A Worthwhile Alternative to Foreclosure: Receivership
The LA Times reported that the City of Los Angeles is seeking to assign a receiver to the 29 distressed buildings for Skid Row Housing Trust (SRHT).
This topic is close to my heart. My dad was #homeless. After finding his sobriety, he ended up becoming a chaplain and then rose through the ranks to become the Chief Operating Officer of the Los Angeles Mission.
Rather than stay in his cushy office, he walked the streets of Skid Row every day speaking to the forgotten and most downtrodden to help them get a meal and a shower.
SRHT defaulted on a $4MM commercial real estate loan from Pacific Premier Bank (PPBI), a $22B bank. Worse, the buildings are uninhabitable and SRHT does not have the money to make the repairs.
When a property becomes a nuisance or a danger to the community, a court may order a nuisance abatement receivership to take control of the property and manage it in a way that reduces or eliminates the nuisance.
This type of receivership is different from a traditional rents and profits receivership, which is used to manage a property that is in financial distress or in dispute over ownership.
Nuisance abatement receiverships are typically used in cases where a property is causing harm to the surrounding community, such as through drug activity, gang violence, or illegal dumping.
In these cases, the court may appoint a receiver to take control of the property and take steps to address the nuisance.
This may include making repairs and improvements to the property, evicting tenants who are engaging in illegal activity, and implementing security measures to prevent further harm to the community.
One of the key differences between a nuisance abatement receivership and a traditional rents and profits receivership is the focus of the receiver’s duties.
In a traditional rents and profits receivership, the receiver is primarily responsible for managing the property and collecting rent on behalf of the owner.
However, in a nuisance abatement receivership, the receiver’s primary duty is to abate the nuisance and ensure that the property is no longer a danger to the community. This may require the receiver to take actions that would not be necessary in a traditional receivership, such as working with law enforcement agencies to address criminal activity on the property.
In the SHRT case, the receiver might be able to access state health and safety code provisions to borrow against those distressed properties to fix them.
It is likely public funds will be needed as any lender will want to protect themselves in a rising rate environment where commercial property values are decreasing.
Another difference between the two types of receiverships is the level of involvement of the property owner.
In a traditional rents and profits receivership, the owner is typically still involved in the management of the property and may have input into the decisions made by the receiver.
However, in a nuisance abatement receivership, the owner may have little or no involvement in the management of the property and may even be barred from entering the property while the receiver is in control.
Overall, the purpose of a nuisance abatement receivership is to address a serious problem that is affecting the community and to restore the property to a state where it is no longer a danger or a nuisance.
While it may be a difficult process, the appointment of a receiver can help to ensure that the necessary actions are taken to address the problem and that the property is managed in a way that benefits the community.
Our team offers receivership services. To learn more about our capacity, check out our website:
https://marcelobermudezinc.com/receivership/
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