person” means an individual, estate, business or nonprofit entity, public 70 
corporation, government or governmental subdivision, agency, or instrumentality, or other legal 71 
entity. 72 
 (12)  “Proceeds” means the following property:  73 
 (A) Whatever is acquired on the sale, lease, license, exchange, or other disposition 74 
of receivership property; 75 
 (B) Whatever is collected on, or distributed on account of, receivership property;  76 
 (C) Rights arising out of receivership property;  77 
 (D) To the extent of the value of receivership property, claims arising out of the 78 
loss, nonconformity, or interference with the use of, defects or infringement of rights in, or 79 
damage to the property; or  80  4 
 
 (E) To the extent of the value of receivership property and to the extent payable to 81 
the owner or mortgagee, insurance payable by reason of the loss or nonconformity of, defects or 82 
infringement of rights in, or damage to the property. 83 
 (13)  “Property” means all of a person’s right, title, and interest, both legal and equitable, 84 
in real and personal property, tangible and intangible, wherever located and however acquired. 85 
The term includes proceeds, products, offspring, rents, or profits of or from the property.  86 
 (14)  “Receiver” means a person appointed by the Superior Court as the court’s agent, 87 
and subject to the court’s direction, to take possession of, manage, and, if authorized by this act 88 
or court order, transfer, sell, lease, license, exchange, collect, or otherwise dispose of 89 
receivership property. 90 
 (15)  “Receivership” means a proceeding in which a receiver is appointed. 91 
 (16)  “Receivership property” means the property of an owner which is described in the 92 
order appointing a receiver or a subsequent order.  The term includes any proceeds, products, 93 
offspring, rents, or profits of or from the property. 94 
 (17)  “Record”, used as a noun, means information that is inscribed on a tangible medium 95 
or that is stored on an electronic or other medium and is retrievable in perceivable form.   96 
 (18)  “Rents” means: 97 
 (A) Sums payable for the right to possess or occupy, or for the actual possession 98 
or occupation of, real property of another person; 99 
 (B) Sums payable to a mortgagor under a policy of rental-interruption insurance 100 
covering real property; 101 
 (C) Claims arising out of a default in the payment of sums payable for the right to 102 
possess or occupy real property of another person; 103  5 
 
 (D) Sums payable to terminate an agreement to possess or occupy real property of 104 
another person; 105 
 (E) Sums payable to a mortgagor for payment or reimbursement of expenses 106 
incurred in owning, operating, and maintaining real property or constructing or installing 107 
improvements on real property; or 108 
 (F) Other sums payable under an agreement relating to the real property of 109 
another person which constitute rents under law of the District other than this act. 110 
 (19)  “Secured obligation” means an obligation the payment or performance of which is 111 
secured by a security agreement. 112 
 (20) “Security agreement” means an agreement that creates or provides for a lien. 113 
 (21)  “Sign” means, with present intent to authenticate or adopt a record: 114 
 (A) To execute or adopt a tangible symbol; or 115 
 (B) To attach to or logically associate with the record an electronic sound, 116 
symbol, or process. 117 
 (22)  “State” means a state of the United States, the District of Columbia, Puerto Rico, 118 
the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction 119 
of the United States. 120 
 (23) “Superior Court” means the Superior Court of the District of Columbia. 121 
 Sec. 3.  Notice and opportunity for hearing. 122 
 (a) Except as otherwise provided in subsection (b), the Superior Court may issue an 123 
order under this act only after notice and opportunity for a hearing appropriate in the 124 
circumstances. 125 
 (b)  The Superior Court may issue an order under this act: 126  6 
 
 (1) Without prior notice if the circumstances require issuance of an order before 127 
notice is given; 128 
 (2) After notice and without a prior hearing if the circumstances require issuance 129 
of an order before a hearing is held; or 130 
 (3) After notice and without a hearing if no interested party timely requests a 131 
hearing. 132 
 Sec. 4.  Scope; exclusions. 133 
 (a) Except as otherwise provided in subsection (b) or (c), this act applies to a 134 
receivership for an interest in real property and any personal property related to or used in 135 
operating the real property. 136 
 (b)  This act does not apply to a receivership for an interest in real property improved by 137 
one to four dwelling units unless: 138 
 (1) The interest is used for agricultural, commercial, industrial, or mineral-139 
extraction purposes, other than incidental uses by an owner occupying the property as the 140 
owner’s primary residence; 141 
 (2) The interest secures an obligation incurred at a time when the property was 142 
used or planned for use for agricultural, commercial, industrial, or mineral-extraction purposes; 143 
 (3) The owner planned or is planning to develop the property into one or more 144 
dwelling units to be sold or leased in the ordinary course of the owner’s business; or 145 
 (4) The owner is collecting or has the right to collect rents or other income from 146 
the property from a person other than an affiliate of the owner. 147  7 
 
 (c)  This act does not apply to a receivership authorized by law of the District other than 148 
this act in which the receiver is a governmental unit or an individual acting in an official capacity 149 
on behalf of the unit except to the extent provided by the other law. 150 
 (d)  This act does not limit the authority of a court to appoint a receiver under law of the 151 
District other than this act. 152 
 (e)  Unless displaced by a particular provision of this act, the principles of law and equity 153 
supplement this act. 154 
Sec. 5.  Power of Superior Court. 155 
 The Superior Court has exclusive jurisdiction to direct the receiver and determine any 156 
controversy related to the receivership or receivership property. 157 
 Sec. 6.  Appointment of receiver.   158 
 (a)  The Superior Court may appoint a receiver: 159 
 (1) Before judgment, to protect a party that demonstrates an apparent right, title, 160 
or interest in real property that is the subject of the action, if the property or its revenue-161 
producing potential: 162 
 (A) Is being subjected to or is in danger of waste, loss, dissipation, or 163 
impairment; or 164 
 (B) Has been or is about to be the subject of a voidable transaction;   165 
 (2) After judgment: 166 
 (A) To carry the judgment into effect; or 167 
 (B) To preserve nonexempt real property pending appeal or when an 168 
execution has been returned unsatisfied and the owner refuses to apply the property in 169 
satisfaction of the judgment; or 170  8 
 
 (3) In an action in which a receiver for real property may be appointed on 171 
equitable grounds; or  172 
 (4) During the time allowed for redemption, to preserve real property sold in an 173 
execution or foreclosure sale and secure its rents to the person entitled to the rents. 174 
 (b)  In connection with the foreclosure or other enforcement of a mortgage, the Superior 175 
Court may appoint a receiver for the mortgaged property if: 176 
 (1) Appointment is necessary to protect the property from waste, loss, transfer, 177 
dissipation, or impairment; 178 
 (2) The mortgagor agreed in a signed record to appointment of a receiver on 179 
default;  180 
 (3) The owner agreed, after default and in a signed record, to appointment of a 181 
receiver; 182 
 (4) The property and any other collateral held by the mortgagee are not sufficient 183 
to satisfy the secured obligation; 184 
 (5) The owner fails to turn over to the mortgagee proceeds or rents the mortgagee 185 
was entitled to collect; or 186 
 (6) The holder of a subordinate lien obtains appointment of a receiver for the 187 
property. 188 
 (c)  The Superior Court may condition appointment of a receiver without prior notice 189 
under section 3(b)(1) or without a prior hearing under section 3(b)(2) on the giving of security by 190 
the person seeking the appointment for the payment of damages, reasonable attorney’s fees, and 191 
costs incurred or suffered by any person if the court later concludes that the appointment was not 192  9 
 
justified.  If the court later concludes that the appointment was justified, the court shall release 193 
the security. 194 
 Sec. 7.  Disqualification from appointment as receiver; disclosure of interest. 195 
 (a)  The Superior Court may not appoint a person as receiver unless the person submits to 196 
the court a statement under penalty of perjury that the person is not disqualified.   197 
 (b) Except as otherwise provided in subsection (c), a person is disqualified from 198 
appointment as receiver if the person: 199 
 (1) Is an affiliate of a party; 200 
 (2) Has an interest materially adverse to an interest of a party; 201 
 (3) Has a material financial interest in the outcome of the action, other than 202 
compensation the Superior Court may allow the receiver; 203 
 (4) Has a debtor-creditor relationship with a party; or 204 
 (5) Holds an equity interest in a party, other than a noncontrolling interest in a 205 
publicly-traded company. 206 
 (c)  A person is not disqualified from appointment as receiver solely because the person: 207 
 (1) Was appointed receiver or is owed compensation in an unrelated matter 208 
involving a party or was engaged by a party in a matter unrelated to the receivership;  209 
 (2) Is an individual obligated to a party on a debt that is not in default and was 210 
incurred primarily for personal, family, or household purposes; or 211 
 (3) Maintains with a party a deposit account as defined in D.C. Code § 28:9-212 
102(a)(29).  213 
 (d) A person seeking appointment of a receiver may nominate a person to serve as 214 
receiver, but the Superior Court is not bound by the nomination. 215  10 
 
 Sec. 8.  Receiver’s bond; alternative security. 216 
 (a)  Except as otherwise provided in subsection (b), a receiver shall post with the Superior 217 
Court a bond that: 218 
 (1) Is conditioned on the faithful discharge of the receiver’s duties; 219 
 (2) Has one or more sureties approved by the court; 220 
 (3) Is in an amount the court specifies; and 221 
 (4) Is effective as of the date of the receiver’s appointment. 222 
 (b) The Superior Court may approve the posting by a receiver with the court of 223 
alternative security, such as a letter of credit or deposit of funds. The receiver may not use 224 
receivership property as alternative security.  Interest that accrues on deposited funds must be 225 
paid to the receiver on the receiver’s discharge.  226 
 (c)  The Superior Court may authorize a receiver to act before the receiver posts the bond 227 
or alternative security required by this section.    228 
 (d)  A claim against a receiver’s bond or alternative security must be made not later than 229 
one year after the date the receiver is discharged. 230 
Sec. 9.  Status of receiver as lien creditor. 231 
 On appointment of a receiver, the receiver has the status of a lien creditor under: 232 
 (1)  D.C. Code § 28:9-101 et seq. as to receivership property that is personal property or 233 
fixtures; and 234 
 (2)  Section 499 of An Act To establish a code of law for the District of Columbia, 235 
approved March 3, 1901, 31 Stat. 1189, Chapter 854; D.C. Code § 42–401) as to receivership 236 
property that is real property. 237 
 Sec. 10.  Security agreement covering after-acquired property. 238  11 
 
 Except as otherwise provided by law of the District other than this act, property that a 239 
receiver or owner acquires after appointment of the receiver is subject to a security agreement 240 
entered into before the appointment to the same extent as if the Superior Court had not appointed 241 
the receiver. 242 
 Sec. 11.  Collection and turnover of receivership property.   243 
 (a)  Unless the Superior Court orders otherwise, on demand by a receiver: 244 
 (1) A person that owes a debt that is receivership property and is matured or 245 
payable on demand or on order shall pay the debt to or on the order of the receiver, except to the 246 
extent the debt is subject to setoff or recoupment; and 247 
 (2) Subject to subsection (c), a person that has possession, custody, or control of 248 
receivership property shall turn the property over to the receiver. 249 
 (b)  A person that has notice of the appointment of a receiver and owes a debt that is 250 
receivership property may not satisfy the debt by payment to the owner.   251 
 (c)  If a creditor has possession, custody, or control of receivership property and the 252 
validity, perfection, or priority of the creditor’s lien on the property depends on the creditor’s 253 
possession, custody, or control, the creditor may retain possession, custody, or control until the 254 
court orders adequate protection of the creditor’s lien.  255 
 (d)  Unless a bona fide dispute exists about a receiver’s right to possession, custody, or 256 
control of receivership property, the Superior Court may sanction as civil contempt a person’s 257 
failure to turn the property over when required by this section. 258 
 Sec. 12.  Powers and duties of receiver. 259 
 (a)  Except as limited by court order or law of the District other than this act, a receiver 260 
may: 261  12 
 
 (1) Collect, control, manage, conserve, and protect receivership property; 262 
 (2) Operate a business constituting receivership property, including preservation, 263 
use, sale, lease, license, exchange, collection, or disposition of the property in the ordinary 264 
course of business; 265 
 (3) In the ordinary course of business, incur unsecured debt and pay expenses 266 
incidental to the receiver’s preservation, use, sale, lease, license, exchange, collection, or 267 
disposition of receivership property; 268 
 (4) Assert a right, claim, cause of action, or defense of the owner which relates to 269 
receivership property;  270 
 (5) Seek and obtain instruction from the Superior Court concerning receivership 271 
property, exercise of the receiver’s powers, and performance of the receiver’s duties;  272 
 (6) On subpoena, compel a person to submit to examination under oath, or to 273 
produce and permit inspection and copying of designated records or tangible things, with respect 274 
to receivership property or any other matter that may affect administration of the receivership;  275 
 (7) Engage a professional as provided in section 15;  276 
 (8) Apply to a court of another state for appointment as ancillary receiver with 277 
respect to receivership property located in that state; and 278 
 (9) Exercise any power conferred by court order, this act, or law of the District 279 
other than this act. 280 
 (b)  With the Superior Court’s approval, a receiver may: 281 
 (1) Incur debt for the use or benefit of receivership property other than in the 282 
ordinary course of business; 283 
 (2) Make improvements to receivership property; 284  13 
 
 (3) Use or transfer receivership property other than in the ordinary course of 285 
business as provided in section 16; 286 
 (4) Adopt or reject an executory contract of the owner as provided in section 17; 287 
 (5) Pay compensation to the receiver as provided in section 21, and to each 288 
professional engaged by the receiver as provided in section 15; 289 
 (6) Recommend allowance or disallowance of a claim of a creditor as provided in 290 
section 20; and 291 
 (7) Make a distribution of receivership property as provided in section 20. 292 
 (c)  A receiver shall: 293 
 (1) Prepare and retain appropriate business records, including a record of each 294 
receipt, disbursement, and disposition of receivership property;  295 
 (2) Account for receivership property, including the proceeds of a sale, lease, 296 
license, exchange, collection, or other disposition of the property; 297 
 (3) File with the Office of the Recorder of Deeds a copy of the order appointing 298 
the receiver and, if a legal description of the real property is not included in the order, the legal 299 
description;  300 
 (4) Disclose to the Superior Court any fact arising during the receivership which 301 
would disqualify the receiver under section 7; and 302 
 (5) Perform any duty imposed by court order, this act, or law of the District other 303 
than this act.  304 
 (d)  The powers and duties of a receiver may be expanded, modified, or limited by the 305 
Superior Court’s order. 306 
 Sec. 13.  Duties of owner.   307  14 
 
 (a)  An owner shall: 308 
 (1) Assist and cooperate with the receiver in the administration of the receivership 309 
and the discharge of the receiver’s duties; 310 
 (2) Preserve and turn over to the receiver all receivership property in the owner’s 311 
possession, custody, or control; 312 
 (3) Identify all records and other information relating to the receivership property, 313 
including a password, authorization, or other information needed to obtain or maintain access to 314 
or control of the receivership property, and make available to the receiver the records and 315 
information in the owner’s possession, custody, or control;  316 
 (4) On subpoena, submit to examination under oath by the receiver concerning the 317 
acts, conduct, property, liabilities, and financial condition of the owner or any matter relating to 318 
the receivership property or the receivership; and 319 
 (5) Perform any duty imposed by court order, this act, or law of the District other 320 
than this act. 321 
 (b)  If an owner is a person other than an individual, this section applies to each officer, 322 
director, manager, member, partner, trustee, or other person exercising or having the power to 323 
exercise control over the affairs of the owner. 324 
 (c)  If a person knowingly fails to perform a duty imposed by this section, the Superior 325 
Court may: 326 
 (1) Award the receiver actual damages caused by the person’s failure, reasonable 327 
attorney’s fees, and costs; and 328 
 (2) Sanction the failure as civil contempt. 329 
 Sec. 14.  Stay; injunction. 330  15 
 
 (a)  Except as otherwise provided in subsection (d) or ordered by the Superior Court, an 331 
order appointing a receiver operates as a stay, applicable to all persons, of an act, action, or 332 
proceeding: 333 
 (1) To obtain possession of, exercise control over, or enforce a judgment against 334 
receivership property; and 335 
 (2) To enforce a lien against receivership property to the extent the lien secures a 336 
claim against the owner which arose before entry of the order. 337 
 (b)  Except as otherwise provided in subsection (d), the Superior Court may enjoin an act, 338 
action, or proceeding against or relating to receivership property if the injunction is necessary to 339 
protect the property or facilitate administration of the receivership. 340 
 (c)  A person whose act, action, or proceeding is stayed or enjoined under this section 341 
may apply to the Superior Court for relief from the stay or injunction for cause.   342 
 (d)  An order under subsection (a) or (b) does not operate as a stay or injunction of: 343 
 (1) An act, action, or proceeding to foreclose or otherwise enforce a mortgage by 344 
the person seeking appointment of the receiver; 345 
 (2) An act, action, or proceeding to perfect, or maintain or continue the perfection 346 
of, an interest in receivership property; 347 
 (3) Commencement or continuation of a criminal proceeding; 348 
 (4) Commencement or continuation of an action or proceeding, or enforcement of 349 
a judgment other than a money judgment in an action or proceeding, by a governmental unit to 350 
enforce its police or regulatory power; or 351 
 (5) Establishment by a governmental unit of a tax liability against the owner or 352 
receivership property or an appeal of the liability. 353  16 
 
 (e)  The Superior Court may void an act that violates a stay or injunction under this 354 
section. 355 
 (f)  If a person knowingly violates a stay or injunction under this section, the Superior 356 
Court may: 357 
 (1) Award actual damages caused by the violation, reasonable attorney’s fees, and 358 
costs; and 359 
 (2) Sanction the violation as civil contempt. 360 
 Sec. 15.  Engagement and compensation of professional. 361 
 (a)  With the Superior Court’s approval, a receiver may engage an attorney, accountant, 362 
appraiser, auctioneer, broker, or other professional to assist the receiver in performing a duty or 363 
exercising a power of the receiver.  The receiver shall disclose to the Superior Court: 364 
 (1) The identity and qualifications of the professional; 365 
 (2) The scope and nature of the proposed engagement; 366 
 (3) Any potential conflict of interest; and 367 
 (4) The proposed compensation. 368 
 (b)  A person is not disqualified from engagement under this section solely because of the 369 
person’s engagement by, representation of, or other relationship with the receiver, a creditor, or a 370 
party.  This act does not prevent the receiver from serving in the receivership as an attorney, 371 
accountant, auctioneer, or broker when authorized by law. 372 
 (c)  A receiver or professional engaged under subsection (a) shall file with the Superior 373 
Court an itemized statement of the time spent, work performed, and billing rate of each person 374 
that performed the work and an itemized list of expenses.  The receiver shall pay the amount 375 
approved by the court. 376  17 
 
 Sec. 16.  Use or transfer of receivership property not in ordinary course of business. 377 
  (a)  In this section, “good faith” means honesty in fact and the observance of reasonable 378 
commercial standards of fair dealing. 379 
 (b)  With the Superior Court’s approval, a receiver may use receivership property other 380 
than in the ordinary course of business. 381 
 (c)  With court approval, a receiver may transfer receivership property other than in the 382 
ordinary course of business by sale, lease, license, exchange, or other disposition.  Unless the 383 
agreement of sale provides otherwise, a sale under this section is free and clear of a lien of the 384 
person that obtained appointment of the receiver, any subordinate lien, and any right of 385 
redemption but is subject to a senior lien. 386 
 (d)  A lien on receivership property which is extinguished by a transfer under subsection 387 
(c) attaches to the proceeds of the transfer with the same validity, perfection, and priority the lien 388 
had on the property immediately before the transfer, even if the proceeds are not sufficient to 389 
satisfy all obligations secured by the lien.  390 
 (e)  A transfer under subsection (c) may occur by means other than a public auction sale.  391 
A creditor holding a valid lien on the property to be transferred may purchase the property and 392 
offset against the purchase price part or all of the allowed amount secured by the lien, if the 393 
creditor tenders funds sufficient to satisfy in full the reasonable expenses of transfer and the 394 
obligation secured by any senior lien extinguished by the transfer.   395 
 (f)  A reversal or modification of an order approving a transfer under subsection (c) does 396 
not affect the validity of the transfer to a person that acquired the property in good faith or revive 397 
against the person any lien extinguished by the transfer, whether the person knew before the 398  18 
 
transfer of the request for reversal or modification, unless the Superior Court stayed the order 399 
before the transfer. 400 
 Sec. 17.  Executory contract.   401 
 (a)  In this section, “timeshare interest” means an interest having a duration of more than  402 
three years which grants its holder the right to use and occupy an accommodation, facility, or 403 
recreational site, whether improved or not, for a specific period less than a full year during any 404 
given year. 405 
 (b)  Except as otherwise provided in subsection (h), with the Superior Court’s approval, a 406 
receiver may adopt or reject an executory contract of the owner relating to receivership property.  407 
The court may condition the receiver’s adoption and continued performance of the contract on 408 
terms appropriate under the circumstances.  If the receiver does not request court approval to 409 
adopt or reject the contract within a reasonable time after the receiver’s appointment, the receiver 410 
is deemed to have rejected the contract.  411 
 (c)  A receiver’s performance of an executory contract before the Superior Court’s 412 
approval under subsection (b) of its adoption or rejection is not an adoption of the contract and 413 
does not preclude the receiver from seeking approval to reject the contract. 414 
 (d)  A provision in an executory contract which requires or permits a forfeiture, 415 
modification, or termination of the contract because of the appointment of a receiver or the 416 
financial condition of the owner does not affect a receiver’s power under subsection (b) to adopt 417 
the contract. 418 
 (e)  A receiver’s right to possess or use receivership property pursuant to an executory 419 
contract terminates on rejection of the contract under subsection (b).  Rejection is a breach of the 420  19 
 
contract effective immediately before appointment of the receiver.  A claim for damages for 421 
rejection of the contract must be submitted by the later of:   422 
 (1) The time set for submitting a claim in the receivership; or 423 
 (2) 30 days after the  Superior Court approves the rejection. 424 
 (f)  If at the time a receiver is appointed, the owner has the right to assign an executory 425 
contract relating to receivership property under law of the District other than this act, the receiver 426 
may assign the contract with court approval. 427 
 (g)  If a receiver rejects under subsection (b) an executory contract for the sale of 428 
receivership property that is real property in possession of the purchaser or a real-property 429 
timeshare interest, the purchaser may: 430 
 (1) Treat the rejection as a termination of the contract, and in that case the 431 
purchaser has a lien on the property for the recovery of any part of the purchase price the 432 
purchaser paid; or 433 
 (2) Retain the purchaser’s right to possession under the contract, and in that case 434 
the purchaser shall continue to perform all obligations arising under the contract and may offset 435 
any damages caused by nonperformance of an obligation of the owner after the date of the 436 
rejection, but the purchaser has no right or claim against other receivership property or the 437 
receiver on account of the damages. 438 
 (h)  A receiver may not reject an unexpired lease of real property under which the owner 439 
is the landlord if: 440 
 (1) The tenant occupies the leased premises as the tenant’s primary residence; 441 
 (2) The receiver was appointed at the request of a person other than a mortgagee; 442 
or 443  20 
 
 (3) The receiver was appointed at the request of a mortgagee and: 444 
 (A) The lease is superior to the lien of the mortgage; 445 
 (B) The tenant has an enforceable agreement with the mortgagee or the 446 
holder of a senior lien under which the tenant’s occupancy will not be disturbed as long as the 447 
tenant performs its obligations under the lease; 448 
 (C) The mortgagee has consented to the lease, either in a signed record or 449 
by its failure timely to object that the lease violated the mortgage; or 450 
 (D) The terms of the lease were commercially reasonable at the time the 451 
lease was agreed to and the tenant did not know or have reason to know that the lease violated 452 
the mortgage. 453 
 Sec. 18.  Defenses and immunities of receiver. 454 
 (a)  A receiver is entitled to all defenses and immunities provided by law of the District 455 
other than this act for an act or omission within the scope of the receiver’s appointment. 456 
 (b)  A receiver may be sued personally for an act or omission in administering 457 
receivership property only with approval of the court that appointed the receiver. 458 
 Sec. 19.  Interim report of receiver. 459 
 A receiver may file or, if ordered by the court, shall file an interim report that includes: 460 
 (1)  The activities of the receiver since appointment or a previous report; 461 
 (2)  Receipts and disbursements, including a payment made or proposed to be made to a 462 
professional engaged by the receiver; 463 
 (3)  Receipts and dispositions of receivership property; 464 
 (4)  Fees and expenses of the receiver and, if not filed separately, a request for approval 465 
of payment of the fees and expenses; and 466  21 
 
 (5)  Any other information required by the court. 467 
 Sec. 20.  Notice of appointment; claim against receivership; distribution to creditors.   468 
 (a)  Except as otherwise provided in subsection (f), a receiver shall give notice of 469 
appointment of the receiver to creditors of the owner by: 470 
 (1) Deposit for delivery through first-class mail or other commercially reasonable 471 
delivery method to the last-known address of each creditor; and 472 
 (2) Publication as directed by the Superior Court. 473 
 (b)  Except as otherwise provided in subsection (f), the notice required by subsection (a) 474 
must specify the date by which each creditor holding a claim against the owner which arose 475 
before appointment of the receiver must submit the claim to the receiver.  The date specified 476 
must be at least 90 days after the later of notice under subsection (a)(1) or last publication under 477 
subsection (a)(2).  The Superior Court may extend the period for submitting the claim.  Unless 478 
the court orders otherwise, a claim that is not submitted timely is not entitled to a distribution 479 
from the receivership.  480 
 (c)  A claim submitted by a creditor under this section must: 481 
 (1) State the name and address of the creditor; 482 
 (2) State the amount and basis of the claim; 483 
 (3) Identify any property securing the claim; 484 
 (4) Be signed by the creditor under penalty of perjury; and 485 
 (5) Include a copy of any record on which the claim is based. 486 
 (d)  An assignment by a creditor of a claim against the owner is effective against the 487 
receiver only if the assignee gives timely notice of the assignment to the receiver in a signed 488 
record. 489  22 
 
 (e)  At any time before entry of an order approving a receiver’s final report, the receiver 490 
may file with the Superior Court an objection to a claim of a creditor, stating the basis for the 491 
objection.  The court shall allow or disallow the claim according to law of the District other than 492 
this act.  493 
 (f)  If the Superior Court concludes that receivership property is likely to be insufficient 494 
to satisfy claims of each creditor holding a perfected lien on the property, the court may order 495 
that: 496 
 (1) The receiver need not give notice under subsection (a) of the appointment to 497 
all creditors of the owner, but only such creditors as the court directs; and 498 
 (2) Unsecured creditors need not submit claims under this section. 499 
 (g)  Subject to section 21: 500 
 (1) A distribution of receivership property to a creditor holding a perfected lien on 501 
the property must be made in accordance with the creditor’s priority under law of the District 502 
other than this act; and 503 
 (2) A distribution of receivership property to a creditor with an allowed unsecured 504 
claim must be made as the court directs according to law of the District other than this act. 505 
 Sec. 21.  Fees and expenses. 506 
 (a)  The Superior Court may award a receiver from receivership property the reasonable 507 
and necessary fees and expenses of performing the duties of the receiver and exercising the 508 
powers of the receiver. 509 
 (b)  The Superior Court may order one or more of the following to pay the reasonable and 510 
necessary fees and expenses of the receivership, including reasonable attorney’s fees and costs: 511  23 
 
 (1) A person that requested the appointment of the receiver, if the receivership 512 
does not produce sufficient funds to pay the fees and expenses; or 513 
 (2) A person whose conduct justified or would have justified the appointment of 514 
the receiver under section 6(a)(1). 515 
 Sec. 22.  Removal of receiver; replacement; termination of receivership. 516 
 (a)  The Superior Court may remove a receiver for cause. 517 
 (b)  The Superior Court shall replace a receiver that dies, resigns, or is removed. 518 
 (c)  If the Superior Court finds that a receiver that resigns or is removed, or the 519 
representative of a receiver that is deceased, has accounted fully for and turned over to the 520 
successor receiver all receivership property and has filed a report of all receipts and 521 
disbursements during the service of the replaced receiver, the replaced receiver is discharged. 522 
 (d)  The Superior Court may discharge a receiver and terminate the court’s administration 523 
of the receivership property if the court finds that appointment of the receiver was improvident 524 
or that the circumstances no longer warrant continuation of the receivership. If the court finds 525 
that the appointment was sought wrongfully or in bad faith, the court may assess against the 526 
person that sought the appointment: 527 
 (1) The fees and expenses of the receivership, including reasonable attorney’s fees 528 
and costs; and 529 
 (2) Actual damages caused by the appointment, including reasonable attorney’s 530 
fees and costs. 531 
 Sec. 23.  Final report of receiver; discharge. 532 
 (a)  On completion of a receiver’s duties, the receiver shall file a final report including: 533  24 
 
 (1) A description of the activities of the receiver in the conduct of the 534 
receivership; 535 
 (2) A list of receivership property at the commencement of the receivership and 536 
any receivership property received during the receivership; 537 
 (3) A list of disbursements, including payments to professionals engaged by the 538 
receiver; 539 
 (4) A list of dispositions of receivership property; 540 
 (5) A list of distributions made or proposed to be made from the receivership for 541 
creditor claims;  542 
 (6) If not filed separately, a request for approval of the payment of fees and 543 
expenses of the receiver; and 544 
 (7) Any other information required by the court. 545 
 (b)  If the Superior Court approves a final report filed under subsection (a) and the 546 
receiver distributes all receivership property, the receiver is discharged. 547 
 Sec. 24.  Receivership in another state; ancillary proceeding. 548 
 (a)  The Superior Court may appoint a receiver appointed in another state, or that 549 
person’s nominee, as an ancillary receiver with respect to property located in the District or 550 
subject to the jurisdiction of the court for which a receiver could be appointed under this act, if: 551 
 (1) The person or nominee would be eligible to serve as receiver under section 7; 552 
and 553 
 (2) The appointment furthers the person’s possession, custody, control, or 554 
disposition of property subject to the receivership in the other state. 555  25 
 
 (b)  The Superior Court may issue an order that gives effect to an order entered in another 556 
state appointing or directing a receiver. 557 
 (c)  Unless the Superior Court orders otherwise, an ancillary receiver appointed under 558 
subsection (a) has the rights, powers, and duties of a receiver appointed under this act. 559 
 Sec. 25.  Effect of enforcement by mortgagee.   560 
 (a)  A request by a mortgagee for appointment of a receiver, the appointment of a 561 
receiver, or application by a mortgagee of receivership property or proceeds to the secured 562 
obligation does not: 563 
 (1) Make the mortgagee a mortgagee in possession of the real property; 564 
 (2) Make the mortgagee an agent of the owner; 565 
 (3) Constitute an election of remedies that precludes a later action to enforce the 566 
secured obligation; 567 
 (4) Make the secured obligation unenforceable;  568 
 (5) Limit any right available to the mortgagee with respect to the secured 569 
obligation; or 570 
 (6) Except as otherwise provided in subsection (b), bar a deficiency judgment 571 
pursuant to law of the District other than this act governing or relating to a deficiency judgment. 572 
 If a receiver sells receivership property that pursuant to section 16(c) is free and clear of a 573 
lien, the ability of a creditor to enforce an obligation that had been secured by the lien is subject 574 
to law of the District other than this act relating to a deficiency judgment. 575 
 Sec. 26.  Uniformity of application and construction. 576 
 In applying and construing this uniform act, consideration must be given to the need to 577 
promote uniformity of the law with respect to its subject matter among states that enact it. 578  26 
 
 Sec. 27.  Relation to Electronic Signatures in Global and National Commerce Act. 579 
 This act modifies, limits, or supersedes the Electronic Signatures in Global and National 580 
Commerce Act, 15 U.S.C. § 7001 et seq., but does not modify, limit, or supersede section 101(c) 581 
of that act, 15 U.S.C. § 7001(c), or authorize electronic delivery of any of the notices described 582 
in section 103(b) of that act, 15 U.S.C. § 7003(b). 583 
 Sec. 28.  Transition. 584 
 This act does not apply to a receivership for which the receiver was appointed before the 585 
effective date of this act. 586 
 Sec. 29.  Fiscal impact statement. 587 
 The Council adopts the attached fiscal impact statement as the fiscal impact statement 588 
required by section 602(c)(3) of the District of Columbia Home Rule Act, approved December 589 
24, 1973 (87 Stat. 813; D.C. Official Code § 1-206.02(c)(3)). 590 
 Sec. 30.  Effective date. 591 
 This act shall take effect following approval by the Mayor (or in the event of veto by the 592 
Mayor, action by the Council to override the veto), a 30-day period of Congressional review as 593 
provided in section 602(c)(1) of the District of Columbia Home Rule Act, approved December  594 
24, 1973 (87 Stat. 813; D.C. Official Code § 1-206.02(c)(1)), and publication in the District of 595 
Columbia Register. 596   
 
 
 
 
 
 
The ULC is a nonprofit formed in 1892 to create nonpartisan state legislation. Over 350 volunteer commissioners—lawyers, 
judges, law professors, legislative staff, and others—work together to draft laws ranging from the Uniform Commercial Code to 
acts on property, trusts and estates, family law, criminal law and other areas where uniformity of state law is desirable. 
NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS 
Uniform Law Commission 
111 N. Wabash Ave. 
Suite 1010 
Chicago, IL 60602 
(312) 450- 6600 tel 
(312) 450- 6601 fax 
www.uniformlaws.org 
THE UNIFORM COMMERCIAL REAL ESTATE RECEIVERSHIP ACT 
 
- A Summary - 
 
A receiver is someone appointed by a court to take possession of another person’s property and 
manage it.  Receivers can be used in a variety of situations, including: 
 
• When the property is the subject of a lawsuit and its value must be preserved while the 
issue is litigated; 
• When the property includes an operating business, to sell its assets in an orderly manner 
and maximize the return for its owners and/or creditors; and 
• When requested by a creditor, to collect, preserve, and distribute the property of an 
insolvent or defaulting debtor. 
 
Currently, receivership procedures vary widely from state to state, and sometimes even from 
court to court.  The Uniform Commercial Real Estate Receivers hip Act (UCRERA) provides a 
consistent set of rules for receiverships involving commercial property , including: 
 
Due Process.  Under UCRERA, the court may issue an order only after notic	e and opportunity 
for a hearing, unless no interested party requests a hearing or special circumstances require the 
issuance of an order before a hearing can be held. 
 
Appointment. UCRERA establishes uniform standards under which a court may appoint a 
receiver, and under which a mortgage len	der may obtain appointment of a receiver, either as a 
matter of right or as a matter of the court’s discretion.  
 
Identity and Independence.  Because a receiver is the agent of the court , UCRERA requires 
independent receivers.  A party seeking the appointment of a receiver may nominate a person to 
serve, but the nomination is not binding on the court. 
 
Effect of Appointment. On appointment, a receiver has the legal 	status of a lien creditor with 
respect to receivership property.  However, pre	-existing perfected security interests in 
receivership property are unaffected. 
 
Powers and Duties. UCRERA sets out the receiver’s presumptive powers, as well as those that 
the receiver may exercise only with court approval. The act also sets out the duties of both the 
receiver and the owner of receivership property.   
 
Use or Sale of Receivership Property. Receivers can use or sell receivership property in the 
ordinary course of business, but must get court approval for uses or transfers of property outside 
the ordinary course of business.  With cour	t approval, sales may be free and clear of liens and 
rights of redemption, except that junior lienholders may not force a sale free and clear of liens 
without the consent of senior lienholders. Secured creditors are entitled to the proceeds of 
property sales according to existing priority rules. 
  2 
 
Existing Contracts and Leases. 	A receiver may accept or reject a pre-	existing contract with 
court approval, but UCRERA provides special protections for most commercial tenants of 
receivership property as well as t	enants who occupy receivership property as their primary 
residences . 
 
Creditor Claims. In most cases, a receiver must notify creditors of the receivership, 	and 
creditors must file claims with the receiver before receiving distributions from receivership 
property. 
 
Reporting. A receiver must file periodic reports with the court overseeing the receivership, 
creating a public record of receivership accounts. 
 
Receivership in Context of Mortgage Enforcement.  	Under UCRERA, a mortgage lender that 
requests appointment of a receiver is not liable as a possessor of receivership property and 
retains other remedies for enforcing the mortgage.   
 
UCRERA provides a set of uniform rules that should provide more predictability to lenders and 
borrowers alike.  It gives state courts guidance on the receivership process while preserving the 
court’s flexibility to craft a remedy appropriate under the circumstances.   
 
For further information about UCRERA, please contact ULC Chief Counsel Benjamin Orzeske at 
(312) 450-6621 or 	borzeske@uniformlaws.org
.   
 
 
 
 
 
 
The ULC is a nonprofit formed in 1892 to create nonpartisan state legislation. Over 350 volunteer commissioners—lawyers, 
judges, law professors, legislative staff, and others—work together to draft laws ranging from the Uniform Commercial Code to 
acts on property, trusts and estates, family law, criminal law and other areas where uniformity of state law is desi	rable. 
NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS 
Uniform Law Commission 
111 N. Wabash Ave. 
Suite 1010 
Chicago, IL 60602 
(312) 450- 6600 tel 
(312) 450- 6601 fax 
www.uniformlaws.org 
WHY YOUR STATE SHOULD ADOPT THE 
U
NIFORM COMMERCIAL REAL ESTATE RECEIVERSHIP ACT (UCRERA) 
 
A receiver is a person appointed by a court to take possession of property and to manage or dispose of 
that property and any income the property produces.  Usually the property or its owner is the subject of a 
lawsuit or a foreclosure action. The receiver’s job is to ensure the property retains its maximum value and 
that any income is distributed to the proper parties.  
 
 
Courts usually appoint receivers of commercial property when the court needs a responsible party to run a 
business located on the property, collect rents, or sell 	the property in an orderly manner.  However, the 
standards for court appointment and the powers of the receiver vary widely from state to state	, and 
sometimes from court to court.  The Uniform Commercial Real Estate Receivership Act (UCRERA) 
provides a basic set of standard rules for receiverships, and gives courts the flexibility to design the most 
appropriate remedy for the circumstances.  States should adopt UCRERA because:
 
 
• UCRERA provides certainty for business owners and creditors. 	Commercial lending markets 
operate most efficiently when the rules are consistent from state to state	.  Under UCRERA, all 
parties know exactly when a receiver may be appointed and what powers a receiver may exercise. 
 
  
• UCRERA is fair to all parties. No receiver may be appointed under UCRERA without notice and 
an opportunity for a court hearing, unless special circumstances make that impossible.  Receivers 
must post a security bond and are subject to court supervision and removal.  Anyone who 
wrongfully obtains appointment of a receiver is liable for damages, including legal fees. 
 
• UCRERA can preserve and maximize the value of commercial property.  Standard comm	ercial 
mortgage contracts give the lender a right to have a receiver appointed in the event of default.  
Under UCRERA, with court approval, a receiver may sell receivership property free and clear of 
liens and rights of redemption (i.e., with the same effect as a foreclosure sale) without impairing a 
senior mortgage. This permits a receiver to market and sell receivership property more effectively 
than through foreclosure (which by law is a “distress sale” at public auction), and thus receiver 
sales under UCRERA should produce higher sale prices. UCRERA’s fair and efficient procedures 
should encourage lenders to choose receivership, but do not prevent lenders from choosing to 
proceed with a traditional foreclosure.  
 
• UCRERA helps state courts implement proper remedies. A receiver can act as an extension of 
the court, doing the practical day-to-day work necessary to preserve property and income as 
necessary to implement the court’s orders. 
 
• UCRERA is limited to commercial property	. No receiver may be appointed for owner	-occupied 
real property improved with one to four dwelling units unless the owner uses the property 
primarily for agricultural, commercial, industrial, or mineral-	extraction purposes.   
 
For further information about 	UCRERA, please contact ULC C	hief Counsel Benjamin Orzeske 
at (312) 450-6621 or borzeske@uniformlaws.org
.   
UNIFORM COMMERCIAL REAL ESTATE 
RECEIVERSHIP ACT 
 
 
drafted by the 
 
 
 
NATIONAL CONFERENCE OF COMMISSIONERS 
ON UNIFORM STATE LAWS 
 
 
 
and by it 
 
 
 
APPROVED AND RECOMMENDED FOR ENACTMENT 
IN ALL THE STATES 
 
 
 
at its  
 
 
 
ANNUAL CONFERENCE 
MEETING IN ITS ONE-HUNDRED-AND-TWENTY-FOURTH YEAR 
WILLIAMSBURG, VIRGINIA 
JULY 10 - JULY 16, 2015 
 
 
 
WITH PREFATORY NOTE AND COMMENTS 
 
 
 
Copyright © 2015 
By 
NATIONAL CONFERENCE OF COMMISSIONERS 
ON UNIFORM STATE LAWS 
 
July 29, 2016   ABOUT ULC 
 
The Uniform Law Commission (ULC), also known as National Conference of Commissioners 
on Uniform State Laws (NCCUSL), now in its 124th year, provides states with non-partisan, 
well-conceived and well-drafted legislation that brings clarity and stability to critical areas of 
state statutory law. 
 
ULC members must be lawyers, qualified to practice law. They are practicing lawyers, judges, 
legislators and legislative staff and law professors, who have been appointed by state 
governments as well as the District of Columbia, Puerto Rico and the U.S. Virgin Islands to 
research, draft and promote enactment of uniform state laws in areas of state law where 
uniformity is desirable and practical. 
 
• ULC strengthens the federal system by providing rules and procedures that are consistent 
from state to state but that also reflect the diverse experience of the states. 
 
• ULC statutes are representative of state experience, because the organization is made up 
of representatives from each state, appointed by state government. 
 
• ULC keeps state law up-to-date by addressing important and timely legal issues. 
 
• ULC’s efforts reduce the need for individuals and businesses to deal with different laws 
as they move and do business in different states. 
 
• ULC’s work facilitates economic development and provides a legal platform for foreign 
entities to deal with U.S. citizens and businesses. 
 
• Uniform Law Commissioners donate thousands of hours of their time and legal and 
drafting expertise every year as a public service, and receive no salary or compensation 
for their work. 
 
• ULC’s deliberative and uniquely open drafting process draws on the expertise of 
commissioners, but also utilizes input from legal experts, and advisors and observers 
representing the views of other legal organizations or interests that will be subject to the 
proposed laws. 
 
• ULC is a state-supported organization that represents true value for the states, providing 
services that most states could not otherwise afford or duplicate. 
   UNIFORM COMMERCIAL REAL ESTATE RECEIVERS HIP ACT 
The Committee appointed by and representing the National Conference of Commissioners on 
Uniform State Laws in preparing this Act consists of the following individuals:  
THOMAS S. HEMMENDINGER, 362 Broadway, Providence, RI 02909-1434, Chair  
JACK P. BURTON, 119 E. Marcy St., Suite 200, Santa Fe, NM 87501-2046 
STEPHEN C. CAWOOD, 127 Ridgewood Cir., Pineville, KY 40977-1409 
ELLEN F. DYKE, 2125 Cabots Point Ln., Reston, VA 20191 
THOMAS A. EDMONDS, 9401 Michelle Pl., Richmond, VA 23229 
PATRICIA BRUMFIELD FRY, P.O. Box 3880, Edgewood, NM 87015-3880 
DONALD E. MIELKE, 6534 S. Chase St., Littleton, CO 80123 
FRED H. MILLER, 80 S. 8th St., 4200 IDS Center, Minneapolis, MN 55402-2274 
ROSEMARY S. SACKETT, 5401 Lake Shore Dr., Box 949, Okoboji, IA 51355-2599 
MARK SANDLIN, 9301 Dayflower St., Prospect, KY 40059 
MARY GAY TAYLOR-JONES, 18 N. Foxhill Rd., North Salt Lake, UT 84054 
R. WILSON FREYERMUTH, University of Missouri School of Law, 215 Hulston Hall, 
 Columbia, MO 65211, Reporter 
 
EX OFFICIO 
HARRIET LANSING, 1 Heather Pl., St. Paul, MN 55102-3017, President 
LANE SHETTERLY, 189 SW Academy St., P.O. Box 105, Dallas, OR 97338, Division Chair 
 
AMERICAN BAR ASSOCIATION ADVISOR S 
JOHN M. TROTT, 2049 Century Park E., 28th Floor, Los Angeles, CA 90067-3284, ABA 
 Advisor 
JEFFREY M. ALLEN, 436 14th
 
St., Suite 1400, Oakland, CA 94612-2716, ABA Section Advisor 
JAMES L. SCHWARTZ, 617 W. Fulton St., 5th Floor, Chicago, IL 60661, ABA Section 
 Advisor 
KAY STANDRIDGE KRESS, 4000 Town Center, Suite 1800, Southfield, MI 48075-1505, ABA 
 Section Advisor 
JUSTIN G. WILLIAMS, P.O. Box 3206, Tuscaloosa, AL 35403-3206, ABA Section Advisor 
 
 	EXECUTIVE DIRECTOR 
LIZA KARSAI, 111 N. Wabash Ave., Suite 1010, Chicago, IL 60602, Executive Director 
 
Copies of this act may be obtained from: 
 
NATIONAL CONFERENCE OF COMMISSIONERS 
ON UNIFORM STATE LAWS 
 	111 N. Wabash Ave., Suite 1010 
 	Chicago, Illinois  60602 
312/450-6600 
www.uniformlaws.org 
   UNIFORM COMMERCIAL REAL ESTATE RECEIVERS HIP ACT 
 
TABLE OF CONTENTS 
 
Prefatory Note ................................................................................................................................. 1 
SECTION 1.  SHORT TITLE. ....................................................................................................... 9 
SECTION 2.  DEFINITIONS. ........................................................................................................ 9 
SECTION 3.  NOTICE AND OPPORTUNITY FOR HEARING. .............................................. 15 
SECTION 4.  SCOPE; EXCLUSIONS. ....................................................................................... 16 
SECTION 5.  POWER OF COURT. ............................................................................................ 22 
SECTION 6.  APPOINTMENT OF RECEIVER. ........................................................................ 24 
SECTION 7.  DISQUALIFICATION FROM APPOINTMENT AS RECEIVER; DISCLOSURE 
OF INTEREST.................................................................................................................. 28 
SECTION 8.  RECEIVER’S BOND; ALTERNATIVE SECURITY. ......................................... 30 
SECTION 9.  STATUS OF RECEIVER AS LIEN CREDITOR. ................................................ 32 
SECTION 10.  SECURITY AGREEMENT COVERING AFTER -ACQUIRED PROPERTY. . 33 
SECTION 11.  COLLECTION AND TURNOVER OF RECEIVERSHIP PROPERTY. .......... 35 
SECTION 12.  POWERS AND DUTIES OF RECEIVER. ......................................................... 37 
SECTION 13.  DUTIES OF OWNER. ......................................................................................... 41 
SECTION 14.  STAY; INJUNCTION. ........................................................................................ 43 
SECTION 15.  ENGAGEMENT AND COMPENSATION OF PROFESSIONAL. .................. 47 
SECTION 16.  USE OR TRANSFER OF RECEIVERSHIP PROPERTY NOT IN ORDINARY 
COURSE OF BUSINESS. ................................................................................................ 48 
SECTION 17.  EXECUTORY CONTRACT. .............................................................................. 55 
SECTION 18.  DEFENSES AND IMMUNITIES OF RECEIVER. ............................................ 62 
SECTION 19.  INTERIM REPORT OF RECEIVER. ................................................................. 63 
SECTION 20.  NOTICE OF APPOINTMENT; CLAIM AGAINST RECEIVERSHIP; 
DISTRIBUTION TO CREDITORS. ................................................................................ 64 
SECTION 21.  FEES AND EXPENSES. ..................................................................................... 68 
SECTION 22.  REMOVAL OF RECEIVER; REPLACEMENT; TERMINATION OF 
RECEIVERSHIP. ............................................................................................................. 69 
SECTION 23.  FINAL REPORT OF RECEIVER; DISCHARGE. ............................................. 70 
SECTION 24.  RECEIVERSHIP IN ANOTHER STATE; ANCILLARY PROCEEDING. ...... 71 
SECTION 25.  EFFECT OF ENFORCEMENT BY MORTGAGEE. ......................................... 73 
SECTION 26.  UNIFORMITY OF APPLICATION AND CONSTRUCTION. ......................... 74 
SECTION 27.  RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND 
NATIONAL COMMERCE ACT. .................................................................................... 74 
SECTION 28.  TRANSITION. ..................................................................................................... 75 
SECTION 29.  REPEALS; CONFORMING AMENDMENTS. ................................................. 75 
SECTION 30.  EFFECTIVE DATE. ............................................................................................ 75 
  
 
   1 
 
Prefatory Note 
Introduction. A receiver is a person appointed by a court to take possession of the 
property of another and to “receive, collect, care for, and dispose of the property or the fruits of 
the property.”  1 Clark on Receivers § 11(a), at 13 (3d ed. 1959).  Courts exercising general 
equity jurisdiction have traditionally appointed receivers in a variety of different contexts: 
 
 Courts have appointed pendente lite receivers to preserve property that is the subject 
matter of pending litigation, thereby preventing its waste, deterioration, or removal before 
judgment.   
 
 Courts have appointed receivers after entry of a judgment to preserve the property 
pending appeal, to carry the judgment into effect, or to enforce the judgment.   
 
 Courts have appointed receivers to preserve the property of a corporation, partnership, or 
other legal entity in the context of the dissolution or winding up of the entity, or where 
the entity is operationally dysfunctional because of an ownership or management dispute. 
 
 Courts have appointed receivers, at the behest of one or more creditors, to collect, 
preserve, administer, liquidate and distribute the property of insolvent debtors. 
 
Where authorized by statute or the usages of equity, receivers may also be appointed for the 
administration of certain entities affected with the public interest, such as railways, banks, or 
insurance companies. 
 
Courts also commonly appoint receivers at the request of a mortgage lender that seeks to 
enforce a mortgage in default.  A typical commercial real estate mortgage or deed of trust 
explicitly provides that on default, the mortgagee may seek the appointment of a receiver from a 
court with jurisdiction over the mortgaged premises; frequently, the terms of the mortgage or 
deed of trust purport to provide mortgagor consent for the appointment of a receiver following 
default.  Traditionally, mortgage lenders have sought the appointment of a receiver pending 
foreclosure for one or more of several reasons: 
 
 The mortgaged property is located in a state where the foreclosure process takes a 
substantial period of time (e.g., six months or longer).  In such states, during the 
pendency of the foreclosure proceeding, the mortgaged premises will typically generate 
substantial rents from tenants or other occupiers.  In most loan transactions, these rents 
have been assigned to the mortgagee as security for the loan, and the lender reasonably 
expects them to be applied toward reduction of the mortgage debt.  Application of these 
rents to the debt is of particular importance where the value of the mortgaged premises 
has declined, the mortgage loan is “nonrecourse” (i.e., where the borrower has no 
personal liability for the loan’s repayment), the mortgagee is a special purpose vehicle, or 
the mortgagee is otherwise unlikely to be able to pay a deficiency. In these situations, 
application of the rents to the mortgage debt could help to reduce or even eliminate the 
deficiency that might follow a completed foreclosure.  Thus, obtaining the appointment 
of a receiver prevents the mortgagor from diverting rents to other creditors or insiders of  2 
 
the mortgagor pending a foreclosure sale. 
 
 The mortgaged property is subject to waste, deterioration, or some other immediate 
physical harm that threatens to reduce the value of the mortgaged property and thus 
threatens the mortgagee’s security. 
 
 The mortgaged property might be subject to a high vacancy rate or underperforming due 
to poor property management.  In such a case, the mortgagee might wish to provide better 
and more active property management and to enter into new tenant leases.  In this 
situation, the mortgagee might prefer to secure the appointment of a receiver to provide 
this day-to-day management, both because (1) the appointment of a receiver would 
insulate the mortgagee from the liability that the mortgagee would assume if the 
mortgagee provided this property management directly and thereby became a “mortgagee 
in possession,” and (2) the receiver might be a person with specialized expertise in 
operating and “turning around” a property of that type. 
 
 The mortgaged collateral might include not only real estate but substantial personal 
property as well, as would be the case (for example) where the collateral is a hotel or 
resort property.  In this situation, the mortgagee might wish to proceed with foreclosure 
in a judicial proceeding so as to minimize or avoid any claim that might arise if it 
disposed of the personal property under Article 9 of the Uniform Commercial Code and 
the disposition was subsequently attacked as being commercially unreasonable. 
 
 The property might be subject to environmental contamination, and the mortgagee does 
not want to be in the chain of title or to rely solely on statutory exemptions from federal 
or state environmental laws that might depend on the mortgagee’s status as a secured 
creditor.  See, e.g., 42 U.S.C.A. § 9601(20)(A) (excluding from federal CERCLA “owner 
and operator” liability any person who “without participating in the management of a … 
facility, holds indicia of ownership primarily to protect his security interest in the … 
facility”). 
 
The Need for a Uniform Act. Unfortunately, very few states have comprehensive 
statutory guidance regarding the appointment and powers of receivers for commercial real estate.  
In the vast majority of states, receivers are appointed pursuant to a court’s general equitable 
power to appoint a receiver, with minimal statutory guidance either expressly confirming or 
limiting the power of a receiver.  A small handful of states (including California, Indiana, 
Nebraska, New Mexico, Ohio, Oklahoma, and South Dakota) provide a moderate amount of 
statutory guidance regarding the appointment and powers of receivers.  Only two states — 
Washington and Minnesota — provide a comprehensive statutory codification of the laws 
governing the appointment and powers of receivers and receivership procedures.   
 
Likewise, to date, no uniform law addresses the appointment and powers of real estate 
receivers in a comprehensive fashion.  Although the Uniform Assignment of Rents Act (UARA), 
promulgated in 2005, does address the evidentiary showing necessary to obtain the appointment 
of a receiver, UARA’s focus is limited to appointment at the request of an assignee of rents, and 
nothing in UARA explicitly addresses either receivership procedure or the scope of the powers  3 
 
that a receiver of real estate may exercise before foreclosure.   
 
As a result, there is variation from state to state with regard to the laws governing 
appointment and powers of receivers.  Furthermore, because most states have such minimal 
statutory guidance, there is even variation from one county, district, parish, or municipal 
subdivision to the next within a state, as individual judges might have disparate perspectives on 
the circumstances in which a receivership constitutes an appropriate remedy.  The following 
provides a non-exhaustive list of some of these inter-state and intra-state variations: 
 
 There is substantial variation as to the circumstances that justify the appointment of a 
receiver, particularly in the case of mortgaged property.  Some courts require that the 
petitioning party establish the existence of waste; other courts do not require the 
existence of waste if the property’s value is insufficient to satisfy the mortgage debt; 
others simply permit the petitioning mortgagee to obtain a receiver if the mortgage is in 
default and the mortgagor consented in the mortgage to the appointment of a receiver 
after default. 
 
 There is substantial variation as to the circumstances, if any, that justify ex parte 
appointment of a receiver and the procedures associated with ex parte appointment.  
Some courts routinely appoint receivers on an ex parte basis with no heightened 
evidentiary showing required, particularly where the mortgagor consented to ex parte 
appointment in the mortgage or deed of trust.  Other courts refuse ex parte appointment 
outright, or require the petitioning mortgagee to establish the circumstances justifying 
appointment without prior notice to the mortgagor. 
 
 There is substantial variation as to the enforceability of provisions in the mortgage or 
deed of trust by which the mortgagor consents in advance to the appointment of a 
receiver after default.  In some states, such contractual provisions are enforceable as a 
matter of right.  See, e.g., Ind. Code § 32-30-5-1; Minn. Stat. Ann. § 559.17, subd. 2; 
N.Y. Real Prop. Law § 254(10); N. Mex. Stat. Ann. § 44-8-4(A).  By contrast, most 
existing statutes provide (or have been interpreted to mean) that the decision to appoint a 
receiver rests in the discretion of the court, without regard to the terms of the mortgage. 4 
Clark on Receivers § 950, at 1718 (3d ed. 1959). 
 
Furthermore, in many states, existing receivership statutes simply do not address a 
number of questions concerning receivership procedure.  For example, many state statutes do not 
address such issues as the necessity or amount of the receiver’s bond, the necessity or amount of 
a bond from the person seeking appointment of a receiver, the eligibility requirements for service 
as a receiver, or the requirements for notification to creditors.  These shortcomings make it more 
difficult for “best practices” to develop in the receivership context. 
 
Finally, the existing receivership laws in most states do not adequately set forth the 
powers that a receiver may (or may not) exercise, either with or without prior approval of the 
court.  This can result in potential uncertainty regarding the ability of a receiver to borrow 
money, to approve or reject executory contracts entered into by the owner of the property 
(including unexpired leases), to sell receivership property other than in the ordinary course of  4 
 
business, or to make improvements to receivership property.   
 
In particular, there is substantial current uncertainty regarding whether a receiver has the 
power to sell real estate.  Customarily, a receiver’s ability to sell receivership property varies 
depending on the circumstances of the receivership.  When a court appoints a general receiver 
for all of the assets of an insolvent debtor, the court commonly authorizes the receiver to gather 
and sell the assets of the debtor.  The court frequently empowers such a receiver, in the 
receivership order, to sell assets both in the ordinary course of business (such as sales of 
inventory) and even outside of the ordinary course with court approval. 
 
By contrast, when a court appoints a limited receiver to take possession of a specific asset 
— such as a receiver for mortgaged property — the receiver’s role is more typically viewed as 
custodial.  For this reason, receivers appointed for mortgaged property are often viewed as 
having the power to operate, maintain, and preserve the property pending a foreclosure sale, but 
not to sell the property; instead, a sale would occur, if at all, only in the context of the foreclosure 
proceeding.   
 
Recently, some commentators have advocated that receivership can be an effective way 
to dispose of real estate, and mortgaged real property in particular.  Indeed, there are at least 
three specific contexts in which a sale by the receiver might be advantageous: 
 
 Sale of property securing commercial mortgaged-backed securities (CMBS) loans. 
CMBS loans are held in real estate mortgage investment conduits (“REMICs”), which are 
special purpose vehicles used for the pooling of mortgage loans and the issuance of 
mortgage-backed securities.  The Internal Revenue Code forbids REMICs from issuing 
new debt or making new loans, but permits some modifications to an existing defaulted 
loan.  Thus, when a REMIC completes a foreclosure sale, it cannot make a new loan on a 
seller-financing basis.  However, if the property can be sold (through a receiver or by the 
borrower directly) with the buyer assuming the mortgage, the mortgage loan can be 
modified and restructured under the REMIC rules.  Often, this can produce a sale at a 
higher value than by comparison to a cash sale, and thus is attractive to lenders who want 
to avoid foreclosing on a property that is worth less than the outstanding mortgage debt.  
See generally John C. Murray and Kenneth R. Jannen, Public and Private Sales of Real 
Property by Federal Court Receivers, ACREL Papers (March 2011). 
 
 Foreclosure sale at “arms-length” rather than “distress sale.” Under current 
foreclosure law in all 50 states, a foreclosure sale is a “distress sale,” i.e., a public auction 
sale, typically “on the courthouse steps.”  Foreclosure by sale has been justified as a 
means to protect the mortgagor’s equity in the mortgaged property, particularly by 
comparison to the historical approach under which a defaulting borrower simply forfeited 
its interest in the mortgaged property (and any equity the borrower might have 
accumulated either through principal reduction or market appreciation).  Nevertheless, 
there is concern that foreclosure sales do not always bring prices that reflect the value 
that might be obtained in an arms-length, non-distress sale. By contrast to a traditional 
foreclosure, a receiver could theoretically market the mortgaged property to potential 
buyers in the context of its operation of the property.  Marketing of the property in an  5 
 
arms-length context could permit potential buyers to perform more meaningful and 
complete due diligence; further, a sale that is both free and clear of liens and rights of 
redemption and subject to judicial confirmation could produce greater finality regarding 
the title acquired by the buyer.  In theory, providing potential foreclosure buyers with 
better information regarding the mortgaged property and greater certainty of title should 
produce sale prices higher than those that would be produced by distress foreclosure 
sales. 
 
 Foreclosure in a “unified” sale of realty and personalty. In some circumstances, it might 
make sense for a creditor to sell “mixed” personal and real property collateral as a going 
concern in one sale, rather than selling the personalty under Article 9 and the realty in a 
separate real estate foreclosure. Ostensibly, U.C.C. § 9-604(a) facilitates unified sales of 
mixed collateral by providing that “[i]f a security agreement covers both real and 
personal property, a secured party may proceed … as to both the personal property and 
the real property in accordance with the rights with respect to the real property,” in which 
case Article 9’s foreclosure provisions do not apply. U.C.C. § 9-604(a)(2). Unfortunately, 
§ 9-604(a)’s language leaves a number of interpretive questions that compromise its 
potential effectiveness in the mixed collateral context. These questions include (a) 
whether the security interests in the realty and the personalty must be created in the same 
document or can arise under separate documents; (b) whether the personalty and realty 
must be used in some closely related way to be sold in a unified sale; and (c) whether the 
secured party must dispose of all of the personalty under the rules of real estate law or 
can instead dispose of some of it (along with the land) in a unified sale and the rest in an 
Article 9 disposition. These interpretive gaps might discourage some mortgagees from 
attempting unified sales.  
 
As to receivership sales, federal law has evolved further than state statutory law.  Federal 
law authorizes receivers appointed by a federal court to sell mortgaged property free and clear of 
liens. 28 U.S.C.A. §§ 2001 to 2004. The federal statutes are vague with respect to the procedures 
for marketing and selling the property, “thereby allowing for flexibility and creativity.” Kay 
Kress, Federal Receiverships (2005 ABA Business Law Section Meeting).  Furthermore, federal 
courts have concluded that “the power of sale is within the scope of a receiver’s ‘complete 
control’ over receivership assets …, a conclusion firmly rooted in the common law of equity 
receiverships.” Securities Exch. Comm’n v. American Capital Investments, Inc., 98 F.3d 1133, 
1144 (9th Cir. 1996).  The federal statute specifically authorizes receivers appointed by a federal 
court to conduct a private sale after notice to all interested parties and a hearing.  28 U.S.C. § 
2001(b).  Further, federal courts have concluded that there is no right of post-sale redemption 
from judicial sales conducted under 28 U.S.C.A. § 2001(b), notwithstanding any state statutory 
redemption rights the mortgagor might otherwise claim.  See, e.g., United States v. Heasley, 283 
F.2d 422 (8th Cir. 1960). 
 
For the reasons described above, substantial benefits could flow to the resolution of 
distressed commercial mortgage loans if state law explicitly granted a receiver the power of sale 
as recognized under federal law.  Unfortunately, most existing state statutes do not specifically 
authorize a receiver to conduct a sale of real property, and some courts have held that in the 
absence of express statutory authority, receivers lack the authority to conduct such sales.  See,  6 
 
e.g., Kirven v. Lawrence, 137 S.E.2d 764 (S.C. 1964) (receiver does not have inherent power of 
sale, as receivership is “custodial” in nature and designed to preserve the status quo); Andrick 
Dev. Corp. v. Maccaro, 311 S.E.2d 95 (S.C. Ct. App. 1984) (same); Eppes v. Dade Developers, 
Inc., 170 So. 875 (Fla. 1936); Shubh Hotels Boca, LLC v. FDIC, 46 So.3d 163 (Fla. Dist. Ct. 
App. 2010) (receiver lacked power to sell hotel even though court had authorized the sale; no 
Florida statute authorizes a court-appointed receiver in a foreclosure case to sell the mortgaged 
property in contravention of mortgagor’s right of redemption).  To provide the needed clarity, the 
Act provides more explicit rules addressing the extent to which a receiver can sell receivership 
property, either subject to or free and clear of existing liens and rights of redemption. 
 
Summary of the Act. The following paragraphs provide a brief summary of the primary 
provisions of the Act. 
 
 Notice and Opportunity for a Hearing.  Under the Act, the court may enter orders 
only after notice and opportunity for a hearing as is appropriate under the 
circumstances. § 3(a), (b).  The court may issue an order without an actual hearing if 
no interested party timely requests a hearing or the particular circumstances require 
the issuance of an order before a hearing can be held. 
 
 Scope. The Act applies to receiverships for real property as well as personal property 
that is related to the real property or used in its operation.  § 4(a).  It does not govern a 
receivership for an interest in real property improved by one to four dwelling units, 
unless (1) the interest is used for agricultural, commercial, industrial, or mineral 
extraction purposes, other than incidental uses by an owner occupying the property as 
the owner’s primary residence; (2) the interest secures an obligation incurred when 
the property was used or planned for use for agricultural, commercial, industrial, or 
mineral extraction purposes; (3) the owner planned or is planning to develop the 
property with one or more dwelling units to be sold or leased in the ordinary course of 
the owner’s business, or (4) the owner collects rents or other income from an 
unrelated tenant or other occupier.  § 4(b).  The Act does not provide the exclusive 
method for the appointment of a receiver.  § 4(d). 
 
 Court. The state’s court of general equity jurisdiction has exclusive jurisdiction of the 
receivership proceeding. § 5. 
 
 Appointment. The Act establishes standards under which a court may appoint a receiver 
in the exercise of its equitable discretion. § 6(a). The Act also establishes standards under 
which a petitioning mortgage lienholder is entitled to appointment of a receiver, either as 
a matter of right or as a matter of the court’s discretion. § 6(b). Where the court appoints 
a receiver on an ex parte basis, the court may require the party seeking appointment to 
post security for any damages, attorney’s fees and costs incurred by a person injured by 
an appointment later determined to be unjustified.  § 6(c).  
 
 Identity and Independence of Receiver. Because a receiver holds receivership property 
for the benefit of all interested parties, the Act requires that the receiver provide sworn 
evidence of the receiver’s independence, § 7(a), (b), subject to an exception to prevent  7 
 
disqualification based on certain pre-existing relationships that are de minimis in nature. § 
7(c). While a party seeking the appointment of a receiver may nominate a person to 
serve as a receiver, the nomination is not binding on the court.  § 7(d). 
 
 Effect of Appointment.  On appointment, a receiver has the status and priority of a lien 
creditor with respect to receivership property.  § 9.  Appointment of a receiver does not 
affect the validity of a pre-receivership security interest in receivership property, and 
property acquired after appointment is subject to any pre-receivership security agreement 
to the same extent as if no receiver had been appointed.  § 10.  On appointment, persons 
having possession, custody or control of receivership property must turn the property 
over to the receiver, and persons owing debts that constitute receivership property must 
pay those debts to the receiver. § 11. Entry of the order of appointment effects a stay, 
applicable to all persons, of an act to obtain possession of, exercise control over, or 
enforce a judgment against receivership property, as well as an act to enforce a lien 
against receivership property.  § 14(a). In appropriate situations, the court can expand the 
scope of the stay, § 14(b), and grant relief from the stay, § 14(c). However, for policy 
reasons, certain actions are outside the scope of the stay. § 14(d). The Act also addresses 
the consequences of a violation of the stay. § 14(e), (f). 
 
 Powers and Duties of Receiver; Duties of Owner. The Act sets forth the receiver’s 
presumptive powers, § 12(a), as well as those that the receiver may exercise only with 
court approval. § 12(b).  The Act also sets forth the duties of the receiver, § 12(c), and the 
duties of the owner of receivership property.  § 13. 
 
 Engagement and Compensation of Professionals. The Act authorizes the receiver to 
engage and pay professionals to assist in the administration of the receivership following 
court approval.  § 15.  
 
 Use, Sale, Lease, License, or Other Transfer of Receivership Property Other than in 
Ordinary Course. With court approval, the Act permits the receiver to use, sell, lease, 
license, exchange or otherwise transfer receivership property other than in the ordinary 
course of business.  § 16(b), (c).  Unless the agreement of transfer provides otherwise, the 
transfer is free and clear of rights of redemption and liens other than liens that are senior 
to the lien of the person who obtained the receiver’s appointment.  § 16(c).  Liens 
extinguished by the receiver’s sale attach to proceeds with the same validity, perfection, 
and priority as they had with respect to the property sold.  § 16(d).  The sale may be 
conducted as a private sale, and creditors with valid secured claims may credit bid. § 
16(e). The Act also provides a safe harbor for purchasers, in case a party objects to the 
sale but fails to get a stay of the order approving the sale. § 16(f). Secured creditors are 
entitled to the proceeds of their collateral according to the priority rules established by 
law other than this Act, § 20(g), although the court may award the receiver the reasonable 
and necessary fees and expenses for carrying out the receiver’s duties.  § 21(a). 
 
 Executory Contracts and Unexpired Leases. With court approval, a receiver may adopt 
or reject an executory contract of the owner relating to receivership property.  § 17(b).  
The Act covers the mechanics for adoption or rejection of executory contracts. § 17(c).  8 
 
The receiver may also assign an adopted executory contract to the extent permitted by the 
contract and applicable law other than this Act, but free of so-called “ipso facto” clauses.  
§ 17(d), (f).  The Act specifies the consequences of a receiver’s rejection of an executory 
contract. § 17(e). The Act contains protections for purchasers in possession of real 
property or real property time share interests that are analogous to those contained in the 
Bankruptcy Code.  § 17(g).  The Act also limits the receiver’s ability to reject the 
unexpired lease of a tenant, permitting rejection of the lease only in very limited 
situations. § 17(h).   
 
 Immunity of Receiver. Consistent with the receiver’s status as an officer of the court, the 
Act provides the receiver with immunity for acts or omissions within the scope of the 
receiver’s appointment.  § 18(a).  Further, the Act incorporates the Barton doctrine and 
provides that a receiver cannot be sued personally for an act or omission in administering 
receivership property except with the approval of the appointing court.  § 18(b). 
 
 Claims. The Act requires the receiver to notify creditors of the appointment of the 
receiver unless the court orders otherwise, § 20(a), (e), and requires creditors to file 
claims with the receiver as a precondition to obtaining any distribution from receivership 
property or the proceeds of such property.  § 20(b).  The Act permits the receiver to 
recommend disallowance of claims.  § 20(e).  The Act also authorizes the court to forgo 
the filing of unsecured claims where the receivership property is likely to be insufficient 
to satisfy secured claims against the property.  § 20(f). 
 
 Receiver’s Reports.  The receiver must file interim reports (as directed by the court) and, 
on completion of the receiver’s duties, a final report.  §§ 19 and 23. 
 
 Ancillary Receivership. Where a receiver has been appointed by another state, the Act 
authorizes the court to appoint that person or its designee as an ancillary receiver for the 
purpose of obtaining possession, custody and control of receivership property located 
within this state.  § 24(a).  The Act also permits the court to enter any order necessary to 
effectuate an order of a court in another state appointing or directing a receiver.  § 24(b). 
 
 Receivership in Context of Mortgage Enforcement. The Act makes clear that the 
appointment of a receiver on request by a mortgagee or assignee of rents, and actions 
taken by the receiver, do not make the mortgagee or assignee of rents a “mortgagee in 
possession,” do not constitute an election of remedies or make the secured obligation 
unenforceable, and do not constitute an “action” within the meaning of a state’s “one-
action” rule.  § 25(a).  In a state with anti-deficiency rules, where a receiver conducts a 
sale of receivership property free and clear of a lien, the state’s anti-deficiency rules will 
apply to any person that held a lien extinguished by the sale to the same extent those rules 
would have applied after a foreclosure sale not governed by the Act.  § 25(b).  
   9 
 
UNIFORM COMMERCIAL REAL ESTATE RECEIVERS HIP ACT 
 SECTION 1.  SHORT TITLE. This [act] may be cited as the Uniform Commercial 
Real Estate Receivership Act. 
 SECTION 2.  DEFINITIONS. In this [act]: 
 (1)  “Affiliate” means: 
 (A) with respect to an individual: 
 (i) a companion of the individual; 
 (ii) a lineal ancestor or descendant, whether by blood or adoption, of: 
 (I) the individual; or 
 (II) a companion of the individual; 
 (iii) a companion of an ancestor or descendant described in clause (ii); 
 (iv) a sibling, aunt, uncle, great aunt, great uncle, first cousin, niece, 
nephew, grandniece, or grandnephew of the individual, whether related by the whole or the half 
blood or adoption, or a companion of any of them; or 
 (v) any other individual occupying the residence of the individual; and 
 (B) with respect to a person other than an individual: 
 (i) another person that directly or indirectly controls, is controlled by, or is 
under common control with the person; 
 (ii) an officer, director, manager, member, partner, employee, or trustee or 
other fiduciary of the person; or 
 (iii) a companion of, or an individual occupying the residence of, an 
individual described in clause (i) or (ii). 
 (2)  “Companion” means:  10 
 
 (A) the spouse of an individual; 
 (B) the [registered] domestic partner of an individual; or 
 (C) another individual in a civil union with an individual. 
 (3)  “Court” means [identify court of general equity jurisdiction in this state]. 
(4)  “Executory contract” means a contract, including a lease, under which each party has 
an unperformed obligation and the failure of a party to complete performance would constitute a 
material breach. 
(5)  “Governmental unit” means an office, department, division, bureau, board, 
commission, or other agency of this state or a subdivision of this state. 
(6)  “Lien” means an interest in property which secures payment or performance of an 
obligation. 
(7)  “Mortgage” means a record, however denominated, that creates or provides for a 
consensual lien on real property or rents, even if it also creates or provides for a lien on personal 
property. 
(8)  “Mortgagee” means a person entitled to enforce an obligation secured by a mortgage. 
(9)  “Mortgagor” means a person that grants a mortgage or a successor in ownership of 
the real property described in the mortgage. 
(10)  “Owner” means the person for whose property a receiver is appointed. 
(11)  “Person” means an individual, estate, business or nonprofit entity, public 
corporation, government or governmental subdivision, agency, or instrumentality, or other legal 
entity. 
(12)  “Proceeds” means the following property:  
 (A) whatever is acquired on the sale, lease, license, exchange, or other disposition  11 
 
of receivership property; 
 (B) whatever is collected on, or distributed on account of, receivership property;  
 (C) rights arising out of receivership property;  
 (D) to the extent of the value of receivership property, claims arising out of the 
loss, nonconformity, or interference with the use of, defects or infringement of rights in, or 
damage to the property; or  
 (E) to the extent of the value of receivership property and to the extent payable to 
the owner or mortgagee, insurance payable by reason of the loss or nonconformity of, defects or 
infringement of rights in, or damage to the property. 
(13)  “Property” means all of a person’s right, title, and interest, both legal and equitable, 
in real and personal property, tangible and intangible, wherever located and however acquired. 
The term includes proceeds, products, offspring, rents, or profits of or from the property.  
(14)  “Receiver” means a person appointed by the court as the court’s agent, and subject 
to the court’s direction, to take possession of, manage, and, if authorized by this [act] or court 
order, transfer, sell, lease, license, exchange, collect, or otherwise dispose of receivership 
property. 
(15)  “Receivership” means a proceeding in which a receiver is appointed. 
(16)  “Receivership property” means the property of an owner which is described in the 
order appointing a receiver or a subsequent order.  The term includes any proceeds, products, 
offspring, rents, or profits of or from the property. 
(17)  “Record”, used as a noun, means information that is inscribed on a tangible medium 
or that is stored on an electronic or other medium and is retrievable in perceivable form.   
(18)  “Rents” means:  12 
 
 (A) sums payable for the right to possess or occupy, or for the actual possession 
or occupation of, real property of another person; 
 (B) sums payable to a mortgagor under a policy of rental-interruption insurance 
covering real property; 
 (C) claims arising out of a default in the payment of sums payable for the right to 
possess or occupy real property of another person; 
 (D) sums payable to terminate an agreement to possess or occupy real property of 
another person; 
 (E) sums payable to a mortgagor for payment or reimbursement of expenses 
incurred in owning, operating, and maintaining real property or constructing or installing 
improvements on real property; or 
 (F) other sums payable under an agreement relating to the real property of another 
person which constitute rents under law of this state other than this [act]. 
(19)  “Secured obligation” means an obligation the payment or performance of which is 
secured by a security agreement. 
(20)  “Security agreement” means an agreement that creates or provides for a lien. 
(21)  “Sign” means, with present intent to authenticate or adopt a record: 
 (A) to execute or adopt a tangible symbol; or 
 (B) to attach to or logically associate with the record an electronic sound, symbol, 
or process. 
(22) “State” means a state of the United States, the District of Columbia, Puerto Rico, 
the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction 
of the United States.  13 
 
Comment 
1. “Affiliate.”  The Act uses the term to describe a person who is presumptively disqualified 
from serving as a receiver under Section 7 based on the person’s relationship with a party to the 
proceeding. The term is also used in conjunction with the Act’s scope exclusion for residential 
real property in Section 4(b). The definition derives from the Uniform Debt-Management 
Services Act (2011). 
 
2. “Companion.” The term means the spouse or [registered] domestic partner of an 
individual as well as another individual in a civil union with the individual.  This definition 
works in conjunction with the definition of “affiliate” to simplify that definition. 
 
 The Act defines the term “companion” broadly to account both for the recent past 
variation among the states in recognition of same-sex marriage and future uncertainty regarding 
the prevalence of domestic partnerships and civil unions in the wake of the Supreme Court’s 
decision in Obergefell v. Hodges, 135 S. Ct. 2584 (2015), recognizing a right to same-sex 
marriage under the U.S. Constitution. 
 
3. “Court.”  The Act defines the term to refer to the court of general equity jurisdiction 
within the state.  
 
4. “Executory contract.”  The Act defines the term to include an unexpired lease. The 
definition is similar to the one contained in the Minnesota receivership statute, Minn. Stat. Ann. 
§ 576.21(d), but with a slight modification to track the traditional “Countryman” formulation of 
the term more precisely. See, e.g., Countryman, Executory Contracts in Bankruptcy: Part I, 57 
Minn. L. Rev. 439, 460 (1973) (executory contract is one under which the obligation of both 
parties “are so far unperformed that the failure of either to complete performance would 
constitute a material breach excusing the performance of the other”). 
 
5.  “Governmental unit.”  In this Act, the term “governmental unit” is used to describe state 
or municipal entities capable of exercising regulatory and police powers. See Minn. Stat. Ann. § 
576.21(t).  
 
6. “Lien.”  The Act defines “lien” to include any voluntary and involuntary interest in 
property securing an obligation, and includes a security interest. 
 
7. “Mortgage.”  The Act defines “mortgage” to mean any record, however denominated, 
that creates a security interest in real property.  The term includes a deed of trust, a deed to 
secure debt, and an assignment of rents and leases. It also includes an installment land contract in 
a state that treats an installment land contract as creating a security interest. 
 
8. “Mortgagee.”  The Act defines the term to include any person holding a mortgage. The 
term includes an assignee of rents. 
 
9. “Mortgagor.”  The Act defines “mortgagor” to mean the person granting a mortgage and 
any successor owner of the mortgaged real property. The term includes an assignor of rents.   14 
 
10. “Owner.”  The Act defines “owner” to mean the person over whose property the receiver 
is appointed. 
 
11. “Person.”  The Act uses the standard ULC definition. 
 
12. “Proceeds.”  The Act defines proceeds in a fashion consistent with its definition under 
Uniform Commercial Code § 9-102(a)(64). 
 
13. “Property.”  The Act defines the term broadly to include all legally-recognized interests.  
“Personal property” includes both tangible and intangible property.  
 
14. “Receiver.”  The definition derives from Minn. Stat. Ann. § 576.21(p).  
 
15. “Receivership.”  The definition derives from Minn. Stat. Ann. § 576.21(q).  
 
16. “Receivership property.”  The definition derives from Minn. Stat. Ann. § 576.21(r). The 
term encompasses all property that is described in the order appointing the receiver, any 
subsequent order of the court, and all rents and proceeds of that property.  
 
17. “Record.”  The Act uses the media-neutral term “record” as a noun to include both 
written and electronic documents. The limitation of the definition to use of “record” as a noun 
avoids confusion due to the customary use of the term “record” as a verb in real estate practice. 
 
18. “Rents.”  This definition is largely identical to the definition used in the Uniform 
Assignment of Rents Act, and refers to sums that are payable (but not yet paid) on account of the 
right to occupy land. Once those sums have been paid by the occupier or on the occupier’s 
account, the sums paid constitute “proceeds” of receivership property as defined in § 2(12). 
 
 Because this Act’s scope exclusion for residential property depends on whether the 
resident is collecting rents from a non-affiliate, the definition of “rents” delineates the Act’s 
scope with clarity. Likewise, the definition is needed because the owner’s failure to turn over 
rents that a mortgagee is entitled to collect provides grounds for the appointment of a receiver 
under § 6(b). 
 
19. “Secured obligation.”  The Act uses this term, which is commonly used in other real 
estate-related acts, see, e.g., Uniform Assignment of Rents Act § 2(13); Uniform Residential 
Mortgage Satisfaction Act § 102(15), rather than the term “mortgage debt.”  
 
20. “Security agreement.”  The Act uses this term to include any agreement that creates or 
provides for a lien. The term includes a mortgage as defined in Section 2(7). 
 
21. “Sign.”  The Act uses the media-neutral version of the term commonly used in other 
recent Uniform Acts. 
 
22. “State.”  The Act uses the standard ULC definition.  15 
 
 SECTION 3.  NOTICE AND OPPORTUNITY FOR HEARING. 
 (a)  Except as otherwise provided in subsection (b), the court may issue an order under 
this [act] only after notice and opportunity for a hearing appropriate in the circumstances. 
 (b)  The court may issue an order under this [act]: 
 (1) without prior notice if the circumstances require issuance of an order before 
notice is given; 
 (2) after notice and without a prior hearing if the circumstances require issuance 
of an order before a hearing is held; or 
 (3) after notice and without a hearing if no interested party timely requests a 
hearing. 
Comment 
1. Principles of due process and fairness in judicial administration require that persons 
affected by a receivership should have notice and an opportunity to be heard before a final 
determination of their legal rights and responsibilities. However, because receivership is a 
flexible remedy based in equity, it is not appropriate to require a uniform type of notice, a 
uniform duration of notice, or a hearing prior to every determination made in the administration 
of a receivership.   
 
Consistent with due process requirements, Section 3(a) incorporates the idea that any 
court order under this Act—from the order appointing the receiver to the order discharging the 
receiver—may be made only “after notice and opportunity for a hearing.” Section 3(a) expresses 
this concept, however, in a flexible fashion that permits the court to require notice and 
opportunity for a hearing that is appropriate in the particular circumstances. 
  
 For example, when a receiver proposes to sell property free and clear of liens under 
Section 16, there are no plausible circumstances that would require such a sale to occur without 
notice to interested persons and without the opportunity for a hearing at which a party objecting 
to the sale may be heard as to the basis for the party’s objection. Thus, a court should not issue 
an order approving such a sale without prior notice to interested persons and the actual conduct 
of a hearing on the proposed merits of the sale terms.  
 
By contrast, in many circumstances, such as when the court is approving a routine 
periodic report by the receiver, the court might require prior notice to interested persons, but 
might indicate that no hearing would be held before the court’s entry of the order unless an 
interested party requested a hearing in a timely fashion.   16 
 
The Act does not dictate a particular time period for the conduct of a hearing following 
notice, but leaves such procedural matters to the state’s existing court rules and procedures. 
 
2. Section 3 recognizes the possibility that in some circumstances, a court might enter an 
order appointing or directing a receiver on an ex parte basis (without prior notice).  The Act does 
not list all of the circumstances in which an interested party can obtain ex parte relief, and any 
attempt to provide a comprehensive list would undoubtedly fail to foresee some circumstance in 
which ex parte relief would be justified. Instead, Section 3 makes clear that an ex parte order is 
appropriate only if the circumstances require that the court issue an order before notice can be 
given or a hearing held. As a matter of best practices, the order appointing the receiver should 
specify the particular circumstances justifying ex parte relief. 
 
In cases of ex parte appointment, principles of due process require that notice be given 
after the order is entered and that prompt opportunity for a post-order hearing be provided. See, 
e.g., Mitchell v. W.T. Grant Co., 416 U.S. 600 (1974). Thus, for example, if the court orders the 
appointment of a receiver for mortgaged property on an ex parte basis, without prior notice to the 
mortgagor or the opportunity for a hearing prior to appointment, the court’s order should identify 
the particular circumstances justifying ex parte relief, and the court should conduct a hearing 
within a reasonable time to determine whether appointment of the receiver was justified. 
 
 In the context of requests for ex parte appointment of a receiver, the court must consider 
Section 3 in conjunction with Section 6.  First, Sections 6(a) and (b) set forth the standards 
justifying the appointment of a receiver, including the effect of a contractual agreement in a 
mortgage under which the mortgagor consented to the appointment of a receiver following 
default. Second, Section 6(c) permits the court to require a party seeking ex parte appointment of 
a receiver to post a bond in an amount specified by the court to protect the owner against damage 
suffered by the owner if the court determines following a post-appointment hearing that 
appointment of the receiver was improvident.    
 
 SECTION 4.  SCOPE; EXCLUSIONS. 
 (a)  Except as otherwise provided in subsection (b) or (c), this [act] applies to a 
receivership for an interest in real property and any personal property related to or used in 
operating the real property. 
 (b)  This [act] does not apply to a receivership for an interest in real property improved 
by one to four dwelling units unless: 
 (1) the interest is used for agricultural, commercial, industrial, or mineral-
extraction purposes, other than incidental uses by an owner occupying the property as the 
owner’s primary residence;  17 
 
 (2) the interest secures an obligation incurred at a time when the property was 
used or planned for use for agricultural, commercial, industrial, or mineral-extraction purposes; 
 (3) the owner planned or is planning to develop the property into one or more 
dwelling units to be sold or leased in the ordinary course of the owner’s business; or 
 (4) the owner is collecting or has the right to collect rents or other income from 
the property from a person other than an affiliate of the owner. 
 (c)  This [act] does not apply to a receivership authorized by law of this state other than 
this [act] in which the receiver is a governmental unit or an individual acting in an official 
capacity on behalf of the unit [except to the extent provided by the other law]. 
(d)  This [act] does not limit the authority of a court to appoint a receiver under law of 
this state other than this [act]. 
(e)  Unless displaced by a particular provision of this [act], the principles of law and 
equity supplement this [act]. 
Legislative Note: In many states, there are statutes under which a governmental unit or official 
may be appointed as a receiver for an organization such as a hospital, insurance company, or 
other organization affected with a public interest. This act generally would not govern the 
receivership, but the bracketed language at the end of subsection (c) would permit a state to 
modify its existing receivership statute to incorporate some or all provisions of this act.  
   
Comment 
1. Subsection (a) provides that except to the extent Section 4 otherwise limits, the Act 
governs receivership of real property and any personal property that is related to the real property 
or used in its operation. Thus, for example, if the mortgagee of real estate used by the mortgagor 
as a hotel sought the appointment of a receiver following the mortgagor’s default, the court could 
appoint a receiver under this Act for both the real estate and any personal property of the owner 
used in the operation of the hotel (e.g., furnishings, food/beverage inventories, franchise 
agreement, and accounts receivable). In a receivership for an owner engaged in farming 
operations on land, the court could appoint a receiver for the owner’s interest in the land, 
growing crops, farm equipment, and other farm products. Likewise, owners of natural resource 
development projects often finance their operations through large credit facilities which include 
real property collateral (the mineral estate and/or the surface estate), personal property collateral, 
and fixtures. The court could appoint a receiver under this Act for all of the real and personal  18 
 
property assets the owner used in or related to operating such a project.  
 
 If mineral rights have not been severed from the surface estate, appointment of a receiver 
for the surface estate would include the unsevered mineral rights.  If mineral rights have been 
severed and the court appoints a receiver for the owner of the mineral rights, the receivership 
property would include the mineral rights, but would include no rights in the surface estate other 
than easement or other use rights associated with ownership of the mineral rights. In such a case, 
the receiver (subject to express direction from the court) either could exploit the mineral rights or 
market and sell the mineral rights using the receiver’s power under Section 16 of this Act.   
 
2. Subsection (b) provides the Act’s primary scope exclusion. In general, the Act is intended 
to apply to property that is “commercial” in nature. This does not mean that the Act cannot apply 
to “residential” property. Any dichotomy between “commercial” and “residential” property is 
essentially false. Not only can parcels of land be subject to mixed uses, but if property is 
occupied by someone other than its owner, property that is “residential” from the perspective of 
the tenant is essentially commercial property in the hands of its owner (e.g., the landlord). 
Section 4(b) thus establishes the scope of this Act based on a different dichotomy, distinguishing 
between commercial property (appropriately subject to this Act) and consumer property (to 
which this Act would not apply). 
 
For this reason, subsection (b) provides that under this Act, the court may not appoint a 
receiver for an interest in real property improved with one to four dwelling units, unless (1) the 
interest is used for agricultural, commercial, industrial, or mineral extraction purposes, other than 
incidental uses by an owner occupying the property as the owner’s primary residence; (2) the 
interest secures an obligation incurred at a time when the property was used or planned for use 
for agricultural, commercial, industrial, or mineral extraction purposes; (3) the owner planned or 
is planning to develop the property into one or more dwelling units to be sold or leased in the 
ordinary course of the owner’s business; or (4) the owner is collecting or has the right to collect 
rents or other income from the property from a person other than an affiliate of the owner. 
Property that is improved by one to four dwelling units, but falls into one of these four 
categories, is essentially “commercial” in nature and thus is covered by this Act. 
 
The following examples demonstrate the application of subsection (b): 
 
Example 1. Henning owns a 25-unit apartment building subject to a mortgage in favor of 
Bank. Henning goes into default on the mortgage, and Bank seeks the appointment of a 
receiver. If the circumstances justify the appointment of a receiver under the standards in 
Section 6, the court may appoint a receiver under this Act. Because the land is improved 
by more than four dwelling units, subsection (b)’s scope limitation does not apply.  
 
Example 2. Henning owns 640 acres of farmland subject to a mortgage in favor of Bank. 
Henning grows corn and soybeans on the land as part of a farming operation, and lives in 
a single-family home located on the land. Henning goes into default on the mortgage, and 
Bank seeks the appointment of a receiver. If the circumstances justify the appointment of 
a receiver under the standards in Section 6, the court may appoint a receiver under this 
Act. Although Henning occupies the property as his personal residence, he uses it for  19 
 
agricultural purposes that are not incidental to his residential occupancy within the 
meaning of subsection (b)(1).   
 
Example 3. Henning owns 640 acres of farmland subject to a mortgage granted to Bank 
at a time when Henning grew corn and soybeans on the land as part of a farming 
operation, and lives in a single-family home located on the land. Henning goes into 
default on the mortgage after ceasing farming operations, and Bank seeks the 
appointment of a receiver. If the circumstances justify the appointment of a receiver 
under the standards in Section 6, the court may appoint a receiver under this Act. 
Although Henning occupies the property as his personal residence, he used it for non-
incidental agricultural purposes at the time he granted the mortgage to Bank. Thus, under 
subsection (b)(2), the property does not fall within the general scope exclusion for 
property improved by one to four dwelling units.  
 
Example 4. Henning owns and occupies a single-family home on 5 acres of land, subject 
to a mortgage in favor of Bank. On the land, Henning maintains a garden in which he 
grows vegetables for the consumption of his family and friends. Henning goes into 
default on the mortgage, and Bank seeks the appointment of a receiver. The court may 
not appoint a receiver under this Act.  Henning occupies the home as his personal 
residence, and his agricultural activity is incidental to his residential use within the 
meaning of subsection (b)(1). 
 
Example 5. Henning owns an unoccupied single-family home on one acre of land, 
subject to a mortgage in favor of Bank. Henning goes into default on the mortgage, and 
Bank seeks the appointment of a receiver. The court may not appoint a receiver under this 
Act.  Although Henning does not occupy the property as his personal residence, it does 
not fall into any of the four categories articulated in subsection (b) and is thus 
“residential” in nature (even if not currently subject to residential use). 
 
Example 6. Same as Example 5, except that the home is occupied by Gabriel, an 
unrelated friend to whom Henning leased the home for an agreed rental of $1,000/month. 
If the circumstances justify the appointment of a receiver under the standards in Section 
6, the court may appoint a receiver under this Act. Although Gabriel’s use of the home is 
residential in nature, Henning’s right to collect rents from Gabriel is commercial activity 
that brings the property within the intended scope of this Act. Thus, under subsection 
(b)(4), the property does not fall within the general scope exclusion for property 
improved by one to four dwelling units. 
 
Example 7. Same as Example 5, except the home is occupied by Henning’s son Andrew, 
to whom Henning leased the home for an agreed rental of $500/month. The court may not 
appoint a receiver under this Act. Even though Henning has a right to collect rents from 
Andrew, his doing so in the context of a family transaction is not “commercial” activity 
within the intended scope of the Act. 
 
Example 8. Henning owns a 20-acre parcel of undeveloped land, subject to a mortgage 
in favor of Bank. Henning goes into default on the mortgage, and Bank seeks the  20 
 
appointment of a receiver. If the circumstances justify the appointment of a receiver 
under the standards in Section 6, the court may appoint a receiver under this Act.  
Because the land is not improved by any dwelling unit (and thus is not residential in 
nature), subsection (b)’s scope limitation does not apply. 
 
Example 9. Same as example 8, except that Henning acquired the land with the specific 
intent of eventually building a home on the land that he would occupy in his retirement. 
If the circumstances justify the appointment of a receiver under the standards in Section 
6, the court may appoint a receiver under this Act. Because the land is not currently 
improved by a dwelling unit (and thus is not residential in nature), notwithstanding 
Henning’s future intent to use the land for residential purposes, subsection (b)’s scope 
limitation does not apply. 
 
Example 10. Henning owns 1000 acres of land, subject to a mortgage in favor of Bank. 
Henning subdivided the property and began constructing homes for sale, but the 
development failed and Henning defaulted after completing only two homes. Henning 
goes into default on the mortgage, and Bank seeks the appointment of a receiver. If the 
circumstances justify the appointment of a receiver under the standards in Section 6, the 
court may appoint a receiver under this Act. Even though the land is improved with only 
two dwelling units, Henning’s development is clearly commercial in character.  Thus, 
under subsection (b)(3), the property does not fall within the general scope exclusion for 
property improved by one to four dwelling units. 
 
Example 11. Henning owns a parcel of land, subject to a mortgage in favor of Bank, on 
which he built a “spec” home that remains unsold. Henning goes into default on the 
mortgage, and Bank seeks the appointment of a receiver. If the circumstances justify the 
appointment of a receiver under the standards in Section 6, the court may appoint a 
receiver under this Act. Even though the land is improved with only one dwelling unit, 
Henning’s development of the land is commercial in nature. Thus, under subsection 
(b)(3), the property does not fall within the general scope exclusion for property 
improved by one to four dwelling units. 
 
Example 12. Same as Example 11, except that Henning moves into the home and 
occupies it as a residence while trying to sell it. If the circumstances justify the 
appointment of a receiver under the standards in Section 6, the court may appoint a 
receiver under this Act. Under subsection (b)(1), Henning’s continuing attempts to sell 
the property constitute a commercial use within the intended scope of this Act, despite his 
temporary occupation of the property as a residence. Likewise, under subsection (b)(3), 
because Henning originally constructed the home for sale in the ordinary course, 
Henning’s development of the land is commercial in nature. Thus, the property does not 
fall within the general scope exclusion for property improved by one to four dwelling 
units. 
 
Example 12 demonstrates the general principle that under this Act, if a person owns land 
that is within the scope of this Act, that person cannot simply remove the land from the scope of 
this Act merely by moving onto the land and beginning to occupy it as a residence.     21 
 
Example 13. Henning owns and occupies a home on one acre of land subject to a 
mortgage in favor of Bank. Henning supports himself on his profits from “day trading,” 
buying and selling stocks for his personal portfolio. He engages in his day trading 
activities on the internet from one of the bedrooms in the home. Henning defaults on the 
mortgage, and Bank seeks the appointment of a receiver. The court may not appoint a 
receiver under this Act. The land is improved by one dwelling unit, and Henning’s day-
trading activities should be considered incidental to his occupancy of the home as his 
primary residence within the meaning of subsection (b)(1). 
 
For purposes of subsection (b)(4), an owner “has the right to collect rents or other 
income” only if the owner has a legally enforceable agreement (e.g., a lease, license, or other 
form of occupancy agreement) under which another person has the right to occupy the property. 
 
Example 14. Henning owns a vacation home subject to a mortgage in favor of Bank.  
Henning owns the vacation home for the exclusive use of himself, his family, and his 
guests (from whom he collects no rent). Henning defaults on the mortgage, and Bank 
seeks the appointment of a receiver. The court may not appoint a receiver under this Act. 
The land is improved by one dwelling unit; further, Henning has not entered into any 
occupancy agreements and does not have the “right to collect rents” within the meaning 
of subsection (b)(4). Thus, the land is not commercial in character and does not fall 
within the intended scope of the Act.  
 
Example 15. Same facts as Example 14, except that Henning rents the house (to persons 
unrelated to him) for one-week rentals during periods in which Henning is not using the 
home. If the circumstances justify the appointment of a receiver under the standards in 
Section 6, the court may appoint a receiver under this Act. Although the land is improved 
by one dwelling unit, Henning has the right to collect rents from nonaffiliates within the 
meaning of subsection (b)(4). Thus, his use of the property is commercial in nature and 
brings the property within the intended scope of the Act. 
 
It is possible that the owner of a building containing two, three, or four dwelling units can 
occupy one of the units as his or her primary residence while leasing the other unit(s). Under 
subsection (b)(4), if the owner leases the other unit(s) to nonaffiliates, the owner’s use of the 
property is generally commercial in nature and is thus within the intended scope of the Act. 
 
Example 16.  Henning owns a duplex subject to a mortgage in favor of Bank. He 
occupies one of the units as his personal residence and leases the other unit to his friend 
Gabriel at an agreed rent of $1000. Henning and Gabriel are not related. Henning defaults 
on the mortgage and Bank seeks the appointment of a receiver.  If the circumstances 
justify the appointment of a receiver under the standards in Section 6, the court may 
appoint a receiver under this Act. Although the land is improved by two dwelling units 
and Henning occupies one unit as his primary residence, Henning has the right to collect 
rent from Gabriel within the meaning of subsection (b)(4), bringing the property within 
the intended scope of this Act.  
 
As Example 16 demonstrates, the court may appoint a receiver for a duplex, triplex, or quadplex  22 
 
in which the owner occupies one unit as the owner’s primary residence and leases out the other 
unit(s). In such a case, while this Act does authorize the court to appoint a receiver for the entire 
building, the Act does not address whether the receiver may eject the owner from occupancy of 
the owner’s unit during the receivership, or charge the owner rent for the owner’s continued 
occupation of the unit. The Act leaves resolution of these questions to other applicable law. See, 
e.g., Restatement (Third) of Property: Mortgages § 4.3, comment d (receiver “may not collect 
rent or a use or occupancy charge from a mortgagor who actually occupies the premises and is 
personally liable on the mortgage obligation”).  
 
3. The exclusion of residential property from the Act does not mean that a court could never 
appoint a receiver for such a property.  Instead, the exclusion in subsection (b) means only that 
this Act may not be used to be appoint a receiver.  A court could appoint a receiver for such 
residential property under other state law, if other state law would permit appointment of a 
receiver for residential property under the circumstances. For this reason, subsection (d) makes 
clear that this Act does not provide the exclusive basis by which a court may appoint a receiver. 
 
Further, the mere fact that land is within the scope of this Act does not justify the 
appointment of a receiver. The court should appoint a receiver for property within the scope of 
this Act only if the court concludes that the standards for appointment in Section 6 have been 
satisfied. 
 
4. Subsection (c) addresses the relationship of this Act to existing statutory regimes for the 
appointment of receivers for certain entities.  See, e.g., N.H. Rev. Stat. § 401-B:11 (authorizing 
receivership of an insurance company).  The provisions of this Act do not apply to appointment 
of a receiver under an existing statutory regime, except to the extent that the other statutory 
regime or other law so provides. The bracketed language in subsection (c), by requiring the 
authorization to come from other law, reflects that the Act does not by itself authorize courts to 
apply the provisions of the Act by analogy to cases outside the Act’s scope. 
 
SECTION 5.  POWER OF COURT . The court that appoints a receiver under this [act] 
has exclusive jurisdiction to direct the receiver and determine any controversy related to the 
receivership or receivership property. 
Legislative Note: This section is appropriate in a state where a court in one county, circuit, or 
district may issue orders with statewide effect and has the power to act on property located in 
another county, circuit, or district within the state. In a state where a court in one county, circuit, 
or district may appoint a receiver but an order entered by the court in that county, circuit, or 
district lacks statewide effect, the state should modify this section to make clear that an order of 
a court appointing a receiver under this act has statewide effect.  23 
 
Comment 
1. Section 5 provides a statement of the court’s powers in the context of a receivership. It is 
a substantial adaptation of Minnesota’s receivership statute, Minn. Stat. Ann. § 576.23. Under 
this section, the court has the authority to determine all controversies relating to the collection, 
preservation, improvement, disposition and distribution of receivership property, as well as all 
matters arising in or relating to the receivership, the receivership property, the exercise of the 
receiver’s powers, or the performance of the receiver’s duties.  See also Wash. Rev. Code Ann. § 
7.60.055(1).  
 
 Section 5 focuses only on the court’s exclusive judicial authority over the receiver and 
the receivership property.  Section 5 does not displace the exercise of legitimate police powers 
over the receiver or receivership property. 
 
2. In some circumstances, a creditor may ask a court to appoint a receiver for an owner with 
property located in multiple states. For example, suppose Bank holds mortgages on Owner’s 
farm, which is located on contiguous parcels, one located in State A and the other in State B.  At 
Bank’s request, State A appoints a receiver under this Act. Section 5 of this Act does not 
authorize the receiver appointed to take possession and control of the portion of the farm located 
in State B, even if the order appointing the receiver nominally identifies the entire farm as 
receivership property. If a court appoints a receiver in State A and the receiver wants to take 
possession and control of property located in State B, the receiver must obtain appointment as an 
ancillary receiver in State B. Section 12(a)(8) makes clear that the receiver has the power under 
this Act to seek appointment as an ancillary receiver for property located in another state. 
 
 Likewise, at the time a receiver is appointed in this state, there could be pending litigation 
in another state involving the owner or the owner’s property. Section 5 does not expand the 
court’s subject matter jurisdiction to permit the court to direct a court of another jurisdiction in 
the resolution of pending litigation. Section 5 does, however, give the court the exclusive 
jurisdiction to direct the receiver as to how the receiver can or should respond to pending 
litigation in another state that might be relevant to the receivership.  
 
3. In at least one state (Kentucky), while there is existing ancient case law that does confirm 
that the court may empower a receiver to act with respect to receivership property located 
anywhere within the boundaries of the same state, some judges nevertheless hesitate to recognize 
a receiver’s ability to act outside the county in which he or she was appointed without express 
statutory authority. As reflected in the Legislative Note, in states where certain county, district, 
or circuit courts lack the ability to issue orders with statewide effect, Section 5 should be revised 
to permit a court’s orders in receiverships covered by this Act to have statewide effect. 
 
4. This Act does not address the extent to which a person has a right to jury trial in the 
resolution of a controversy pending in the receivership court. The Act leaves this question to 
other applicable law. 
  24 
 
 SECTION 6. APPOINTMENT OF RECEIVER.  
(a)  The court may appoint a receiver: 
 (1) before judgment, to protect a party that demonstrates an apparent right, title, or 
interest in real property that is the subject of the action, if the property or its revenue-producing 
potential: 
 (A) is being subjected to or is in danger of waste, loss, dissipation, or 
impairment; or   
 (B) has been or is about to be the subject of a voidable transaction;   
(2) after judgment:   
(A) to carry the judgment into effect; or 
(B) to preserve nonexempt real property pending appeal or when an 
execution has been returned unsatisfied and the owner refuses to apply the property in 
satisfaction of the judgment; [or] 
 (3) in an action in which a receiver for real property may be appointed on 
equitable grounds[; or  
 (4) during the time allowed for redemption, to preserve real property sold in an 
execution or foreclosure sale and secure its rents to the person entitled to the rents]. 
(b) In connection with the foreclosure or other enforcement of a mortgage, [a mortgagee 
is entitled to appointment of][the court may appoint] a receiver for the mortgaged property if: 
 (1) appointment is necessary to protect the property from waste, loss, transfer, 
dissipation, or impairment; 
 (2) the mortgagor agreed in a signed record to appointment of a receiver on 
default;   25 
 
 (3) the owner agreed, after default and in a signed record, to appointment of a 
receiver; 
 (4) the property and any other collateral held by the mortgagee are not sufficient 
to satisfy the secured obligation; 
 (5) the owner fails to turn over to the mortgagee proceeds or rents the mortgagee 
was entitled to collect; or 
 (6) the holder of a subordinate lien obtains appointment of a receiver for the 
property. 
(c)  The court may condition appointment of a receiver without prior notice under Section 
3(b)(1) or without a prior hearing under Section 3(b)(2) on the giving of security by the person 
seeking the appointment for the payment of damages, reasonable attorney’s fees, and costs 
incurred or suffered by any person if the court later concludes that the appointment was not 
justified. If the court later concludes that the appointment was justified, the court shall release 
the security. 
Legislative Note: Subsection (a)(4) permits the court to appoint a receiver for the property and 
its rents during the redemption period. It would be appropriate in a state that provides a post-
sale statutory redemption right. 
 
Subsection (b) includes bracketed alternatives. Under the first, a mortgagee is entitled to 
appointment of a receiver in the six circumstances listed in subsection (b).  Under the second, 
these six circumstances would justify appointment of a receiver, but appointment would be 
subject to the court’s discretion rather than an entitlement. Under Section 7 of the Uniform 
Assignment of Rents Act (UARA), an assignee of rents is entitled to appointment of a receiver 
under the circumstances expressed in subsection (b). Thus, in a jurisdiction that has enacted 
UARA, subsection (b) should use the first bracketed alternative to avoid the risk that adoption of 
this act might create an implied repeal of UARA Section 7. Even if a jurisdiction has not adopted 
UARA, it may still wish to enact the first bracketed alternative. 
 
Comment 
1. Historically, courts treated the appointment of a receiver as “an equitable remedy and not 
a substantive right.” 1 Clark on Receivers, § 46, at 48 (3d ed. 1959).  As the Clark treatise stated:  26 
 
The appointment of a receiver is the means and not the end. . . .  Before a court will 
appoint a receiver the litigant must bring a proper suit before the court and claim a 
substantive right has been violated, and the court at its discretion appoints a receiver to 
preserve the res in order that it may respond to the adjudication by the court concerning 
the substantive right claimed by the party asking for a receiver.  The appointment of a 
receiver in itself determines no substantive right. 
 
Id. § 48, at 52.  As such, courts traditionally held that there was no specific right to the 
appointment of a receiver, as the power of appointment “is a delicate one … to be exercised with 
great circumspection” by the court, which had to be “satisfied by affidavit or other suitable 
evidence that a receiver is necessary to preserve the property, or in exceptional cases administer 
the property, having in mind the rights and interests of all parties.”  Id. § 49, at 53.    
 
 Consistent with this historical approach, section 6(a) describes the types of cases in which 
a court may appoint a receiver pursuant to this act, and is based on a compilation of numerous 
existing receivership statutes. In each of the situations reflected in subsection (a), the 
determination that circumstances exist to justify the appointment of a receiver for the owner’s 
property is left to the court’s discretion.  
 
 Subsection (a)(3) authorizes the court to appoint a receiver under this Act in cases in 
which courts of this state have appointed or may appoint receivers for real property on equitable 
grounds.  This includes (but is not limited to) the insolvency of the owner of the real property, 
whether equitable (i.e., the owner’s inability to pay its debts when due) or in balance-sheet terms 
(i.e., when the amount of the owner’s liabilities exceed the value of the owner’s assets). 
 
 Subsection (a)(4) is appropriate in states that provide a post-sale statutory redemption 
right, and would permit the court to appoint a receiver for the property and its rents during the 
redemption period. 
 
2. As the Clark treatise explained, courts traditionally held that “[s]ince no litigant can force 
a judge to do a judicial act … no litigant has an absolute right to have the court take another’s 
property into its custody by the appointment of a receiver.” 1 Clark on Receivers, § 48, at 52 (3d 
ed. 1959).  Nevertheless, it is quite common for mortgage loan documents to contain 
“receivership clauses” under which the mortgagor consents to the appointment of a receiver after 
default, without regard to whether the mortgaged property is subject to waste or whether it 
provides adequate security for repayment of the mortgage debt.  Because appointment of a 
receiver traditionally was within the court’s equitable discretion, some courts have refused to 
appoint a receiver — despite the presence of a receivership clause — in cases where they would 
have denied appointment of a receiver otherwise.  See, e.g., Dart v. Western Sav. & Loan Ass’n, 
438 P.2d 407 (Ariz. 1968); Chromy v. Midwest Fed. Sav. & Loan Ass’n, 546 So.2d 1172 (Fla. Ct. 
App. 1989); Sazant v. Foremost Invsts., N.V., 507 So.2d 653 (Fla. Ct. App. 1987) (receivership 
clause not binding on court where mortgagor had not committed waste and default did not place 
mortgagee at serious risk of noncollection); Gage v. First Fed. Sav. & Loan Ass’n, 717 F. Supp. 
745 (D. Kan. 1989); Barclays Bank, P.L.C. v. Davidson Ave. Assocs., Ltd., 644 A.2d 685 (N.J. 
Super. Ct. 1994) (receivership clause “usurps the judicial function” and thus violates public 
policy).    27 
 
 Other courts have treated receivership clauses as presumptively but not conclusively 
enforceable.  Barclays Bank v. Superior Court, 137 Cal. Rptr. 743 (Cal. Ct. App. 1977); 
Riverside Props. v. Teachers Ins. & Annuity Ass’n, 590 S.W.2d 736 (Tex. Ct. App. 1979); Okura 
& Co. v. Careau Group, 783 F. Supp. 482 (C.D. Cal. 1991); Wellman Sav. Bank v. Roth, 432 
N.W.2d 697 (Iowa Ct. App. 1988).   
 
 By contrast, there is significant recent authority supporting the view that a receivership 
clause alone provides a sufficient basis to appoint a receiver after the mortgagor’s default.  See, 
e.g., Bank of America Nat’l Trust & Sav. Ass’n v. Denver Hotel Ass’n Ltd. Partn., 830 P.2d 1138 
(Colo. Ct. App. 1992); Fleet Bank v. Zimelman, 575 A.2d 731 (Me. 1990); Metropolitan Life Ins. 
Co. v. Liberty Ctr. Venture, 650 A.2d 887 (Pa. Super. Ct. 1994); Federal Home Loan Mortg. 
Corp. v. Nazar, 100 B.R. 555 (D. Kan. 1989). Likewise, federal courts have routinely held 
receivership clauses in federally insured mortgages sufficient to justify the appointment of a 
receiver.  See, e.g., United States v. Berk & Berk, 767 F. Supp. 593 (D. N.J. 1991); United States 
v. Drexel View II, Ltd., 661 F. Supp. 1120 (N.D. Ill. 1987).  
 
 Consistent with this recent authority, both the Restatement (Third) of Property: 
Mortgages and the Uniform Assignment of Rents Act take the view that a mortgagee/assignee of 
rents is “entitled” to the appointment of a receiver if the loan documents contain a clause under 
which the mortgagor consented to appointment.  Restatement (Third) of Property: Mortgages § 
4.3(b); UARA § 7(a). Furthermore, some state statutes explicitly make clear that the mortgagee 
is entitled to a receiver following default as a matter of right.  See, e.g., Ind. Code § 32-30-5-1 
(court “shall” appoint a receiver if “either the mortgagor or the owner of the property has agreed 
in the mortgage or in some other writing to the appointment of a receiver”); Minn. Stat. Ann. § 
559.17, subd. 2 (if assignment of rents contains receivership clause, “the court shall, without 
regard to waste, adequacy of the security, or solvency of the mortgagor, appoint a receiver”); 
N.Y. Real Prop. Law § 254(10) (receivership clause “must be construed as meaning that the 
mortgagee, his heirs, successors or assigns, in any action to foreclose the mortgage, shall be 
entitled, without notice and without regard to adequacy of any security of the debt, to the 
appointment of a receiver of the rents and profits of the premises covered by the mortgage”); N. 
Mex. Stat. Ann. § 44-8-4(A) (court “shall appoint a receiver in an action by a mortgagee or 
secured party … where such mortgage, security agreement, contract or other written agreement 
provides for the appointment of a receiver”). 
 
 Consistent with this recent trend, the first bracketed alternative in subsection (b) tracks 
the comparable provision of § 7 of the Uniform Assignment of Rents Act.  Under this alternative, 
a person seeking appointment of a receiver is entitled to a receiver as a matter of right in a 
proceeding to foreclosure a mortgage or enforce an assignment of rents if one or more of the 
following conditions exists:  (1) appointment is necessary to protect the mortgaged property or 
rents arising from the property from waste, loss, transfer, or dissipation; (2) the loan documents 
contain a receivership clause; (3) the owner otherwise consents; (4) the property’s value is not 
sufficient to satisfy the secured obligation; (5) the owner has failed to turn over rents that the 
creditor is entitled to collect; or (6) a subordinate creditor has obtained the appointment of a 
receiver for the property. Under the second bracketed alternative, the presence of one or more of 
these six factors is grounds for appointment in the court’s discretion.  The Legislative Note 
makes clear that in jurisdictions that have enacted the Uniform Assignment of Rents Act, the  28 
 
state should make certain that Section 6(b) adopts the “matter of right” alternative, so as to avoid 
any possibility that the enactment of this Act might work an implied repeal of the provisions of 
UARA Section 7. Likewise, in states in which statutory law or case law makes appointment of a 
receiver mandatory in certain cases involving mortgage enforcement, the first bracketed 
alternative should be adopted to facilitate the Act’s consistency with existing state law. Even a 
state that currently has no rule of law making the appointment of a receiver mandatory in some 
cases nevertheless may choose to enact the first bracketed alternative. 
 
3. Traditionally, the appointment of a receiver was an ancillary remedy sought in the 
context of a pending court proceeding.  See, e.g., 1 Clark on Receivers § 75, at 106 (3d ed. 1959) 
(“An order appointing a receiver … presupposes a pending suit.”). In the context of a mortgage 
foreclosure, the need for a pending action (to which the receivership could be ancillary) posed no 
obstacle in judicial foreclosure states, as the foreclosing mortgagee could seek the appointment 
of a receiver in the foreclosure action.  In nonjudicial foreclosure states, however, there might be 
no pending action to which a receivership motion could be made on an ancillary basis.  In such 
states, strict adherence to the traditional approach required the foreclosing mortgagee to bring an 
action for specific performance of its assignment of rents before the mortgagee could then file a 
motion for the appointment of a receiver. 
 
 Subsection (b) authorizes the court to appoint a receiver “in connection with foreclosure 
or other enforcement of a mortgage ….”  The section permits a mortgagee foreclosing 
nonjudicially to petition the court directly for the appointment of a receiver, without having to 
institute an entirely separate action for specific performance of an assignment of rents or some 
other civil action to which the receivership could serve as an ancillary remedy.   
 
  The reference in paragraph (b)(1) to “the mortgaged property” includes proceeds.  Thus, 
protection against the waste, loss, transfer, dissipation, or impairment of insurance proceeds of 
the mortgaged real property can be the basis for the appointment of a receiver. 
 
4. Subsection (c) authorizes (but does not require) the court to condition the ex parte 
appointment of a receiver on the giving of security by the person seeking appointment. This 
security would protect against damages, fees, and costs incurred or suffered by any person if the 
court later concludes that the receiver’s appointment was not justified.  
 
 The Act does not require a court to appoint a receiver on an ex parte basis simply because 
the loan documents contain the mortgagor’s consent to ex parte appointment. Nevertheless, 
Section 3 authorizes the court to appoint a receiver on an ex parte basis if the particular 
circumstances justified ex parte appointment, and nothing in this Act bars a court from 
concluding that a clause in the mortgage consenting to ex parte appointment would constitute a 
relevant “circumstance” justifying ex parte appointment. 
 
 SECTION 7.  DISQUALIFICATION FROM APPOINTMENT AS RECEIVER; 
DISCLOSURE OF INTEREST. 
(a)  The court may not appoint a person as receiver unless the person submits to the court  29 
 
a statement under penalty of perjury that the person is not disqualified.   
(b)  Except as otherwise provided in subsection (c), a person is disqualified from 
appointment as receiver if the person: 
 (1) is an affiliate of a party; 
 (2) has an interest materially adverse to an interest of a party; 
 (3) has a material financial interest in the outcome of the action, other than 
compensation the court may allow the receiver; 
 (4) has a debtor-creditor relationship with a party; or 
 (5) holds an equity interest in a party, other than a noncontrolling interest in a 
publicly-traded company. 
(c)  A person is not disqualified from appointment as receiver solely because the person: 
 (1) was appointed receiver or is owed compensation in an unrelated matter 
involving a party or was engaged by a party in a matter unrelated to the receivership;  
 (2) is an individual obligated to a party on a debt that is not in default and was 
incurred primarily for personal, family, or household purposes; or 
 (3) maintains with a party a deposit account as defined in [U.C.C. Section 9-
102(a)(29)].  
(d)  A person seeking appointment of a receiver may nominate a person to serve as 
receiver, but the court is not bound by the nomination. 
Comment 
1. Traditionally, the receiver is an independent third party who serves as an officer of the 
court and owes a fiduciary duty to the mortgagor and the mortgagee.  See, e.g., 1 Clark on 
Receivers § 34, at 35 (3d ed. 1959); 1 Nelson, Whitman, Burkhart & Freyermuth, Real Estate 
Finance Law § 4.33 (6th ed. Practitioner Treatise 2014). Consistent with this approach, Section 7 
requires the receiver’s “independence.”  This concept is adapted (with substantial simplification) 
from Minnesota’s receivership statute, Minn. Stat. Ann. § 576.26, subdivisions 1 and 3.  30 
 
Existing law in some states permits a court to appoint an interested person as receiver 
with the consent of all parties. See, e.g., Okla. Stat. Ann. tit. 12, § 1552. Because significant 
abuse might result from the appointment of an interested person as a receiver, this Act requires 
the receiver’s independence.  
 
 Subsection (a) requires the prospective receiver to provide sworn evidence of its 
independence, and subsection (b) sets forth the circumstances that would disqualify a person 
from service as a receiver. Subsection (c) makes clear, however, that a person is not disqualified 
as a receiver merely because that person has served as a receiver in or is owed compensation 
relating to a prior unrelated dispute. Mortgage lenders frequently seek the appointment of a 
receiver based on that person’s competent service as receiver in one or more prior transactions; 
the principle of independence would be too strict if it prevented a court from appointing such a 
person as receiver despite a demonstrated track record of competence and the lack of any other 
apparent conflict of interest. 
 
Subsection (c) also makes clear that an individual is not disqualified from service as a 
receiver for an owner’s property merely because the receiver is obligated to a creditor of the 
owner on a consumer loan that is not in default, or because the receiver maintains a deposit 
account with such a creditor. For example, an individual would not be disqualified from serving 
as receiver in a case in which Last National Bank is a creditor merely because the receiver’s 
home mortgage was originated or is serviced by Last National Bank. 
 
2. In modern commercial practice, it is customary for the person seeking the receiver’s 
appointment to nominate a prospective receiver.  Subsection (d) contemplates such a practice, 
but makes clear that the identity of the receiver is ultimately subject to the court’s discretion.  1 
Clark on Receivers, § 48, at 52 (3d ed. 1959) (“the power of determining who the receiver shall 
be rests with the court”). 
 
 SECTION 8.  RECEIVER’S BOND; ALTERNATIVE SECURITY .  
(a)  Except as otherwise provided in subsection (b), a receiver shall post with the court a 
bond that: 
 (1) is conditioned on the faithful discharge of the receiver’s duties; 
 (2) has one or more sureties approved by the court; 
 (3) is in an amount the court specifies; and 
 (4) is effective as of the date of the receiver’s appointment. 
(b)  The court may approve the posting by a receiver with the court of alternative 
security, such as a letter of credit or deposit of funds.  The receiver may not use receivership  31 
 
property as alternative security.  Interest that accrues on deposited funds must be paid to the 
receiver on the receiver’s discharge.  
(c)  The court may authorize a receiver to act before the receiver posts the bond or 
alternative security required by this section.   
(d)  A claim against a receiver’s bond or alternative security must be made not later than 
[one] year after the date the receiver is discharged. 
Legislative Note: Subsection (d) creates a limitation period for a claim against the bond based 
on an action by the receiver. The period should be consistent with the state’s limitation period 
for obtaining relief from a judgment.  
 
Comment 
1. The purpose of the receiver’s bond is to ensure that the receiver faithfully performs the 
receiver’s duties, renders a true accounting of receivership property and receivership receipts and 
disbursements, and obeys the lawful orders of the court.  1 Clark on Receivers § 119, at 172 (3d 
ed. 1959). The bond thus provides a source of recovery for persons harmed by the receiver’s 
misfeasance (such as, for example, the receiver’s wrongful disbursement of receivership funds). 
 
Nearly all of the existing state receivership statutes or rules require that the receiver must 
post a bond in an amount determined by the court, but provide no specific guidance to the court 
with respect to the amount of the bond.  See, e.g., Alaska Stat. § 09.40.250; Ariz. R. Civ. Proc. 
66(b)(2); Ark. R. Civ. Proc. 66(a); Cal. Code Civ. Proc. § 567(b); Colo. R. Civ. Proc. 66(b); 
Idaho Code § 8-604; Ind. Code § 32-30-5-3; Iowa Code Ann. § 680.3; Kan. Stat. Ann. § 60-
1302; Mich. Comp. Laws Ann. § 600.2926; Minn. Stat. Ann. § 576.27; Miss. Code Ann. § 11-5-
159; Mo. Rev. Stat. § 515.250; Mont. Code Ann. § 27-20-301; N.C. Gen. Stat. § 1-504; N.D. 
Cent. Code § 32-10-03; Ohio Rev. Code § 2735.03; Okla. Stat. tit. 12, § 1553; R.I. R. Civ. Proc. 
66(k); S.D. Codif. Laws § 21-21-8; Tex. Civ. Prac. & Rem. Code § 64.023; Wash. Rev. Code 
Ann. § 7.60.045; W.Va. Code § 53-6-1. By contrast, only a few statutes provide some 
requirement regarding the size of the bond. See, e.g., Va. Code Ann. § 8.01-587 (bond must be 
“sufficient at least to cover the probable amount under [the receiver’s] control in any one year); 
Wis. Stat. Ann. § 813.16(6) (bond must be in an amount “sufficient to cover all property likely to 
come into the receiver’s hands”). 
 
 Under subsection (a), this Act leaves the amount of the receiver’s bond to the discretion 
of the judge based on the particular circumstances of the case. Because receivership is by its 
nature a flexible remedy, rather than dictate a fixed amount for the bond or an amount calculated 
through a mandatory formula, the Act allows the court the flexibility to require bonding in an 
amount appropriate to the circumstances of the receivership.  If the court is appointing a receiver 
for commercial real estate such as an office building or shopping center, for example, best 
practices would suggest that the court should require a bond amount based on expected monthly  32 
 
cash flow through the receivership. 
 
2. Although it is not a common practice for receivers to post alternative security, subsection 
(b) permits the court to approve the posting of alternative security (such as a letter of credit or 
deposit of funds) in lieu of a bond. The receiver may not use receivership property as alternative 
security.  
 
3. Although subsection (a) requires that the receiver’s bond must be effective as of the date 
of appointment, subsection (c) makes clear that the court may authorize the receiver to act before 
the bond (or any alternative security) has been posted with the court.  
 
4. Section 23(b) provides that the court’s approval of the receiver’s final report following 
the receiver’s distribution of all receivership property discharges the receiver from further duties 
as receiver.  However, that discharge does not result in the discharge of the surety on the 
receiver’s bond.  As the Clark treatise explains: 
 
At the time of discharge of the receiver the court will not vacate his recognizance or bond 
even upon the request of all parties, nor shall sureties on the bond be discharged upon 
their own request. On the discharge of the receiver the surety is still liable for any default 
[the receiver] may have made during the administration of his trust, even though this may 
be afterwards discovered. [3 Clark on Receivers § 696(a), at 1282 (3d ed. 1959).] 
 
 To provide finality to the surety on the receiver’s bond, subsection (d) provides a one-
year period for filing claims against the bond, and is modeled on a similar provision in Wash. 
Rev. Code Ann. § 7.60.045. As the Legislative Note makes clear, the period specified in 
subsection (d) should be consistent with the applicable limitations period for obtaining relief 
from a judgment.  
 
SECTION 9.  STATUS OF RECEIVER AS LIEN CREDITOR .  On appointment of a 
receiver, the receiver has the status of a lien creditor under: 
(1)  [U.C.C. Article 9] as to receivership property that is personal property or fixtures; 
and 
(2)  [the recording statute of this state] as to receivership property that is real property. 
Comment 
 As a general rule, on appointment a receiver takes the receivership property subject to all 
existing valid liens, priorities, equities, charges and encumbrances. 1 Clark on Receivers, § 269, 
at 413 (3d ed. 1959).  For this reason, “[p]rior liens are not divested by the appointment of a 
receiver in cases in which the lienholders are not parties and have not had their day in court.” Id.  
This principle also includes voluntary liens such as security interests, as Clark explains: 
  33 
 
The appointment of a receiver does not void contracts between the plaintiff and 
defendant, neither does it void contracts between the defendant and third parties. It, 
therefore, follows that under ordinary circumstances, without a governing statute, a third 
person having an interest in the res or a part of the res by reason of a [security interest] is 
not deprived of his contractual right by reason of the appointment of a receiver. [Id. § 
274.2, at 425.] 
 
 Nevertheless, Uniform Commercial Code Article 9 requires that a security interest be 
perfected to ensure its priority versus certain third parties (including lien creditors). As a result, a 
receiver can assert priority over an unperfected security interest in personal property which the 
receiver finds in his possession. Id. § 274.2, at 426. 
 
Consistent with the foregoing, Section 9 (which is a simplified version of Minnesota’s 
receivership statute, Minn. Stat. Ann. § 576.30) provides that the receiver has the status of a lien 
creditor as to both personal and real property. Under Article 9 of the UCC, the term “lien 
creditor” includes “a receiver in equity from the time of appointment.” U.C.C. § 9-
102(a)(52)(D). Section 9 makes clear that a receiver appointed under this Act also has the status 
and priority of a “lien creditor” as to personal property under Article 9.  
 
Section 9 of this Act enables the receiver to establish priority not only against subsequent 
creditors, but also a prior unperfected secured party, as that unperfected secured party would be 
subordinate to a person who acquires the rights of a lien creditor before the conflicting security 
interest is perfected.  U.C.C. § 9-317(a)(2). Section 9 does not create (and is not intended to 
create) an “avoiding power” in the receiver analogous to the strong-arm power exercisable by a 
bankruptcy trustee under Bankruptcy Code § 544(a).     
 
Section 9 also gives the receiver the status and priority of a lien creditor under the state’s 
recording statute with respect to receivership property that is real property.  The application of 
Section 9 would produce different results in different states with respect to an unrecorded interest 
in real property (such as an unrecorded mortgage).  In the majority of states, an unrecorded 
mortgage would nevertheless have priority over a subsequent judgment lien.  See Stoebuck & 
Whitman, The Law of Property § 11.10, at 880-881 (“Often this conclusion is based on the literal 
language of the pertinent judgment lien statute, which typically imposes the lien on ‘the 
defendant’s real property—not the record property, the courts frequently hold, but the actual 
property as depleted by unrecorded conveyances. An alternative basis for the same result is that 
the creditor is simply not a ‘purchaser’ in the sense used by the recording statute.”).  In a 
minority of states, an unrecorded mortgage is subordinate to a subsequent judgment lien, because 
the recording statute either explicitly so provides or has been so interpreted by the state’s courts.  
See Schleuter Co. v. Sevigny, 564 N.W.2d 309 (S.D. 1997); Solans v. McMenimen, 951 N.E.2d 
999 (Mass. Ct. App. 2011); McDuff Estate v. Kost, 158 A. 373 (R.I. 1932).  
 
SECTION 10.  SECURITY AGREEMENT COVERING AFTER-ACQUIRED 
PROPERTY. Except as otherwise provided by law of this state other than this [act], property 
that a receiver or owner acquires after appointment of the receiver is subject to a security  34 
 
agreement entered into before the appointment to the same extent as if the court had not 
appointed the receiver. 
Comment 
 Section 10 is adapted from Washington’s receivership statute, Wash. Rev. Code Ann. § 
7.60.240.  Section 10 provides that if the owner had entered into a pre-appointment security 
agreement covering after-acquired property, that agreement is effective against property acquired 
after the receiver’s appointment to the extent provided under other law. By contrast, under 
bankruptcy law, the filing of a bankruptcy petition terminates the effectiveness of an after-
acquired property clause contained in any prepetition security agreement entered by the debtor.  
11 U.S.C. § 552(a).  While this limitation on the effectiveness of an after-acquired property 
clause makes sense in the context of bankruptcy, it is not appropriate in the context of many 
commercial real estate receiverships that involve operating businesses. Section 10 thus ensures 
that the appointment of a receiver should have no impact on the effectiveness of an after-
acquired property clause in a pre-petition security agreement.  
 
 As used in Section 10, “property that a receiver … acquires after appointment of the 
receiver” is limited to property in which the owner has some interest (i.e., property that is 
receivership property), but not property that a receiver acquires in which the owner has no 
interest (i.e., property that is not receivership property). 
 
Example 1.  Henning owns and operates the Broadway Hotel. Bank holds a recorded 
mortgage on the land and a security interest (properly perfected by filing) in all present 
and after-acquired inventory and equipment used in the operation of the Broadway Hotel. 
At the request of a judgment creditor of Henning, the court appoints Smith as a receiver 
for the Broadway Hotel. Smith has significant experience in operating hotels, is 
frequently appointed as a receiver for hotels, and at any one time typically is operating 
from five to ten hotels as a receiver.  In the context of operating the Broadway Hotel as 
receiver, Smith acquires a dozen new beds and places them into several of the rooms to 
replace existing worn-out beds. The beds constitute “after-acquired equipment” subject to 
the Bank’s pre-receivership security agreement. 
 
Example 2.  Same as Example 1. Smith acquires a computer for Smith’s use in 
accounting, recordkeeping and reporting both as to Smith’s operations of the Broadway 
Hotel and as to Smith’s operations of other hotels for which he serves as receiver. To 
acquire the computer, Smith uses Smith’s personal funds, not revenues generated from 
the operation of the Broadway Hotel. As Henning has no ownership rights in the 
computer, Bank has no security interest in the computer pursuant to its pre-receivership 
security agreement with Henning.    
  35 
 
SECTION 11. COLLECTION AND TURNOVER OF RECEIVERSHIP 
PROPERTY.   
(a)  Unless the court orders otherwise, on demand by a receiver: 
 (1) a person that owes a debt that is receivership property and is matured or 
payable on demand or on order shall pay the debt to or on the order of the receiver, except to the 
extent the debt is subject to setoff or recoupment; and 
 (2) subject to subsection (c), a person that has possession, custody, or control of 
receivership property shall turn the property over to the receiver. 
(b)  A person that has notice of the appointment of a receiver and owes a debt that is 
receivership property may not satisfy the debt by payment to the owner.  
 (c)  If a creditor has possession, custody, or control of receivership property and the 
validity, perfection, or priority of the creditor’s lien on the property depends on the creditor’s 
possession, custody, or control, the creditor may retain possession, custody, or control until the 
court orders adequate protection of the creditor’s lien.  
 (d)  Unless a bona fide dispute exists about a receiver’s right to possession, custody, or 
control of receivership property, the court may sanction as civil contempt a person’s failure to 
turn the property over when required by this section. 
Comment 
1. When a receiver is appointed for commercial real estate, the receiver’s ability to carry out 
its duties successfully depends on the receiver’s ability to obtain control over all receivership 
property (whether in the hands of the owner or third persons) and to collect accrued but unpaid 
rents arising from the real estate. To this end, Section 11 facilitates the ability of the receiver to 
gather receivership property and to collect debts that are receivership property.  
 
Subsection (a)(1) facilitates the receiver’s ability to collect debts that constitute 
receivership property.  The obligor on a debt that is matured, payable on demand, or payable on 
order must pay the debt to the receiver on demand, except to the extent that the obligor has a 
right of setoff or recoupment under other law.  Subsection (a)(1) thus provides the receiver with  36 
 
an ability to collect debts that is comparable to that possessed by a trustee or debtor-in-
possession under Section 542(b) of the Bankruptcy Code, 11 U.S.C. § 542(b). 
 
 Subsection (a)(2) obligates anyone in possession, custody, or control of receivership 
property to turn that property over to the receiver on demand, unless the court orders otherwise.  
Subsection (a)(2) provides a receiver with an ability to compel the turnover of receivership 
property that is comparable to that possessed by a trustee or debtor-in-possession under Section 
542(a) of the Bankruptcy Code, 11 U.S.C. § 542(a).   
 
2. Subsection (b) provides that a person who owes money to the owner and has notice of the 
receiver’s appointment may not satisfy that obligation by paying the owner. The rule established 
by subsection (b) is consistent with background principles of commercial law. See, e.g., U.C.C. § 
9-406(a) (“[A]n account debtor … may discharge its obligation by paying the assignor until, but 
not after, the account debtor receives a notification … that that amount due or to become due has 
been assigned and that payment is to be made to the assignee. After receipt of the notification, 
the account debtor may discharge its obligation by paying the assignee and may not discharge 
the obligation by paying the assignor.”). 
 
Example 1:  Henning owns a 10-unit apartment building. Gabriel occupies Unit 1 
pursuant to a written lease at a rental of $1,000/month. On April 1, at the request of a 
judgment creditor, the court appoints Smith as a receiver for the building.  On April 2, 
Gabriel pays Henning $1,000 for April rent. On April 3, Gabriel receives a letter from 
Smith informing Smith of his appointment and directing Gabriel to pay the $1,000 April 
rent directly to Smith. Gabriel’s April 2 payment to Henning discharged his liability for 
April rent. 
 
Example 2:  Same as Example 1, except that Gabriel receives notice of Smith’s 
appointment on April 2 and pays Henning $1,000 on April 3.  Gabriel’s April 3 payment 
to Henning did not discharge his liability for April rent, and as receiver Smith can enforce 
Gabriel’s liability for April rent through applicable legal processes. 
 
 Under best practices, a competent receiver will accompany any demand for payment 
from a debtor with a copy of the order of appointment, thus making it clear that the debtor has 
notice of the receiver’s appointment. Nevertheless, in some cases, a debtor might have “notice” 
of the appointment of a receiver within the meaning of subsection (b) even if the person has not 
actually received a copy of the order appointing the receiver. If a receiver makes a demand of a 
debtor for payment of a debt under Section 11 without having provided the debtor with a copy of 
the order or other evidence of its appointment, the debtor may request (and the receiver must 
provide) reasonable proof of its appointment. Cf. U.C.C. § 9-406(c). 
 
3. Subsection (c) makes clear that if a creditor holds a lien on receivership property in the 
creditor’s possession, custody, or control, and the validity, perfection, or priority of its lien 
depends on the creditor’s retention of that possession, custody, or control, the creditor may retain 
possession, custody, or control until such time as the court enters an order providing for the 
adequate protection of the creditor’s lien.  Thus, for example, a creditor with a statutory lien on a 
vehicle could retain possession of the vehicle despite a turnover demand by the receiver until the  37 
 
court entered an order preserving the validity of the creditor’s lien on the vehicle (which would 
otherwise be lost if the creditor released possession of the vehicle).  Section 10 thus avoids the 
result of cases such as In re WEB2B Payment Solutions, Inc., 488 B.R. 387 (Bankr. 8th Cir. 
2013) (creditor’s turnover of funds in deposit account, without order providing for adequate 
protection of creditor’s interest, rendered creditor’s security interest unperfected). 
 
 The Act does not specifically define “adequate protection” or specify what constitutes 
adequate protection under subsection (c), but leaves this determination to the discretion of the 
court based on the circumstances of the case. In general, however, any form of payment or 
security that would constitute adequate protection under the Bankruptcy Code, 11 U.S.C. § 361, 
would suffice to constitute adequate protection under this Act. 
 
4. Under subsection (d), a person’s failure to turnover receivership property on demand by 
the receiver may be sanctioned by the court as contempt unless there is a bona fide dispute with 
respect to the receiver’s right to possession, custody, or control of the property.  
 
 SECTION 12.  POWERS AND DUTIES OF RECEIVER . 
 (a) Except as limited by court order or law of this state other than this [act], a receiver 
may: 
 (1) collect, control, manage, conserve, and protect receivership property; 
 (2) operate a business constituting receivership property, including preservation, 
use, sale, lease, license, exchange, collection, or disposition of the property in the ordinary 
course of business; 
 (3) in the ordinary course of business, incur unsecured debt and pay expenses 
incidental to the receiver’s preservation, use, sale, lease, license, exchange, collection, or 
disposition of receivership property; 
 (4) assert a right, claim, cause of action, or defense of the owner which relates to 
receivership property;  
 (5) seek and obtain instruction from the court concerning receivership property, 
exercise of the receiver’s powers, and performance of the receiver’s duties;  
 (6) on subpoena, compel a person to submit to examination under oath, or to  38 
 
produce and permit inspection and copying of designated records or tangible things, with respect 
to receivership property or any other matter that may affect administration of the receivership;  
 (7) engage a professional as provided in Section 15;  
(8) apply to a court of another state for appointment as ancillary receiver with 
respect to receivership property located in that state; and 
 (9) exercise any power conferred by court order, this [act], or law of this state 
other than this [act]. 
 (b)  With court approval, a receiver may: 
 (1) incur debt for the use or benefit of receivership property other than in the 
ordinary course of business; 
 (2) make improvements to receivership property; 
 (3) use or transfer receivership property other than in the ordinary course of 
business as provided in Section 16; 
 (4) adopt or reject an executory contract of the owner as provided in Section 17; 
 (5) pay compensation to the receiver as provided in Section 21, and to each 
professional engaged by the receiver as provided in Section 15; 
 (6) recommend allowance or disallowance of a claim of a creditor as provided in 
Section 20; and 
 (7) make a distribution of receivership property as provided in Section 20. 
 (c)  A receiver shall: 
(1) prepare and retain appropriate business records, including a record of each 
receipt, disbursement, and disposition of receivership property;  
(2) account for receivership property, including the proceeds of a sale, lease,  39 
 
license, exchange, collection, or other disposition of the property; 
(3) file with the [appropriate real property recording office] a copy of the order 
appointing the receiver and, if a legal description of the real property is not included in the order, 
the legal description;  
(4) disclose to the court any fact arising during the receivership which would 
disqualify the receiver under Section 7; and 
(5) perform any duty imposed by court order, this [act], or law of this state other 
than this [act].  
 (d)  The powers and duties of a receiver may be expanded, modified, or limited by court 
order. 
Comment 
1. Existing receivership law in most states does not adequately set forth the powers that a 
receiver may (or may not) exercise, either with or without prior approval of the court.  This can 
result in uncertainty regarding the ability of a receiver to borrow money, to approve or reject 
executory contracts entered into by the owner of the property (including unexpired leases), to sell 
receivership property either in or outside of the ordinary course of business, or to make 
improvements to receivership property.  Those adhering to best practices in preparing 
receivership orders of appointment typically ensure that the order incorporates the powers 
identified in this section, and thus subsections (a) and (b) attempt to incorporate these principles 
of best practice into receiverships arising under this Act.  
 
 Sections 12(a) and 12(b) derive from a compilation of various subsections of the 
Minnesota, Washington, and New Mexico receivership statutes.  See, e.g., Minn. Stat. Ann. § 
576.29. subd. 1(a), (b); Wash. Rev. Code Ann. § 7.60.060(1); N.M. Rev. Stat. Ann. § 44-8-7(H). 
 
2. Subsection (a) sets forth the general powers that the receiver may exercise as a matter of 
the receiver’s default powers, except to the extent that the receivership order or other law 
explicitly restricts the receiver.  In particular, subsection (a) addresses the receiver’s authority to 
sell, lease, license, or otherwise transfer receivership property in the ordinary course of business.  
Subsection (a) thus allows the receiver to conduct ordinary course sales (such as sales of 
inventory) in the process of operating a business. It also permits the receiver of a partially-
completed condominium project to sell completed units.  The draft does not contain a definition 
of “ordinary course of business,” but leaves the term to judicial development. 
 
Subsection (a)(6) permits a receiver to compel a person to submit to examination under  40 
 
oath after issuance of a subpoena. However, the Act does not independently create authority in a 
receiver to issue a subpoena.  If the law of the state other than this Act gives the receiver the 
power to issue a subpoena, subsection (a)(9) would permit the receiver to do so.  
 
 Subsection (b) sets forth specific powers that the receiver can exercise only if specifically 
authorized by the court (following notice and an opportunity for a hearing as prescribed in 
Section 3). These powers include the power to sell, lease, license or otherwise transfer 
receivership property other than in the ordinary course of business, to make improvements to 
receivership property, to adopt or reject executory contracts of the owner, to allow or disallow 
claims against the receivership, to pay compensation to professionals, to make distributions of 
receivership property, and to incur debt for the use or benefit of receivership property other than 
in the ordinary course of business.  
 
Because this Act is intended to facilitate the appointment and operation of receivers in a 
variety of different contexts, the Act does not establish specific standards for a court’s approval 
of a request by the receiver to borrow outside the ordinary course of business. Subsection (b)(1) 
is not intended, however, to give the court a “blank check” to authorize the receiver to borrow 
funds and grant the lender of those funds priority over pre-existing liens on receivership 
property. Under the weight of existing authority, such “priming loans” are not appropriate in 
cases involving the operation of a private business, without the consent of the pre-existing 
lienholders, except as necessary to preserve the property. See, e.g., 2 Clark on Receivers, § 
470(b), at 772-773 (3d ed. 1959) (collecting cases). Subsection (b)(1) does not displace this 
authority. 
 
 Whether a receiver’s powers are default powers authorized under subsection (a) or 
specific powers granted by the court under subsection (b), section (d) makes clear that the court 
may expand, modify, or limit powers previously granted to the receiver. Thus, for example, if the 
initial order of appointment did not authorize the receiver to make any improvements to 
receivership real property, the court could subsequently (following notice and opportunity for a 
hearing as required in Section 3) authorize the receiver to make an improvement that the receiver 
believed was necessary in the context of operating the property. 
 
3. Section 12(c), which describes the receiver’s duties, is adapted from Minn. Stat. Ann. § 
576.29, subd. (2).   
 
 Subsection (c)(2) requires the receiver to “account for” receivership property. This 
accounting is evidenced by the receiver’s interim reports (if required by the court) under Section 
19 and the final report provided under Section 23. These reports require the receiver to identify 
items of receivership property and any dispositions of receivership property.  As a party in 
interest in the receivership, the owner has the right to receive a copy any reports filed by the 
receiver. 
 
Subsection (c)(3) includes a duty for the receiver to record a copy of the order of 
appointment in the real estate records in any county in which real property that is receivership 
property is located. This Act does not authorize or empower the receiver to record a copy of the 
order without payment of the applicable recording fee, but the receiver is authorized to pay the  41 
 
applicable recording fee and to obtain reimbursement of that fee under Section 21.  
 
 While Section 12(c)(3) does impose a duty on the receiver to record the order of 
appointment in the real estate records, the Act does not specify the effect of the receiver’s failure 
to do so or indicate that such a failure would permit a purchaser of the real property without 
notice of the receivership to qualify as a bona fide purchaser protected by the state’s recording 
act.  See, e.g., First Southern Properties, Inc. v. Vallone, 533 S.W.2d 339 (Tex. 1976) (purported 
buyer of real estate without notice of receivership did not take title free of receivership under 
recording statute, as receivership property was held in custodia legis and could not be transferred 
without approval of court). Likewise, Section 12(c)(3) is not intended to effect a change in a 
state’s law governing lis pendens. In some states, a lis pendens is triggered immediately when 
litigation over title to the land is docketed in the public litigation records, even if no 
corresponding notation is made in the real property records. In such a state, the appointment of a 
receiver constitutes a lis pendens even if the receiver did not record a copy of the order of 
appointment. 
 
 Section 12(c) does not articulate specific consequences of a receiver’s failure to carry out 
the receiver’s duties.  This generality is appropriate, as a receiver’s failure could range from the 
trivial (e.g., the receiver’s preparation of an interim report that inadvertently did not disclose the 
payment of a bona fide, undisputed debt) to the profound (e.g., the receiver’s misapplication of 
receivership funds to the receiver’s personal benefit). Instead, the Act leaves to the discretion of 
the court what particular consequences (such as the disallowance of some or all of the receiver’s 
fees under Section 21, or the replacement of the receiver under Section 22) would follow from 
any particular failure by the receiver.   
 
 SECTION 13.  DUTIES OF OWNER.   
(a)  An owner shall: 
 (1) assist and cooperate with the receiver in the administration of the receivership 
and the discharge of the receiver’s duties; 
 (2) preserve and turn over to the receiver all receivership property in the owner’s 
possession, custody, or control; 
 (3) identify all records and other information relating to the receivership property, 
including a password, authorization, or other information needed to obtain or maintain access to 
or control of the receivership property, and make available to the receiver the records and 
information in the owner’s possession, custody, or control;  
 (4) on subpoena, submit to examination under oath by the receiver concerning the  42 
 
acts, conduct, property, liabilities, and financial condition of the owner or any matter relating to 
the receivership property or the receivership; and 
 (5) perform any duty imposed by court order, this [act], or law of this state other 
than this [act]. 
(b)  If an owner is a person other than an individual, this section applies to each officer, 
director, manager, member, partner, trustee, or other person exercising or having the power to 
exercise control over the affairs of the owner. 
(c)  If a person knowingly fails to perform a duty imposed by this section, the court may: 
 (1) award the receiver actual damages caused by the person’s failure, reasonable 
attorney’s fees, and costs; and 
 (2) sanction the failure as civil contempt. 
Comment 
1. Section 13 describes the duties of the owner, and derives from the Washington 
receivership statute, Wash. Rev. Code Ann. § 7.60.080. Subsection (a)(1) requires the owner to 
cooperate fully with the receiver in the administration of the receivership and the receiver’s 
performance of its duties. This duty of cooperation includes the duty to take reasonable steps to 
assure that third parties in possession, custody, or control of receivership property (or records or 
information related to receivership property) comply with the receiver’s efforts to obtain 
possession, custody, or control of that property.  
 
 Subsection (a)(2) requires the owner to preserve and turn over to the receiver all 
receivership property in the owner’s possession, custody, or control.  Consistent with the 
definition of property in Section 2(13) of this Act, this turnover obligation includes both tangible 
and intangible property. Subsection (a)(3) obligates the owner to make available to the receiver 
any records related to receivership property and any passwords or authorizations needed to 
facilitate the receiver’s access to information regarding receivership property (such as banking or 
accounting information, information on websites or electronic databases, or other information in 
the hands of third parties). 
 
 To facilitate the receiver’s ability to carry out its duties with regard to the receivership 
and receivership property, subsection (a)(4) obligates the owner to submit to examination by the 
receiver, under oath, regarding the owner’s financial condition, the owner’s actions with regard 
to receivership property, and other matters relevant to the receiver’s ability to carry out the 
receiver’s duties. The Act leaves to other applicable law the question of whether the receiver has  43 
 
the power to issue subpoenas. If other applicable law grants such power to a receiver, the 
receiver may issue a subpoena for an examination of the owner. 
 
2. Subsection (b) makes clear that if the owner is not an individual, the owner’s duties under 
this Act extend to any officer, director, member, partner, trustee, or other individual or 
nonindividual exercising or having the power to exercise control over the affairs of the owner. In 
the context of a receivership involving the property of a publicly-traded corporation, for 
example, the owner’s obligation would extend to officers and directors, but not to a shareholder 
unless that shareholder held a controlling stake in the corporation. 
 
3. If the owner’s failure to fulfill a duty imposed by this Act causes the receiver to suffer 
actual harm, subsection (c) authorizes the court to impose on the owner and award to the receiver 
damages, including reasonable attorney’s fees and costs, on account of the owner’s failure. This 
permits the court, in appropriate cases, to shift the cost of the owner’s noncompliance from 
affected creditors to the owner. For example, if the owner refuses to turn over receivership 
property and the receiver has to incur $5,000 in expenses and attorney fees to locate and take 
possession of the property, subsection (c) permits the court to impose liability for that amount on 
the owner as a sanction for the owner’s noncompliance. 
 
 Subsection (c) also recognizes that in appropriate cases, the court may sanction the 
owner’s noncompliance as civil contempt. Subsection (c) is not intended, however, to limit the 
scope of the court’s equitable powers to address an owner’s noncompliance with any duties 
imposed by Section 13. In appropriate circumstances, a court may use other equitable remedies, 
such as the imposition of an injunction or a constructive trust, to address an owner’s failure to 
comply with its duties under the Act. If the receiver seeks and obtains a recovery under 
subsection (c), that recovery is receivership property and not the proceeds of the receiver’s 
personal cause of action.   
 
 SECTION 14.  STAY; INJUNCTION. 
(a)  Except as otherwise provided in subsection (d) or ordered by the court, an order 
appointing a receiver operates as a stay, applicable to all persons, of an act, action, or 
proceeding: 
 (1) to obtain possession of, exercise control over, or enforce a judgment against 
receivership property; and 
 (2) to enforce a lien against receivership property to the extent the lien secures a 
claim against the owner which arose before entry of the order. 
(b)  Except as otherwise provided in subsection (d), the court may enjoin an act, action,  44 
 
or proceeding against or relating to receivership property if the injunction is necessary to protect 
the property or facilitate administration of the receivership. 
(c)  A person whose act, action, or proceeding is stayed or enjoined under this section 
may apply to the court for relief from the stay or injunction for cause.   
(d) An order under subsection (a) or (b) does not operate as a stay or injunction of: 
 (1) an act, action, or proceeding to foreclose or otherwise enforce a mortgage by 
the person seeking appointment of the receiver; 
 (2) an act, action, or proceeding to perfect, or maintain or continue the perfection 
of, an interest in receivership property; 
 (3) commencement or continuation of a criminal proceeding; 
 (4) commencement or continuation of an action or proceeding, or enforcement of 
a judgment other than a money judgment in an action or proceeding, by a governmental unit to 
enforce its police or regulatory power; or 
 (5) establishment by a governmental unit of a tax liability against the owner or 
receivership property or an appeal of the liability. 
(e)  The court may void an act that violates a stay or injunction under this section. 
(f)  If a person knowingly violates a stay or injunction under this section, the court may: 
 (1) award actual damages caused by the violation, reasonable attorney’s fees, and 
costs; and 
 (2)  sanction the violation as civil contempt. 
Comment 
1. As the Clark treatise on receivership explains, it is customary for the order appointing a 
receiver to impose by its express terms an injunction against acts, actions, or proceedings that 
could interfere with the receiver’s possession and management of receivership property or the 
performance of the receiver’s duties:  45 
 
 The order of appointment may properly include an order directed against the 
defendant, if an individual and if a corporation against its officers, servants, agents and 
employees, ordering each and all of them to deliver up the defendant’s property to the 
receiver and enjoining each and all of them from interfering with the control and 
possession of the property, and if a corporation, from exercising any privileges or 
franchises granted to the corporation. The injunction may go further and enjoin each and 
all of them from collecting or receiving any debts due to the defendant, individual or 
corporation and from paying out, selling, or transferring any property of the estate 
including monies, funds, lands, tenements or effects of any kind whatsoever of the 
defendant. 
 
 The court may protect its possession and control of property within its territorial 
jurisdiction even without a specific injunction. The order of appointment impliedly 
enjoins parties to the cause and warns any other person from interfering with the court’s 
control and possession. [2 Clark on Receivers, § 625.1(a), at 1024 (3d ed. 1959).] 
 
Consistent with this practice, Section 14 provides that the order of appointment operates as a stay 
against any act to obtain possession or control of receivership property (including any attempt to 
enforce a judgment against receivership property) and any act to enforce a lien against 
receivership property on account of a claim arising before the receivership.   
 
 The stay created by Section 14 is narrower in scope than the automatic stay arising in a 
bankruptcy proceeding. Section 14 does not prevent the owner from seeking bankruptcy 
protection, nor does it prevent other creditors from placing the owner into bankruptcy, even if the 
bankruptcy filing would result in an interference with the receiver’s possession, custody, or 
control of receivership property.  See, e.g., Gilchrist v. GE Capital Corp., 262 F.3d 295 (4th Cir. 
2003) (federal court receivership order does not bar creditors from filing involuntary petition 
against debtor). 
 
2. Subsection (b) authorizes the court to grant an injunction against an act, action, or 
proceeding that is not stayed under subsection (a) as necessary to protect receivership property or 
facilitate the administration of the receivership. Subsection (b) is limited, however, to acts, 
actions, or proceedings against receivership property, the receiver, or the owner; therefore, 
subsection (b) would not authorize the court to stay an action against a guarantor or co-obligor. 
 
3. Subsection (c) permits any person subject to the stay or injunction to apply to the court 
for relief from the stay or injunction for cause.  An interested person who wishes to seek relief 
but is not a party should intervene in the receivership action. 
 
 The Act does not define “cause,” but leaves to judicial development the circumstances 
that would justify relief.  Nevertheless, “cause” under subsection (c) certainly includes the right 
of a senior lienholder to obtain the appointment of a receiver under this Act or to proceed with a 
foreclosure after default. Under traditional law, rents collected by a receiver appointed at the 
request of a junior lienholder could be applied to the reduction of the junior lienholder’s debt 
until the senior lienholder took appropriate steps to enforce its right to collect rents. See, e.g., 
Restatement (Third) of Property: Mortgages § 4.5(b). If a junior lienholder obtains the  46 
 
appointment of a receiver for mortgaged property, the court must allow a senior lienholder to 
enforce its right to collect rents. Cf. Section 6(b)(6) (appointment of receiver at request of junior 
lienholder justifies appointment of receiver at request of senior creditor). 
 
Example 1.  Henning owns a parcel of commercial real estate subject to two liens:  a 
senior mortgage held by First Bank, and a junior mortgage held by Second Bank.  Second 
Bank obtains the appointment of a receiver.  Henning is in default under the First Bank 
mortgage, First Bank holds a recorded assignment of rents, and First Bank is entitled to 
the appointment of a receiver under the standards in Section 6. While the appointment of 
the receiver at the request of Second Bank triggers a stay under subsection (a), First Bank 
may request relief from stay to have a receiver appointed its request, and is entitled to 
that relief.  The court must either appoint a different receiver, or order that any sums 
collected by the existing receiver must thereafter be applied to the debt of First Bank. 
 
Example 2.  Same as Example 1, except First Bank requests relief from stay to institute a 
judicial or (if allowed by applicable law) nonjudicial foreclosure proceeding. The court 
should ordinarily grant relief from stay to permit First Bank to foreclose its mortgage in 
accordance with otherwise applicable law. 
 
4. Subsection (d) provides a list of exceptions to the stay created by subsection (a) or an 
injunction under subsection (b).  Subsection (d)(1) makes clear that the stay does not prevent the 
creditor who sought appointment of the receiver from foreclosing its mortgage or enforcing its 
assignment of rents.  Thus, if a mortgagee seeks and obtains the appointment of a receiver for the 
mortgaged property, that mortgagee may institute a judicial or (if permitted by applicable law) 
nonjudicial foreclosure proceeding without violating the stay. 
 
Subsection (d)(2) protects the ability of a creditor to take appropriate steps to perfect a 
lien or maintain the priority of that perfection despite the appointment of a receiver without 
having to seek relief from the court. It permits a person with a security interest in receivership 
property to perfect that interest following appointment of a receiver. Likewise, it permits a 
creditor to file a continuation statement to maintain its perfection so long as that continuation 
statement was filed within the applicable period to ensure that the creditor maintained continuous 
perfection.  Further, it permits a creditor holding a possessory lien on receivership property to 
retain possession, as authorized under Section 11(c), until such time as the court enters an order 
providing adequate protection of the creditor’s lien. Subsection (d)(2) would also permit a 
creditor that had provided labor or materials incorporated into an improvement on receivership 
real property, but had not been paid, to take whatever actions are necessary under the applicable 
mechanics’ lien statute (including the filing or recording of a notice of lien claim or the 
institution of a civil action with the applicable period required to perfect that lien) to ensure the 
perfection and priority of that creditor’s mechanics’ lien. Subsection (a), however, would prevent 
the mechanics’ lien creditor from conducting a sale of the property to enforce its lien without 
first obtaining relief from the stay. 
 
Subsection (d)(3) permits the commencement or continuation of criminal proceedings 
against the owner.  Subsection (d)(4) permits governmental actors to take actions or enforce 
nonmonetary judgments pursuant to police and regulatory powers. Subsection (d)(5) permits a  47 
 
governmental unit to establish a tax liability against the owner or receivership property, but does 
not permit the governmental unit to conduct a tax sale of receivership property without obtaining 
approval from the court.  
 
5. Subsection (e) permits the court to declare an act void as being in violation of the stay 
under subsection (a) or an injunction under subsection (b).  This means that an act in violation of 
the stay is merely voidable rather than void.   
 
6. Subsection (f) permits the receiver to recover actual damages, including costs and 
attorney fees, from a person that knowingly violated the stay or injunction.  In addition, 
subsection (f) authorizes the court to sanction any knowing violation by civil contempt, without 
regard to whether any person suffered actual damages as a result. Subsection (f) is not intended, 
however, to limit the scope of the court’s equitable powers to address a violation of the stay or 
injunction using other equitable remedies. If the receiver seeks and obtains a recovery under 
subsection (f), that recovery is receivership property and not the proceeds of the receiver’s 
personal cause of action.   
 
 SECTION 15.  ENGAGEMENT AND COMPENSATION OF PROFESSIONAL . 
 (a)  With court approval, a receiver may engage an attorney, accountant, appraiser, 
auctioneer, broker, or other professional to assist the receiver in performing a duty or exercising 
a power of the receiver.  The receiver shall disclose to the court: 
 (1) the identity and qualifications of the professional; 
 (2) the scope and nature of the proposed engagement; 
 (3) any potential conflict of interest; and 
 (4) the proposed compensation. 
 (b) A person is not disqualified from engagement under this section solely because of the 
person’s engagement by, representation of, or other relationship with the receiver, a creditor, or a 
party.  This [act] does not prevent the receiver from serving in the receivership as an attorney, 
accountant, auctioneer, or broker when authorized by law. 
(c)  A receiver or professional engaged under subsection (a) shall file with the court an 
itemized statement of the time spent, work performed, and billing rate of each person that 
performed the work and an itemized list of expenses.  The receiver shall pay the amount  48 
 
approved by the court. 
Comment 
1. The receiver’s ability to carry out its duties frequently requires the receiver to obtain the 
services of professionals (such as lawyers, accountants, brokers, appraisers, or auctioneers). 
Under subsection (a), the receiver must obtain the court’s approval to engage and retain 
professionals, but this approval may come in the order of appointment.   While subsection (a) 
uses the singular (“the receiver may engage an attorney ….”), the Act contemplates that when 
the nature of the receivership so demands, the receiver may engage more than one attorney or 
more than one other type of professional as needed.   
 
2. Section 15 requires the receiver to disclose any potential conflict of interest that exists 
with respect to a professional for whom the receiver seeks appointment. Subsection (b) makes 
clear that the court has discretion to approve the engagement of a professional despite the 
presence of existing relationships that might be nominal or de minimis conflicts of interest. For 
example, the fact that an attorney has previously represented a creditor holding a claim against 
the owner in an unrelated matter does not preclude the court from approving the receiver’s 
engagement of that attorney.  Nevertheless, while subsection (a) acknowledges the court’s 
discretion, the court should not approve the engagement of a professional under circumstances 
where a serious or substantial conflict of interest exists. 
 
 Subsection (b) makes clear that the receiver may provide certain types of professional 
services on the receiver’s own behalf, and may be compensated for those services, if the receiver 
is licensed to provide those services.  See, e.g., Wash. Rev. Code Ann. § 7.60.180(3).  A receiver 
may serve as an attorney, accountant, auctioneer, or broker, but not as an appraiser.  The Act 
intentionally omits “appraiser” from this list because dual service as both a receiver and 
appraiser involves an inappropriate conflict of interest, particularly in circumstances in which the 
receiver seeks approval for the sale of receivership property under Section 16.  
 
3. Subsection (c) makes clear that the receiver cannot pay the fees and expenses of 
professionals without first submitting to the court an itemized statement and obtaining court 
approval. 
 
 SECTION 16.  USE OR TRANSFER OF RECEIVERSHIP PROPERTY NOT IN 
ORDINARY COURSE OF BUSINESS.  
 (a)  In this section, “good faith” means honesty in fact and the observance of reasonable 
commercial standards of fair dealing. 
 (b)  With court approval, a receiver may use receivership property other than in the 
ordinary course of business.  49 
 
(c)  With court approval, a receiver may transfer receivership property other than in the 
ordinary course of business by sale, lease, license, exchange, or other disposition.  Unless the 
agreement of sale provides otherwise, a sale under this section is free and clear of a lien of the 
person that obtained appointment of the receiver, any subordinate lien, and any right of 
redemption but is subject to a senior lien. 
(d)  A lien on receivership property which is extinguished by a transfer under subsection 
(c) attaches to the proceeds of the transfer with the same validity, perfection, and priority the lien 
had on the property immediately before the transfer, even if the proceeds are not sufficient to 
satisfy all obligations secured by the lien.  
(e)  A transfer under subsection (c) may occur by means other than a public auction sale.  
A creditor holding a valid lien on the property to be transferred may purchase the property and 
offset against the purchase price part or all of the allowed amount secured by the lien, if the 
creditor tenders funds sufficient to satisfy in full the reasonable expenses of transfer and the 
obligation secured by any senior lien extinguished by the transfer.  
(f)  A reversal or modification of an order approving a transfer under subsection (c) does 
not affect the validity of the transfer to a person that acquired the property in good faith or revive 
against the person any lien extinguished by the transfer, whether the person knew before the 
transfer of the request for reversal or modification, unless the court stayed the order before the 
transfer. 
Comment 
1. Traditionally, a receiver’s ability to sell receivership property varied depending on the 
circumstances of the receivership. For example, when a court appointed a general receiver for all 
of the assets of an insolvent debtor, the court would typically empower the receiver to gather and 
sell the assets of the debtor.  By contrast, when a court appointed a limited receiver to take 
possession of a specific asset — such as a receiver for mortgaged property pending foreclosure 
sale — the receiver’s role was more typically viewed as custodial.  For this reason, receivers  50 
 
appointed in conjunction with foreclosure proceedings were often viewed as having the power to 
operate, maintain, and preserve the property pending the foreclosure sale—but not to sell the 
property, as the sale would instead take place under the applicable foreclosure procedures.   
 
 Many have advocated that receivership is an effective way to dispose of real estate, and 
in appropriate cases provides a more effective way of disposing of mortgaged real property than 
the foreclosure process. Under current foreclosure law in all American jurisdictions, a 
foreclosure sale is a “distress sale,” i.e., a public auction sale on the courthouse steps (or at some 
other public place). Foreclosure by public sale is traditionally justified as a means to protect the 
mortgagor’s equity in the mortgaged property, particularly by comparison to the historical 
approach under which a defaulting borrower simply forfeited its interest in the mortgaged 
property (and any equity the borrower might have accumulated, either through principal 
reduction or market appreciation).  Nevertheless, public foreclosure sales do not consistently 
produce prices that approximate the market value that might be obtained in an arms-length, non-
distress sale.  By contrast, a receiver of mortgaged commercial real property could readily 
market that property to potential buyers in the context of operating the property during the 
receivership. Such marketing could permit potential buyers to perform more meaningful and 
complete due diligence. Further, a sale subject to judicial review and confirmation could produce 
greater finality regarding the title acquired by the buyer at the sale. Thus, there is adequate 
justification to expect that in many cases, a receiver sale of mortgaged commercial real estate 
would produce a higher sale price than a public foreclosure sale would produce. 
 
 Another potential advantage to receiver sales arises out of the structure of the 
securitization of commercial mortgages.  Commercial mortgage-backed securities (CMBS) loans 
are held in real estate mortgage investment conduits (“REMICs”), which are special purpose 
vehicles used for the pooling of mortgage loans and the issuance of mortgage-backed securities.   
The Internal Revenue Code forbids REMICs from issuing new debt or making new loans, at the 
risk of losing their tax status as pass-through entities.  Thus, if a REMIC ends up having to 
purchase the mortgaged property at a foreclosure sale, it cannot make a new loan to a potential 
buyer on a seller-financing basis. However, the Internal Revenue Code permits a REMIC to 
make limited modifications to an existing defaulted loan.  Thus, if the property can be sold 
through a receiver or by the borrower directly, with the buyer assuming the mortgage, the 
mortgage loan can be modified and restructured without threatening the REMIC’s tax status. 
Thus, a CMBS lender might have good reason to believe a receiver sale can produce a higher 
price by comparison to a public foreclosure (cash) sale, making such a sale attractive to a CMBS 
lender that does not wish to foreclose (and possibly take ownership) of a property worth less than 
the outstanding mortgage debt.    
 
 Existing federal statutes explicitly authorize a receiver appointed by a federal court to sell 
mortgaged property, in either a public or private sale, 28 U.S.C.A. § 2001 et seq., and thus 
receiver sales occur frequently in the context of federal receiverships. See generally John C. 
Murray and Kenneth R. Jannen, Public and Private Sales of Real Property by Federal Court 
Receivers, ACREL Papers (March 2011); Kay Kress, Federal Receiverships (2005 ABA 
Business Law Section Meeting). There is no sound justification in commercial policy to permit 
receiver sales in cases in which federal diversity or subject matter jurisdiction exists but not in 
cases in which federal jurisdiction would be lacking. Unfortunately, under existing state laws, the  51 
 
authority for receiver sales is much less clear. Only a few states have statutory provisions that 
explicitly grant the power of sale to a receiver.  See, e.g., Ind. Code § 32-30-5-7; N.C. Gen. Stat. 
§ 1-505; Wash. Rev. Code Ann. § 7.60.260.  Despite having no clear statutory authority, courts 
in Ohio and Michigan have upheld court-authorized receiver sales free and clear of liens and 
statutory redemption rights.  See, e.g., CSB Bank v. Christy, No. 305869 (Mich. Ct. App. Oct. 18, 
2012) (unpublished); Park Nat’l Bank v. Cattani, Inc., 187 Ohio App.3d 186, 931 N.E.2d 623 
(2010); Huntington Nat’l Bank v. Motel 4 BAPS, Inc., 191 Ohio App.3d 90, 944 N.E.2d 1210 
(2010).  In most states, there is no express statutory or judicial authority for receiver sales. See, 
e.g., Kirven v. Lawrence, 244 S.C. 572, 137 S.E.2d 764 (1964) (receiver appointed in foreclosure 
proceeding cannot sell mortgaged real estate; sale must occur through foreclosure process). A 
recent Florida court went further, holding that the court lacks the authority to authorize a receiver 
appointed in a foreclosure case to sell the property free and clear of liens and rights of 
redemption.  Shubh Hotels Boca, LLC v. Federal Deposit Ins. Corp., 46 So.3d 163 (Fla. Dist. Ct. 
App. 2010).  See also Todd Enters., LLC v. MidCountry Bank, 2013 WL 4045765 (Minn. Ct. 
App. 2013) (not reported in N.W.2d) (court order authorizing receiver’s sale free and clear of 
borrower’s statutory right of redemption was contrary to state mortgage foreclosure statute). 
Section 16 provides much-needed clarity by rejecting cases following the latter restrictive 
approach. 
 
 Subsection (c) authorizes the receiver (with court approval after notice and opportunity 
for a hearing as required by Section 3) to sell, lease, license, exchange or otherwise transfer 
receivership property free and clear of liens and rights of redemption, other than a lien that is 
senior in priority to the lien of the creditor that obtained the receiver’s appointment. The Act 
gives the court the flexibility to authorize a sale either free and clear of liens or subject to one or 
more liens, depending on the priority and the direction of the person seeking appointment of the 
receiver. For example, a senior mortgagee of a securitized mortgage loan could seek a receiver to 
facilitate a sale of the property subject to the existing CMBS loan, with that loan being modified 
in the context of the receiver’s sale. In such a case, the court should direct that the receiver’s sale 
would be subject to the lien of the senior mortgage. By contrast, a senior mortgagee could 
instead seek court approval for the receiver to sell the property free and clear of liens and rights 
of redemption (in which case the receiver’s sale would have essentially the same legal effect as a 
foreclosure sale). 
 
2. In some situations, courts appoint receivers at the behest of creditors holding subordinate 
liens (such as junior mortgages or subordinate judgment liens). Subsection (c) makes clear that if 
a creditor holding a junior lien on receivership property obtains the appointment of a receiver, 
the court cannot authorize the receiver to sell the property free and clear of the senior creditor’s 
lien without the senior creditor’s consent. Thus, if a creditor holding a second mortgage obtains 
the appointment of a receiver and the court approves a sale by the receiver, the buyer at the 
receiver sale acquires title subject to the first mortgage, unless the first mortgagee consents to the 
sale free and clear of its lien.  
 
As a practical matter, if a junior creditor obtains the appointment of a receiver but the 
senior mortgagee does not want the buyer as the new owner, it can effectively deter the sale by 
declining to accept the buyer; the Garn-St. Germain Act would permit the senior mortgagee to 
exercise the due-on-sale clause in its mortgage, accelerate the senior indebtedness, and foreclose  52 
 
the mortgage as a consequence of the receiver’s sale. 12 U.S.C. § 1701j-3 et seq. If the sale goes 
forward, the buyer at that sale could redeem the title by paying off the outstanding balance due 
under the first mortgage, including any enforceable prepayment fee, to the extent that the senior 
mortgagee is obligated to accept prepayment of the senior debt. If the senior creditor is a 
nonconsensual creditor such as the holder of a judgment lien, the senior creditor would have to 
release its lien if the buyer tendered payment of the obligation secured by that lien. 
 
Example 1.  Henning owns an office building subject to a senior mortgage held by First 
Bank and a junior mortgage held by Second Bank. By its terms, the loan secured by First 
Bank’s mortgage includes a 5% prepayment charge, which is enforceable under 
applicable law. Following default, Second Bank obtains the appointment of a receiver 
and seeks court approval for a sale of the building. The court may not order the sale of 
the building free and clear of First Bank’s mortgage without First Bank’s consent. If First 
Bank does not consent, and the court approves a sale, the buyer at the sale will take the 
building subject to First Bank’s mortgage lien, and could obtain a release of that lien only 
by paying the full balance of the debt owed to First Bank (including any prepayment fee). 
 
Example 2.  Same as Example 1, except that Henning has no right to prepay the First 
Bank mortgage debt, either under the contract or applicable law.  If First Bank does not 
consent and the court approves a sale, the buyer at the sale will take the building subject 
to First Bank’s mortgage lien, but could not prepay the First Bank mortgage debt prior to 
its maturity without the consent of First Bank. 
 
Example 3.  Henning owns an office building subject to a mechanics’ lien held by 
Contractor and a mortgage held by Bank. Under applicable law, Contractor’s mechanics’ 
lien is entitled to priority. Following a default by Henning, Bank obtains the appointment 
of a receiver and seeks court approval for a sale of the building. Although this Act does 
not permit the court to approve a sale of the building free and clear of Contractor’s lien 
without Contractor’s consent, other applicable law would require Contractor to release its 
lien on receiving full payment of the sums secured by that lien. Thus, Contractor can be 
expected to consent to the sale as long as the sale will provide proceeds sufficient to 
satisfy Contractor’s lien in full. 
 
 Subsection (c) does not authorize the receiver to sell free and clear of easements, real 
covenants, and equitable servitudes that are superior to the lien of the creditor who sought 
appointment of the receiver. Under applicable law, the purchaser at a foreclosure sale would 
receive title subject to any easement, real covenant, or equitable servitude that was superior to 
the lien of the foreclosing mortgagee. 1 Nelson, Whitman, Burkhart & Freyermuth, Real Estate 
Finance Law § 1.1, at 6 (6th ed. Practitioner’s Treatise 2014). 
 
3. Some have argued that a receiver ought not have the power to sell receivership real 
property unless the sale price was sufficient to satisfy all liens on the property. See 11 U.S.C. § 
363(f) (absent consent of lienholder, trustee may sell property of the bankruptcy estate free and 
clear of lien only if the sale price exceeds the aggregate value of all liens on the property, unless 
other applicable law permits sale of such property free and clear of liens or the lienholder could 
be compelled to accept a money satisfaction of its interest). Because the Act views a receiver  53 
 
sale as a potential alternative to a traditional foreclosure sale (at which the collateral might fail to 
bring a price sufficient to satisfy all mortgage liens), Section 16(c) rejects this view. When 
receivership property is subject to multiple liens and the value of that property is not sufficient to 
satisfy the senior mortgage indebtedness, but the senior mortgagee seeks the appointment of a 
receiver for the purpose of selling the real estate, there is no policy justification to permit junior 
lienholders a veto power over such a sale (any more than a junior lienholder should be permitted 
to block a senior lienholder’s foreclosure sale). A junior lienholder that wants to protect its junior 
position from extinguishment always has the option to redeem its lien by paying off the senior 
indebtedness. 1 Nelson, Whitman, Burkhart & Freyermuth, Real Estate Finance Law § 7.2 (6th 
ed. Practitioner’s Treatise 2014). 
 
If the senior mortgagee wishes to obtain the appointment of a receiver for the purpose of 
selling the property, but does not want a sale to proceed at a price less than the balance of the 
senior mortgage debt, the senior mortgagee can ask the court to condition the receiver’s power to 
sell under Section 16 on receipt of a sale price sufficient to satisfy the outstanding senior debt. If 
the senior mortgagee wishes to obtain the appointment of a receiver, but does not want the 
receiver to have the power to sell the property outside the ordinary course, the senior mortgagee 
can ask the court to specify, in the order of appointment, that the receiver’s powers with respect 
to the mortgaged property are to be merely custodial in nature. Finally, if the court has 
authorized the receiver to market the property for sale and the receiver proposes a sale at a price 
that would be insufficient to satisfy the senior mortgage debt, the senior mortgagee (or any other 
lienholder) has the right to be heard under Section 3 in opposition to the proposed sale terms. 
 
4. With respect to intellectual property, the rights of an owner may be limited to the rights 
of a nonexclusive licensee who has no ability to transfer the owner’s rights as licensee without 
the consent of the licensor. In such a situation, the receiver could assume no greater rights than 
the owner had, and those rights would remain subject to the provisions of Section 9-408 of the 
Uniform Commercial Code.   
 
5. Subsection (d) provides for the transfer of any liens extinguished by the sale to the 
proceeds of the sale, in the same order of priority as the liens had with respect to the real 
property, even if the proceeds are not sufficient to satisfy all liens.   
 
In some cases, a bona fide dispute might exist between lienholders over the priority of 
their respective liens. For example, real property under construction might be subject to the lien 
of a construction mortgage and one or more mechanics’ liens, which could (depending on 
disputed facts) be prior to or subordinate to the construction mortgage.  In such a case, if the 
construction mortgagee obtains the appointment of a receiver for the real estate and there is a 
bona fide dispute over the priority of the competing liens, subsection (c) permits the court to sell 
the property free and clear of the competing liens, while later resolving the priority dispute 
before making a distribution of the proceeds of the sale. 
 
6. Subsection (e) permits (but does not require) the receiver to sell receivership property in a 
private sale rather than a public auction sale.  Giving the receiver the power to market the 
property in a private sale, with the increased opportunity for due diligence investigation that a 
private sale might provide, reflects sound policy.  This gives the receiver the flexibility to market  54 
 
the property in a fashion calculated to bring the highest possible price.  Cf. U.C.C. § 9-610, 
comment 2 (noting that Article 9 “encourages private dispositions on the assumption that they 
frequently will result in higher realization on collateral for the benefit of all concerned”). 
 
 Nevertheless, under subsection (c), the receiver may not sell receivership property other 
than in the ordinary course of business without court approval.  Because the court may not enter 
an order approving the sale without notice and opportunity for a hearing under Section 3, a court 
may not approve a private sale without notice of the actual terms of the sale and an opportunity 
for interested persons to be heard on whether those terms justify court approval.  
 
7. Subsection (e) permits a lienholder to purchase the property at a receiver’s sale and to 
credit bid at that sale, as long as the purchasing lienholder tenders funds sufficient to satisfy the 
costs of the sale and the balance due on any obligation secured by any senior lien that was being 
extinguished by payment or the transfer. The application of subsection (e) is demonstrated by the 
following example: 
 
Example.  Henning owns an office building subject to a senior mortgage lien held by 
First Bank (securing an unpaid balance of $3 million) and a junior lien held by Second 
Bank (securing an unpaid balance of $1.5 million), as well as a tax lien for unpaid real 
estate taxes in the amount of $100,000.  Second Bank obtains the appointment of a 
receiver and the court authorizes the receiver to conduct an auction sale of the real estate 
under Section 16. First Bank does not consent to the sale and under applicable law may 
refuse prepayment of the senior mortgage debt.  Any sale by the receiver will be subject 
to First Bank’s mortgage lien.  Second Bank may credit bid against its $1.5 million debt 
at the sale.  If it is the high bidder, it may acquire title to the real estate subject to First 
Bank’s senior mortgage, but free of the tax lien, as long as it tenders funds equal to the 
costs of the sale and the $100,000 unpaid tax bill. 
 
8. A receiver sale under Section 16 can be set aside because of fraud or other reasons 
sufficient to justify relief from a judgment or order. Cf. Fed. R. Civ. Proc. 60(b). However, 
subsection (f) provides that the title of a good faith purchaser from the receiver is not affected by 
modification of the order approving the transfer or its reversal on appeal, unless the authorization 
and transfer were stayed before the transfer takes place. 
 
 Subsection (f) also provides that the modification of an order approving a transfer or its 
reversal on appeal does not revive any lien extinguished by the sale unless the authorization and 
transfer were stayed before the transfer took place.  Subsection (f) thus rejects the reasoning of 
Clear Channel Outdoor, Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25 (9th Cir. B.A.P. 2008) 
(while equitable mootness prevented appellate court from reversing a sale that the bankruptcy 
court had incorrectly approved free and clear of liens, it did not prevent the court from 
reinstating a junior lien despite the sale).    
 
9. Subsection (b) permits the receiver, with court approval, to use receivership property 
other than in the ordinary course of business. This permits a receiver to use receivership 
property in a manner that would differ from its normal use if such use might produce income for 
the benefit of the receivership. For example, subsection (b) would authorize the receiver of a  55 
 
vineyard and winery operation to permit the occasional use/rental of the property for weddings or 
receptions even if the owner had not made equivalent use of the property.  
 
 SECTION 17.  EXECUTORY CONTRACT .   
(a) In this section, “timeshare interest” means [an interest having a duration of more than  
three years which grants its holder the right to use and occupy an accommodation, facility, or 
recreational site, whether improved or not, for a specific period less than a full year during any 
given year]. 
(b)  Except as otherwise provided in subsection (h), with court approval, a receiver may 
adopt or reject an executory contract of the owner relating to receivership property.  The court 
may condition the receiver’s adoption and continued performance of the contract on terms 
appropriate under the circumstances. If the receiver does not request court approval to adopt or 
reject the contract within a reasonable time after the receiver’s appointment, the receiver is 
deemed to have rejected the contract.  
(c) A receiver’s performance of an executory contract before court approval under 
subsection (b) of its adoption or rejection is not an adoption of the contract and does not preclude 
the receiver from seeking approval to reject the contract. 
(d) A provision in an executory contract which requires or permits a forfeiture, 
modification, or termination of the contract because of the appointment of a receiver or the 
financial condition of the owner does not affect a receiver’s power under subsection (b) to adopt 
the contract. 
(e)  A receiver’s right to possess or use receivership property pursuant to an executory 
contract terminates on rejection of the contract under subsection (b).  Rejection is a breach of the 
contract effective immediately before appointment of the receiver.  A claim for damages for 
rejection of the contract must be submitted by the later of:    56 
 
 (1) the time set for submitting a claim in the receivership; or 
 (2) [30] days after the court approves the rejection. 
(f)  If at the time a receiver is appointed, the owner has the right to assign an executory 
contract relating to receivership property under law of this state other than this [act], the receiver 
may assign the contract with court approval. 
(g)  If a receiver rejects under subsection (b) an executory contract for the sale of 
receivership property that is real property in possession of the purchaser or a real-property 
timeshare interest, the purchaser may: 
(1) treat the rejection as a termination of the contract, and in that case the 
purchaser has a lien on the property for the recovery of any part of the purchase price the 
purchaser paid; or 
(2) retain the purchaser’s right to possession under the contract, and in that case 
the purchaser shall continue to perform all obligations arising under the contract and may offset 
any damages caused by nonperformance of an obligation of the owner after the date of the 
rejection, but the purchaser has no right or claim against other receivership property or the 
receiver on account of the damages. 
(h)  A receiver may not reject an unexpired lease of real property under which the owner 
is the landlord if: 
(1) the tenant occupies the leased premises as the tenant’s primary residence; 
(2) the receiver was appointed at the request of a person other than a mortgagee; 
or 
(3) the receiver was appointed at the request of a mortgagee and:  
(A) the lease is superior to the lien of the mortgage;  57 
 
 (B) the tenant has an enforceable agreement with the mortgagee or the 
holder of a senior lien under which the tenant’s occupancy will not be disturbed as long as the 
tenant performs its obligations under the lease; 
 (C) the mortgagee has consented to the lease, either in a signed record or 
by its failure timely to object that the lease violated the mortgage; or 
 (D) the terms of the lease were commercially reasonable at the time the 
lease was agreed to and the tenant did not know or have reason to know that the lease violated 
the mortgage.   
Legislative Note: If a state statute defines the term “timeshare interest,” the state should 
incorporate that definition into subsection (a).  
 
Comment 
1. At the time a receiver is appointed for a commercial real estate project, customarily the 
owner has entered into a number of executory contracts related to the operation of the project.  In 
addition to existing occupancy leases, the owner will frequently have entered into contracts to 
obtain or provide services (such as cleaning, repair, landscaping, advertising, or marketing 
services). In some cases, the terms of the contract are favorable and the receiver is content to 
honor the contract. In other cases, the terms of the contract are unfavorable and the receiver 
might wish to obtain the needed goods or services at a competitive price from another supplier. 
In particular, the receiver might not wish to have to perform a long-term supply contract that the 
owner entered into with an owner-affiliated entity at a noncompetitive, above-market price.  
 
Under established law in receivership cases, a receiver does not automatically become 
bound to the owner’s existing executory contracts on appointment.  See 2 Clark on Receivers, § 
423, at 710 (3d ed. 1959) (“A receiver is not strictly speaking the successor of the defendant, 
individual or corporation and an executory contract of the defendant is not binding on the 
receiver but may be broken by the receivership and give rise to damages resulting in a claim 
against the assets in the hands of the receiver.”). Consistent with this traditional rule, subsection 
(b) permits the receiver to evaluate whether an executory contract relating to receivership 
property is beneficial or burdensome, and with court approval to either adopt or reject the 
contract accordingly. 
 
If the receiver adopts the contract and continues to perform it, subsection (b) permits the 
court to condition the receiver’s adoption on appropriate terms to provide the counterparty with 
assurance of the receiver’s ability to perform. If the receiver rejects the contract, subsection (e) 
provides that the rejection constitutes a breach of the contract and allows the counterparty to file 
a claim against the receivership. Subsection (e) addresses only the potential liability of the  58 
 
receivership, however, and not the underlying liability of the owner. Thus, the Act does not (1) 
discharge the liability of the owner to the counterparty, (2) preclude the counterparty from 
proceeding against the owner or nonreceivership property of the owner, or (3) preclude the 
counterparty from proceeding against guarantors or third-party assets securing the owner’s 
obligation to the counterparty.  
 
 Because the Act provides that rejection gives rise to a claim against the receivership, the 
status of the contract must be resolved within some reasonable period of time before the claims 
deadline.  Under subsection (b), if the receiver does not request approval to accept or reject the 
contract within a reasonable time following appointment, the contract is deemed to be rejected. 
 
 The receiver’s rejection power is limited to an executory contract, i.e., one under which 
the obligations of each party “are so far unperformed that the failure of either to complete 
performance would constitute a material breach excusing the performance of the other.” See, 
e.g., Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn. L. Rev. 439, 460 (1973). 
While subsection (b) allows the receiver to reject an executory contract with court approval, it 
does not permit the receiver to reject a contract for which one party has made full or substantial 
performance. Likewise, it does not permit the receiver to reject a contract for which a party’s 
breach would not excuse the counterparty’s obligation to perform. 
 
Example 1: Smith is appointed as receiver for ABC, Inc., which owns a shopping center. 
Prior to Smith’s appointment, ABC, Inc. had entered into a year-to-year contract with 
Green Landscaping to provide landscaping services to the shopping center to be billed 
monthly. At the time of Smith’s appointment, 10 months remain on the current year’s 
contract. ABC Inc.’s contract with Green Landscaping is an executory contract, as each 
party has substantial unperformed obligations (Green Landscaping’s obligation to 
provide landscaping services for 10 months, and ABC, Inc.’s obligation to pay for those 
services). With court approval, Smith may reject the contract. 
 
Example 2: Same as Example 1, but under the contract, ABC, Inc. has already paid in 
full for the current year’s services. Given ABC, Inc.’s full perfomance, the contract is 
not an executory contract and Smith may not reject it. 
 
Example 3: Smith is appointed as receiver for Shady Acres II, L.P., which owns a failed 
residential development (Shady Acres) in which 80 lots remain unsold and undeveloped. 
Lots in Shady Acres are subject to a restrictive covenant, imposed by a recorded 
declaration, that each lot within Shady Acres may be used for single-family residential 
purposes only. The restrictive covenant is not an executory contract; while a lot owner 
could breach the covenant by making a nonresidential use, such a breach would not 
excuse the obligation of other lot owners to observe the covenant (which creates 
reciprocal property interests that benefit and burden each lot). Thus, Smith may not 
reject the restrictive covenant, even if Smith believes that rejection of the covenant would 
enhance the value of the unsold lots. 
 
2. The receiver’s power of rejection under Section 17 is distinct from the receiver’s right to 
invalidate a transfer of receivership property under other applicable law (e.g., as a fraudulent or  59 
 
otherwise voidable transfer). Likewise, the receiver’s power of rejection is distinct from the 
receiver’s right to terminate an executory contract on account of the counterparty’s material 
breach of that contract or the owner’s right to terminate the contract in accordance with its terms. 
The receiver may exercise such rights of termination pursuant to its powers under Section 
12(a)(4) of this Act without regard to the provisions of Section 17.  
 
3. When a receiver is appointed for commercial real estate, it might take the receiver some 
reasonable period of time to review all of the owner’s executory contracts and to make a 
judgment as to whether the adopt or reject any particular contract. During this period of 
investigation, the receiver may honor a particular contract temporarily, even though the receiver 
may ultimately choose to reject the contract, both (a) to protect the receiver’s ability to enforce 
the contract in the future should the receiver choose to adopt it and (b) to ensure no interruption 
in the provision of necessary goods or services to the project. Subsection (c) provides that the 
receiver’s temporary performance of the contract does not prevent the receiver from later seeking 
court approval to reject it. 
 
Example. Henning owns a shopping center subject to a mortgage held by Bank. Henning 
defaults and the Bank obtains appointment of Smith as a receiver. Prior to the 
receivership, Henning had entered into a long-term contract with Gabriel, who provided 
landscaping and lawn services for the center. To ensure no immediate interruption in the 
maintenance of the center’s lawns and flower beds, Smith has Gabriel provide those 
services during the first month of the receivership, and Smith pays for those services, but 
Smith’s investigation reveals that equivalent services are available at a better price from 
another provider. Smith’s temporary performance of the contract with Gabriel during the 
first month of the receivership does not constitute adoption of the contract and does not 
prevent Smith from seeking court approval to reject the Gabriel contract.   
 
4. Contracts sometimes contain remedy provisions under which the appointment of a 
receiver constitutes a default that allows the counterparty to terminate the contract (often called 
an “ipso facto” clause) or that allows the counterparty to impose “default” terms. Subsection (d) 
provides that a counterparty may not exercise an “ipso facto” clause and use the receiver’s 
appointment as a basis to terminate or modify an executory contract and thereby prevent its 
adoption by the receiver. The prohibition on modification likewise prevents the counterparty 
from using the receiver’s appointment as a basis to impose a contractual penalty so as to increase 
the effective cost of the receiver’s adoption of the contract. For example, if the contract in 
question is a service contract that purports to permit the counterparty to increase the agreed price 
in the event a receiver is appointed, the receiver could adopt the contract at the original contract 
price. 
 
5. Under subsection (f), the receiver can assign an executory contract, but only to the extent 
permitted by the contract and applicable law. See, e.g., 2 Clark on Receivers, § 441.1, at 733 (3d 
ed. 1959) (“If a contract is ordinarily assignable between A & B there seems no reason why the 
receiver under proper orders of court cannot assign the contract.”).  The receiver thus cannot 
assign an executory contract if the contract or applicable law would excuse the counterparty from 
accepting performance from or rendering performance to an entity other than the owner. For 
example, if the court appointed a receiver for the real and personal property of a sculptor with  60 
 
whom a client had commissioned a custom work, the receiver could not assign to another artist 
the sculptor’s rights and obligations to finish the custom work.   
 
6. Subsection (g) addresses situations in which the receiver attempts to reject an executory 
contract for the sale of receivership real property of which the purchaser is in possession (i.e., an 
executory installment land contract or “contract for deed”) or an executory contract for the 
purchase of a timeshare interest. It gives the purchaser the choice to (a) treat the rejection as a 
termination of the contract (in which case the purchaser has a lien against the property for the 
recovery of purchase money already paid); or (b) retain its rights under the contract. If the 
purchaser takes the latter option, it must continue to perform its obligations, and may offset 
against its liability thereon any damages caused by the owner’s nonperformance of the contract 
following rejection, but has no claim or right against other receivership property or the receiver.  
 
 Subsection (g) gives these purchasers protection comparable to the protection under 
Section 365(i) of the Bankruptcy Code, 11 U.S.C.A. § 365(i), and its inclusion responds to 
concerns that the Act should be sensitive to “forum shopping” concerns (i.e., that the Act not 
provide a contracting party with the incentive to seek appointment of a receiver to permit 
termination of contracts that could not be terminated under bankruptcy law). The definition of 
“timeshare interest” in this section is a simplified version of the definition contained in the 
Bankruptcy Code, 11 U.S.C.A. § 101(53D), but should be modified if necessary to conform to 
the definition used in any time-share legislation adopted by the state.  
 
7. Under the definition of “executory contract” used in this Act, the term includes an 
unexpired lease of receivership real property. The receiver’s ability to reject unexpired leases of 
receivership real property presents a conundrum. On the one hand, if the property is subject to a 
number of long-term leases that are “below-market” relative to current rental levels, the receiver 
might wish to reject those leases, negotiate market-rate leases, and thereby enhance the market 
value of the property for an ensuing receivership or foreclosure sale. On the other hand, many of 
those tenants have negotiated those long-term leases in good faith, and rejection of those leases 
could result in substantial disruption to the tenants’ business operations. Further, one or more of 
those tenants might have negotiated for and obtained from the mortgagee of the project an 
agreement that the tenant’s possession would not be disturbed by virtue of a foreclosure 
proceeding or other creditor remedy so long as the tenant continued to perform its bargained-for 
lease obligations. For these reasons, it is appropriate to constrain the receiver’s ability to reject 
unexpired leases.  
 
Subsection (h) protects most tenants holding unexpired leases of real property from 
having their leases rejected by the receiver.  Under no circumstances can the receiver reject the 
lease of a tenant that occupies the property as a primary residence.  Likewise, when the receiver 
is appointed at the behest of an involuntary lienholder (such as a judgment creditor or 
mechanics’ lienor), the receiver likewise cannot reject a tenant’s unexpired lease.   
 
When a receiver is appointed at the behest of a mortgagee, the receiver cannot reject the 
lease under any of the following circumstances:  (a) the lease is senior in priority to the 
mortgage; (b) the tenant has a nondisturbance agreement with the mortgagee or the holder of a 
senior lien; (c) the mortgagee has consented, either in a signed record or by its failure to timely  61 
 
object that the lease violates the terms of the mortgage; or (d) the lease was commercially 
reasonable at the time of the agreement and the tenant did not know or have reason to know that 
the lease violated the terms of the mortgage. 
 
Example 1.  Henning owns an office building subject to a recorded mortgage in favor of 
Bank. At the time Henning granted the mortgage to Bank, Henning had leased the entire 
building to ABC Corp. for use as its headquarters under a 20-year lease, and a 
memorandum of that lease was recorded in the land records. Further, ABC Corp. did not 
enter into any agreement with Bank subordinating its lease to the lien of Bank’s 
mortgage. Following default by Henning, Bank obtains the appointment of Smith as a 
receiver for the building. Smith wants to reject ABC Corp.’s unexpired lease unless ABC 
Corp. will agree to adjust the rent due under the lease to current market levels. Under 
subsection (h)(3)(A), Smith cannot reject ABC Corp.’s lease, as that lease is entitled to 
priority over the lien of Bank’s mortgage. This result is appropriate, as a foreclosure of 
Bank’s mortgage would not have extinguished ABC Corp.’s lease. Nelson, Whitman, 
Burkhart & Freyermuth, Real Estate Transfer, Finance and Development 380-389 (9th 
ed. 2015).  
 
Example 2.  Same as Example 1, except that ABC Corp. and Bank entered into a 
“Subordination, Nondisturbance and Attornment Agreement” under which ABC Corp. 
agreed to subordinate its lease to the lien of Bank’s mortgage, and Bank agreed (for itself 
and its successors and assigns) that in the event of a foreclosure, ABC Corp.’s possession 
of the building would not be disturbed as long as ABC Corp. performed all of its 
obligations under its lease. Under subsection (h)(3)(B), Smith cannot reject ABC Corp.’s 
lease. By virtue of its nondisturbance agreement, ABC Corp. may remain in possession of 
the building as long as it does not default in the performance of its lease obligations. 
 
Example 3.  Henning owns an office building subject to a recorded mortgage in favor of 
Bank. Bank’s mortgage contains an assignment of leases and rents that provides that 
Henning may not enter into a lease of the property at a rent substantially below fair 
market value at the time of the lease without Bank’s prior written approval. Without 
obtaining Bank’s prior written approval, Henning leases office space in the building to 
his friend Gabriel for $1,000 per month at a time when the prevailing market rent for 
comparable space is $15,000 per month. Two weeks later, following default by Henning, 
Bank obtains the appointment of Smith as a receiver for the building. Under subsection 
(h)(3)(D), Smith may reject Gabriel’s lease, because the lease was not commercially 
reasonable at the time Henning and Gabriel contracted and Gabriel had constructive 
notice (through the terms of the recorded mortgage) that the lease violated the mortgage. 
See, e.g., Restatement (Third) of Property: Mortgages § 4.4(b), (c) (1997) (receiver may 
disaffirm lease that contravenes a provision of a prior recorded mortgage or that was 
made while mortgagor was in default and was not commercially reasonable when it was 
consummated). 
 
Example 4.  Same as Example 3, except that at the time Henning entered into the lease 
with Gabriel, Henning sought and obtained Bank’s written consent to Gabriel’s lease. 
Under subsection (h)(3)(C), Smith may not reject Gabriel’s lease, because Bank  62 
 
expressly consented to it. 
 
Example 5.  Same as Example 3, except that at the time Henning defaults and Smith is 
appointed receiver: (a) three years have passed since Gabriel’s lease commenced, (b) 
each year, Henning has provided Bank a copy of the rent roll showing the terms of 
Gabriel’s lease, and (c) Bank never declared a default based on Henning’s lease to 
Gabriel nor took steps to terminate the lease. Under subsection (h)(3)(C), Smith may not 
terminate the lease, as Bank has consented to Gabriel’s lease by virtue of its failure to 
take steps to terminate the lease despite its awareness that the lease existed and violated 
the terms of the mortgage. Cf. U.C.C. § 1-303(a), (f) (course of performance can be 
established through acquiescence and establish waiver or modification of contractual 
term inconsistent with course of performance). 
 
Example 6. Henning owns a 200-unit apartment building subject to a recorded mortgage 
in favor of Bank. Each tenant lease limits use of the unit to residential purposes only. 
Following default by Henning, Bank obtains the appointment of Smith as a receiver for 
the building. Under subsection (h)(1), Smith may not reject the lease of any tenant 
occupying a unit as the tenant’s primary residence. 
 
Subsection (h) merely constrains the receiver’s ability to reject an unexpired lease. It does 
not affect the receiver’s ability to enforce an unexpired lease according to its terms and thus to 
terminate the lease of a tenant who defaults. Thus, in Example 6, while Smith could not reject a 
tenant’s lease, Smith could institute summary proceedings against any tenant who fails to pay the 
required monthly rent and terminate the tenant’s rights under the lease for nonpayment (subject 
to the protections available to the tenant under applicable law other than this Act).  
 
 SECTION 18.  DEFENSES AND IMMUNITIES OF RECEIVER.   
(a)  A receiver is entitled to all defenses and immunities provided by law of this state 
other than this [act] for an act or omission within the scope of the receiver’s appointment. 
(b)  A receiver may be sued personally for an act or omission in administering 
receivership property only with approval of the court that appointed the receiver. 
Comment 
1. As an officer of the court, a receiver is shielded by judicial immunity for actions 
performed under the lawful authority of the appointment order.  As the leading treatise explains:   
 
 On the highest grounds of necessity and public policy judges cannot be held liable 
for acts done by them in their judicial capacity…. It follows that courts managing 
property through a receiver cannot be held liable as courts for imperfect management.  
Officers of the courts, such as sheriffs, constables, receivers and other officers, who act in 
obedience to the lawful mandate of the court or in obedience to lawful process of any  63 
 
sort, are protected or privileged in respect to acts done under such lawful authority.  [2 
Clark on Receivers, § 388, at 648 (3d ed. 1959).] 
 
Consistent with this approach, the Act provides the receiver with immunity for acts or omissions 
within the scope of the order appointing the receiver.  
 
2. Determining the breadth of a receiver’s immunity could create a conceptual problem in a 
case in which a receiver has been appointed as a primary receiver by a court in one state and an 
ancillary receiver by a court in another state.  If the primary state’s law provides the receiver 
with broader immunity than does the ancillary state’s law, a question might arise as to whether 
the receiver is entitled to the broader immunity available under the law of the primary state (or 
only the narrower immunity available under the law of the ancillary state).  In these cases, courts 
should resolve these issues by reference to conflicts-of-laws principles.  
 
3. Subsection (b) is an adaptation of Wash. Rev. Code Ann. § 7.60.160(1), and incorporates 
into the Act the Barton doctrine, which derives from the decision of the United States Supreme 
Court in Barton v. Barbour, 104 U.S. 126, 129, 26 L.Ed. 672 (1881).  In Barton, the Supreme 
Court held that to sue a court-appointed receiver, the would-be plaintiff must first seek approval 
of the appointing court.  The doctrine rests on the notion that the appointing court has in rem 
jurisdiction over the receivership property; thus, a forum other than the appointing court would 
lack subject-matter jurisdiction over the action. See also 2 Clark on Receivers, § 549, at 890 (3d 
ed. 1959) (“The custody of property by the court through its receiver is the custody of the 
sovereign power or government acting through the courts. Possession by the court of the res 
gives jurisdiction over the res to the court appointing the receiver and gives such court power to 
determine all questions concerning the ownership and disposition of this property. No other court 
can interfere with the possession of the res. The general rule of law, therefore, naturally follows 
that a receiver as an officer of court cannot in the absence of an enabling statute be sued without 
leave of the court appointing him.”). 
 
 The appointing court has discretion whether to grant leave to sue the receiver. The 
would-be plaintiff need not demonstrate a substantial likelihood of prevailing on the merits to 
obtain permission to sue the receiver. However, the would-be plaintiff must present a prima facie 
case for holding the receiver personally liable and show that its claim is not without foundation. 
See, e.g., In re National Molding Co., 230 F.2d 69, 71 (3d Cir. 1956). Nevertheless, a decision by 
the court to give permission to sue the receiver is not a conclusion that the would-be plaintiff’s 
claim is meritorious. 
 
 If the appointing court does grant the would-be plaintiff permission to sue the receiver, 
nothing in this Act mandates the appointing court as the venue for the lawsuit. The Act leaves 
questions regarding jurisdiction and venue over such a suit to other applicable law.  
 
 SECTION 19.  INTERIM REPORT OF RECEIVER.  A receiver may file or, if 
ordered by the court, shall file an interim report that includes: 
 (1)  the activities of the receiver since appointment or a previous report;  64 
 
(2)  receipts and disbursements, including a payment made or proposed to be made to a 
professional engaged by the receiver; 
(3)  receipts and dispositions of receivership property; 
(4)  fees and expenses of the receiver and, if not filed separately, a request for approval of 
payment of the fees and expenses; and 
(5)  any other information required by the court. 
Comment 
 Section 19 derives from Minn. Stat. Ann. § 576.36.  It does not automatically require the 
receiver to prepare interim reports, except as ordered by the court.  This approach provides 
flexibility to accommodate different judicial approaches—courts that have traditionally required 
only a final report could continue with such an approach, while courts that have traditionally 
required periodic reporting could specify an appropriate period in the order of appointment. 
 
 SECTION 20.  NOTICE OF APPOINTMENT; CLAIM AGAINST 
RECEIVERSHIP; DISTRIBUTION TO CREDITORS.   
(a)  Except as otherwise provided in subsection (f), a receiver shall give notice of 
appointment of the receiver to creditors of the owner by: 
 (1) deposit for delivery through first-class mail or other commercially reasonable 
delivery method to the last-known address of each creditor; and 
 (2) publication as directed by the court. 
(b)  Except as otherwise provided in subsection (f), the notice required by subsection (a) 
must specify the date by which each creditor holding a claim against the owner which arose 
before appointment of the receiver must submit the claim to the receiver.  The date specified 
must be at least [90] days after the later of notice under subsection (a)(1) or last publication 
under subsection (a)(2).  The court may extend the period for submitting the claim.  Unless the 
court orders otherwise, a claim that is not submitted timely is not entitled to a distribution from  65 
 
the receivership.  
(c)  A claim submitted by a creditor under this section must: 
 (1) state the name and address of the creditor; 
 (2) state the amount and basis of the claim; 
 (3) identify any property securing the claim; 
 (4) be signed by the creditor under penalty of perjury; and 
 (5) include a copy of any record on which the claim is based. 
(d)  An assignment by a creditor of a claim against the owner is effective against the 
receiver only if the assignee gives timely notice of the assignment to the receiver in a signed 
record. 
(e)  At any time before entry of an order approving a receiver’s final report, the receiver 
may file with the court an objection to a claim of a creditor, stating the basis for the objection.  
The court shall allow or disallow the claim according to law of this state other than this [act].    
(f)  If the court concludes that receivership property is likely to be insufficient to satisfy 
claims of each creditor holding a perfected lien on the property, the court may order that: 
 (1) the receiver need not give notice under subsection (a) of the appointment to all 
creditors of the owner, but only such creditors as the court directs; and 
 (2) unsecured creditors need not submit claims under this section. 
(g)  Subject to Section 21: 
(1) a distribution of receivership property to a creditor holding a perfected lien on 
the property must be made in accordance with the creditor’s priority under law of this state other 
than this [act]; and 
(2) a distribution of receivership property to a creditor with an allowed unsecured  66 
 
claim must be made as the court directs according to law of this state other than this [act]. 
Comment 
1. This Act provides a claims process that is substantially simpler and more flexible than the 
comprehensive provisions found in the receivership codes enacted in Minnesota and 
Washington. The Act provides a claims process that the court can adapt to either a custodial 
receivership (in which the receiver acts to preserve the property pending the completion of a 
foreclosure or some other legal proceeding) or a general receivership (in which the receiver 
manages all or substantially all of the assets and financial affairs of the owner). 
 
 In a general receivership, a receiver may gather and liquidate all or substantially all of the 
assets of the owner. If there is an expectation that the receiver’s conduct will generate sums in 
excess of the amount of any secured claims and thus produce proceeds for distribution to general 
creditors, the Act provides a process for the receiver to give notice to all creditors, so those 
creditors can submit claims against the receivership estate.  
 
 By contrast, it might be that the receivership property in a general receivership is not 
likely to generate sums greater than the amount of valid liens on the property. Similarly, in a 
custodial receivership, the sums generated by the receiver’s actions, often in the form of net 
rents, might be far less than the amount of applicable liens, thus leaving no proceeds for 
distribution to general creditors. In such cases, notice to all unsecured creditors might not be 
useful, and Section 20 allows the court to limit formal notice to those creditors whose interests 
may be affected by the receivership.  
 
2. Subsection (a) provides that unless the court orders otherwise, the receiver must give 
notice of appointment to creditors by first class mailing to the last known address of each 
creditor and by publication as directed by the court.  Subsection (b) then directs any creditors 
holding claims that arose before appointment to file a proof of that claim with the receiver within 
90 days unless the court extends that deadline. Creditors submitting untimely claims may not 
receive a distribution from the receivership unless the court orders otherwise. This permits the 
court the flexibility to allow the untimely claim of a creditor in appropriate circumstances (e.g., 
the creditor did not receive mailed notice and only gained knowledge of the receivership after the 
bar date had passed). 
 
If the court concludes that the receivership property is likely not sufficient to satisfy the 
claims of creditors holding liens on that property, subsection (f) permits the court to direct the 
receiver to notify only those creditors required by the court, and to forgo the filing of claims by 
unsecured creditors. 
 
 Subsection (a) requires publication to facilitate the ability of the receiver to give notice to 
any creditors unknown to the receiver at the time. By requiring publication “as directed by the 
court,” the Act provides the court with the flexibility as to the manner of publication in light of 
technological evolution and changing economics in the publishing industry. In many situations, a 
court may direct the receiver to publish notice in a newspaper of general circulation in the county 
where the receivership real property is located, but in some counties today (and increasingly so  67 
 
in the future), it might be the case that the only “newspapers” of circulation in a county are ones 
that publish only in electronic form.  Subsection (a) permits a court to permit electronic 
publication in that context.  
 
3. Subsection (c) provides minimal requirements for the creditor’s proof of claim.    
 
4. Subsection (d) makes clear that while the Act does not prohibit the assignment of claims 
against the receivership, an assignment is effective against the receiver only if the assignee gives 
the receiver timely notice of the assignment. The amount of notice that is “timely” might differ 
depending on the circumstances. For example, for notice of an assignment to be effective to 
protect the assignee’s right to a distribution from the receivership, timely notice requires the 
assignee to give notice before distributions were made.  By contrast, suppose that the receiver 
proposes to sell receivership property, and seeks to give notice of a proposed sale and a hearing 
to approve the sale terms.  In this context, an assignment of a claim would be effective against 
the receiver so as to obligate the receiver to give notice of the proposed sale and hearing if the 
assignee gave notice of the claim assignment before the receiver gave notice of the proposed 
sale.  
 
Example.  On April 1, the receiver gives Creditor X notice of a proposed sale of 
receivership property to be held on April 20.  On April 8, Creditor X assigns its claim to 
Creditor Y. On April 12, Creditor Y notifies the receiver of the claim assignment. On 
April 20, the receiver sells the property to Purchaser, who pays value in good faith. Even 
though the sale had not occurred at the time of Creditor X’s assignment, the validity of 
the sale should not be called into question because Creditor Y did not receive notice of 
the proposed sale. However, for purposes of any distribution to creditors, the assignment 
of the claim to Creditor Y is effective against the receiver.  
 
5. The Act makes clear in Section 12(b)(6) that (if the court so orders) the receiver has the 
power to recommend the allowance and disallowance of claims. Subsection (e) makes clear that 
the court may disallow a timely-filed claim to the extent that the claim is not enforceable under 
other applicable law. 
 
6. As described in Comments 1 and 2, subsection (f) permits the court to streamline the 
claims process if the court concludes that the expected net proceeds from the receivership will be 
insufficient to satisfy the claims of creditors holding secured claims against receivership 
property.  In such a case, the court may order that the receiver notify only those creditors 
directed by the court and that unsecured creditors need not submit claims. In any event, 
however, any creditor holding a secured claim against receivership property must file a proof of 
claim with the receiver, so that the receiver can have the information necessary to facilitate the 
receiver’s ability to make recommendations regarding the appropriate distribution of receivership 
property or the proceeds of such property. 
 
 A court might order the receiver to forgo the process for unsecured claims under 
subsection (f), only to discover later that the receivership in fact generated receipts in excess of 
the amount needed to satisfy secured claims. In this case, Section 5 preserves to the court the 
authority to order the receiver to re-institute the default notice and claims process provided in  68 
 
Section 20, and the receiver would be obliged to carry out that order under Section 12(c)(5). 
 
7. Subsection (g) provides that any distribution of receivership property to a creditor with a 
perfected lien on that property shall be made according to the state’s applicable priority rules as 
determined by law other than this Act.  This applies both to the distribution of proceeds from the 
sale of receivership property under Section 16 and to the distribution of collected rents that are 
the subject of an assignment of rents. 
 
 Subsection (g) also provides that allowed unsecured claims shall receive distribution 
from the residue of the receivership property as the court directs in accordance with law of this 
state other than this Act (including the state’s choice of law rules). Subsection (g) makes clear 
that the court should respect any rules of administrative priority for certain unsecured claims that 
might exist under other applicable law of the state. Absent applicable law requiring a higher 
priority to certain unsecured claims, creditors holding unsecured claims would typically share in 
any distributions on a pro rata basis.  
 
 SECTION 21.  FEES AND EXPENSES. 
 (a)  The court may award a receiver from receivership property the reasonable and 
necessary fees and expenses of performing the duties of the receiver and exercising the powers 
of the receiver. 
 (b)  The court may order one or more of the following to pay the reasonable and 
necessary fees and expenses of the receivership, including reasonable attorney’s fees and costs: 
 (1) a person that requested the appointment of the receiver, if the receivership 
does not produce sufficient funds to pay the fees and expenses; or 
 (2) a person whose conduct justified or would have justified the appointment of 
the receiver under Section 6(a)(1). 
Comment 
1. Under subsection (a), the court may allow the receiver to recover the reasonable and 
necessary fees and expenses of carrying out its duties and exercising its powers before 
distribution to secured creditors.  See, e.g., 2 Clark on Receivers, § 640.1(b), at 1082 (3d ed. 
1959) (“A sale by the receiver free from liens is for most practical purposes equivalent to a 
foreclosure sale and if and when the property is realized under such circumstances and if and 
when the mortgagees or lienholders avail themselves of the advantage of the receivership to 
effect the sale of the mortgaged premises, this means they have saved themselves similar 
expenses in a foreclosure suit or otherwise and, therefore, should pay for the advantage they have  69 
 
received.”).   
 
2. Subsection (b)(1) provides that if a person seeks appointment of a receiver and the 
resulting receivership receipts were insufficient to pay the costs of the receivership, the court 
may assess the person who sought the receivership for the shortfall.  
 
 Subsection (b)(2) provides that if the receiver is or could have been appointed under 
Section 6(a)(1) of this Act—i.e., if the property or its revenue-producing potential was being 
subjected to waste, loss, dissipation, or impairment—then the court may impose the costs of the 
receivership on the person responsible for that waste, loss, dissipation, or impairment. 
 
 In subsection (b), the “reasonable and necessary fees and expenses of the receivership” 
would include reasonable fees and expenses incurred by any professional engaged by the 
receiver under Section 15. 
 
 SECTION 22.  REMOVAL OF RECEIVER; REPLACEMENT ; TERMINATION 
OF RECEIVERSHIP. 
(a)  The court may remove a receiver for cause. 
(b)  The court shall replace a receiver that dies, resigns, or is removed. 
(c)  If the court finds that a receiver that resigns or is removed, or the representative of a 
receiver that is deceased, has accounted fully for and turned over to the successor receiver all 
receivership property and has filed a report of all receipts and disbursements during the service 
of the replaced receiver, the replaced receiver is discharged. 
(d)  The court may discharge a receiver and terminate the court’s administration of the 
receivership property if the court finds that appointment of the receiver was improvident or that 
the circumstances no longer warrant continuation of the receivership. If the court finds that the 
appointment was sought wrongfully or in bad faith, the court may assess against the person that 
sought the appointment: 
 (1) the fees and expenses of the receivership, including reasonable attorney’s fees 
and costs; and 
 (2) actual damages caused by the appointment, including reasonable attorney’s  70 
 
fees and costs. 
Comment 
1. Subsection (a) permits the removal of the receiver for cause. The Act does not define 
“cause,” but leaves the determination of whether “cause” exists to judicial determination on a 
case-by-case basis. This approach reflects sound policy, as the facts and circumstances might 
vary substantially from one receivership to another. Certainly, “cause” would include the 
receiver’s refusal or failure to carry out its duties.  3 Clark on Receivers, § 692, at 1272 (3d ed. 
1959).   
 
2. Under subsection (c), once a removed receiver (or a representative, in the case of a 
deceased receiver) has provided a full accounting for all receivership property and a full report of 
all receipts and disbursements during its tenure, 3 Clark on Receivers, § 699.1, at 1285 (3d ed. 
1959), the replaced receiver is discharged from further duties as receiver.  
 
The discharge of the receiver is a discharge from further duties as receiver; it is not a 
discharge of liability for acts taken by the receiver during the receivership and for which the 
receiver would not be entitled to immunity under Section 18. 
 
3. Subsection (d) permits the court to discharge a receiver and terminate the receivership if 
the court finds that the receiver’s appointment was improvident or that the receivership is no 
longer warranted.  See, e.g., 3 Clark on Receivers, § 692.1, at 1274-1277 (3d ed. 1959).  If the 
court terminates a receivership as having been improvidently granted and the court further finds 
that the person who procured the receiver’s appointment acted wrongfully or in bad faith, the 
court may impose on such person the costs of the receivership and may assess against the person 
damages in favor of the owner, including attorney fees. 
 
 SECTION 23.  FINAL REPORT OF RECEIVER; DISCHARGE . 
(a)  On completion of a receiver’s duties, the receiver shall file a final report including: 
 (1) a description of the activities of the receiver in the conduct of the receivership; 
 (2) a list of receivership property at the commencement of the receivership and 
any receivership property received during the receivership; 
 (3) a list of disbursements, including payments to professionals engaged by the 
receiver; 
 (4) a list of dispositions of receivership property; 
 (5) a list of distributions made or proposed to be made from the receivership for  71 
 
creditor claims;  
 (6) if not filed separately, a request for approval of the payment of fees and 
expenses of the receiver; and 
 (7) any other information required by the court. 
(b)  If the court approves a final report filed under subsection (a) and the receiver 
distributes all receivership property, the receiver is discharged. 
Comment 
 Section 23 provides for the termination of the receivership and discharge of the receiver 
once the receiver has filed a final report complying with subsection (a), the court has approved 
that report following notice and opportunity for hearing as required in Section 3, and the receiver 
has distributed all receivership property in the manner directed by the court and this Act. The 
receiver’s final report is based on the same general template as any interim reports filed by the 
receiver. 
 
Section 23 directs the receiver to prepare its final report on “completion” of its duties. 
Absent an explicit direction from the court, the receiver should prepare its final report when it 
believes that it has carried out all of its duties under this Act, and when the receiver is prepared 
to make a final distribution of receivership property. If the court thereafter orders the receiver to 
carry out further duties, the receiver may update its final report accordingly following their 
completion. 
 
 The discharge of the receiver is a discharge from further duties as receiver; it is not a 
discharge of liability for acts taken by the receiver during the receivership and for which the 
receiver would not be entitled to immunity under Section 18.  
 
 SECTION 24.  RECEIVERSHIP IN ANOTHER STATE; ANCILLARY 
PROCEEDING. 
(a)  The court may appoint a receiver appointed in another state, or that person’s 
nominee, as an ancillary receiver with respect to property located in this state or subject to the 
jurisdiction of the court for which a receiver could be appointed under this [act], if: 
 (1) the person or nominee would be eligible to serve as receiver under Section 7; 
and  72 
 
 (2) the appointment furthers the person’s possession, custody, control, or 
disposition of property subject to the receivership in the other state. 
(b)  The court may issue an order that gives effect to an order entered in another state 
appointing or directing a receiver. 
(c) Unless the court orders otherwise, an ancillary receiver appointed under subsection 
(a) has the rights, powers, and duties of a receiver appointed under this [act]. 
Comment 
1. State boundary lines provide an inherent jurisdictional limitation to the ability of a 
receiver to exercise control over receivership property located outside the boundaries of the state 
in which the receiver was appointed.  As the leading treatise explains: 
 
Although a court having jurisdiction of the defendant owner of property in another state 
may make an order appointing a receiver of the defendant's property wherever situated, 
such an order does not immediately or directly bind tangible personal property or real 
estate outside the territorial jurisdiction of the appointing court. Such an order does not of 
itself cut off rights of local creditors to proceed against the defendant's property in the 
foreign jurisdiction. [1 Clark on Receivers § 294, at 483 (3d ed. 1959).] 
 
Thus, a court cannot immediately exercise jurisdiction over real estate and/or tangible personal 
property outside of its territorial jurisdiction. In this circumstance, it might become necessary for 
the person who sought the receiver’s appointment to apply to a court in the situs state (the state 
where the real estate and/or tangible personal property is located) for the appointment of an 
ancillary receiver.  1 Clark on Receivers § 318 (3d ed. 1959).   
 
2. Section 24 is based in significant part on the provisions of the Minnesota receivership 
statute, Minn. Stat. Ann. § 576.41. Subsection (a) addresses the appointment in this state of an 
ancillary receivership to a primary receivership already granted in another state.  It provides that 
the foreign receiver (or that receiver’s nominee) may be appointed as an ancillary receiver for 
property in this state, as long as the receiver or nominee would be eligible for appointment under 
this Act and appointment would further the purposes of the foreign receivership. A person 
appointed as an ancillary receiver has all of the powers, rights and duties of a receiver under this 
Act, unless the court orders otherwise. 
 
 Subsection (b) authorizes the court to enter any order necessary to give effect to an order 
of another state appointing a receiver or directing the receiver’s conduct.  For example, under 
subsection (b), the court could enter an order authorizing a foreign receiver to repossess personal 
property collateral in this state (rather than requiring the petitioning receiver to incur the cost of 
having to obtain the appointment of an ancillary receiver in this state). 
  73 
 
3. Subsection (c) provides that an ancillary receiver’s powers and duties are determined by 
this Act. 
 
 SECTION 25.  EFFECT OF ENFORCEMENT BY MORTGAGEE .  
 [(a)]  A request by a mortgagee for appointment of a receiver, the appointment of a 
receiver, or application by a mortgagee of receivership property or proceeds to the secured 
obligation does not: 
 (1) make the mortgagee a mortgagee in possession of the real property; 
 (2) make the mortgagee an agent of the owner; 
 (3) constitute an election of remedies that precludes a later action to enforce the 
secured obligation; 
 (4) make the secured obligation unenforceable; [or] 
 (5) limit any right available to the mortgagee with respect to the secured 
obligation[;][; or] 
 [(6) constitute an action within the meaning of [cite the “one-action” statute of 
this state][; or]] 
 [(7) except as otherwise provided in subsection (b), bar a deficiency judgment 
pursuant to law of this state other than this [act] governing or relating to a deficiency judgment]. 
 [(b)  If a receiver sells receivership property that pursuant to Section 16(c) is free and 
clear of a lien, the ability of a creditor to enforce an obligation that had been secured by the lien 
is subject to law of this state other than this [act] relating to a deficiency judgment.]   
Legislative Note: If state law does not prohibit or otherwise limit the ability of a lienholder to 
obtain a deficiency judgment following the enforcement of a lien, the state should enact this 
section  without subsections (a)(7) and (b).   
 
A state that does not have a “one action” statute should omit subsection (a)(6).  74 
 
Comment 
1. Section 25 is an adaptation of Section 11 of the Uniform Assignment of Rents Act 
(UARA), which provides that certain actions taken by an assignee of rents to enforce its security 
interest in rents (such as direct collection of rents after notification to tenants or through 
appointment of a receiver) does not itself make the assignee a “mortgagee in possession,” 
constitute an election of remedies, waive other security held by the assignee, violate a state’s 
“one-action” rule, or constitute a foreclosure sale for purposes of triggering a state’s anti-
deficiency rule. Section 25 assures that this Act does not conflict with UARA by making clear 
that the decision of a mortgagee or an assignee of rents  to pursue its appointment of a receiver 
under the Act should not trigger a state’s one-action rule or bar the mortgagee or assignee of 
rents from an action to enforce the debt. See, e.g., Cal. Code Civ. Proc. § 564(d) (“Any action by 
a secured lender to appoint a receiver pursuant to this section shall not constitute an action within 
the meaning of [California’s one-action rule].”).  
 
2. Subsection (b) is appropriate in states that have enacted legislation prohibiting an action 
for a deficiency judgment following the foreclosure of some or all liens. Under Section 16(c), a 
sale of receivership property by the receiver could have the effect of extinguishing one or more 
liens on the property.  Such a receivership sale is not a foreclosure sale under this Act, but could 
have an effect similar to the title-clearing effect of a foreclosure sale.  See, e.g., 2 Clark on 
Receivers, § 640.1(b), at 1082 (3d ed. 1959) (“A sale by the receiver free from liens is for most 
practical purposes equivalent to a foreclosure sale ….”).  In those situations, the obligor should 
be protected by a state’s prohibition on deficiency judgments to the same extent as the obligor 
would have been protected following a foreclosure sale, and subsection (b) accomplishes this 
result.   
 
 Subsection (b) is also appropriate in states that place a “fair value” limit on the ability of 
a foreclosing creditor to obtain a deficiency judgment following a foreclosure sale.  In such 
states, the foreclosing creditor’s deficiency judgment is calculated by reference to the difference 
between the outstanding balance of the debt and the appraised “fair market value” of the property 
(rather than the difference between the outstanding balance of the debt and the foreclosure sale 
price).  If a receiver sells receivership property free and clear of a lien under Section 16(c), 
Section 25(b) would provide the obligor with the benefit of the state’s “fair value” rule in a 
subsequent action on the debt by the holder of the extinguished lien. 
 
 SECTION 26.  UNIFORMITY OF APPLICATION AND CONSTRUCTION.  In 
applying and construing this uniform act, consideration must be given to the need to promote 
uniformity of the law with respect to its subject matter among states that enact it. 
 SECTION 27.  RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND 
NATIONAL COM MERCE ACT. This [act] modifies, limits, or supersedes the Electronic 
Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not  75 
 
modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize 
electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. 
Section 7003(b). 
 SECTION 28.  TRANSITION. This [act] does not apply to a receivership for which the 
receiver was appointed before [the effective date of this 
[act]]. 
 SECTION 29.  REPEALS; CONFORMING AMENDMENTS .  
 (a) . . . . 
 (b) . . . . 
 (c) . . . . 
 SECTION 30.  EFFECTIVE DATE. This [act] takes effect  . . . .