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Not always better to give than receive.

Since the early 1990's, the presence of Court appointed receivers as litigants in the Landlord and Tenant Court continues to rise. This is the result of a combination of two major events: the Resolution Trust Company(RTC) taking over failed banking institutions, namely the savings and loan companies, and the collapse of many property owners, large and small, in New York City. Receivers, receiver-appointed management companies and their accompanying attorneys should take not of the special relationship they are entering and the pitfalls that should be avoided.

Through foreclosure proceedings or other Supreme Court proceedings, receivers may be appointed to collect rent, oversee and control a property and take actual control of the premises on a temporary basis. There are special considerations and restrictions regarding these rights, duties and obligations

of receivers with regard to the properties over which they have been appointed.

The Role of the Receiver

In many instances, the relationship between the receiver and the property's owner of record is strained and difficult. It becomes harder to have an immediate positive impact upon the premises without some level of cooperation from the record owner in terms of producing records and rent rolls, collection efforts, condition of the premises and other issues affecting the building. This relationship, however, is normally controlled by the particular Supreme Court order appointing the receiver in outlining the obligations and duties of all involved parties. After posting the bond set by the Supreme Court judge, the receiver is normally charged with the day-to-day responsibilities of the premises including the collection of rents and other property management tasks. Engaging the services of a management company, preferably with a reputation for being quick, aggressive, and efficient in both the correction of violations and the collection of rents, becomes the receiver's first effort. The matter of finding an experienced management company is especially pressing in light of the fact that the receiver's presence at the building may be short-term. Remember that under normal circumstances a receiver's compensation is directly related to the rent collections resulting from his or her efforts.

Responsibilities of Owner's Counsel

Over the past few years, the firm of Rudd Rosenberg & Hollender has represented many receivers, both directly and through the recommendation of major law firms involved in the foreclosure and appointment process in the State Supreme Court. It is important for the owner's counsel to work closely in tandem with those law firms; further, counsel needs to regularly communicate with the receiver, management company and other affected parties in order to better serve the short- and long-term business goals of the various parties. While litigation is often the last resort, turned to only after negotiations and workouts have failed, the owners's counsel must be particularly swift, aggressive and experienced in order to bring the fastest results on behalf of receivers and to infuse the greatest amount of financial resources into a premises in the shortest amount of time. It is often only these funds with which a receiver has to work and maintain a premises, and it becomes especially incumbent upon owner's counsel to successfully obtain these funds as quickly as possible.

The Process of Modification

Where there are instances of new leases or modification of leases in residential or commercial properties, it is likely that the Supreme Court judge who has appointed the receiver must ultimately condone the proposed action on behalf of the receiver. As a result, application must be made before the Supreme Court judge seeking approval of any such modifications, changes to the lease, provisions for new leases or any other actions which are outside of the normal scope of the receiver's duties and responsibilities pursuant to the previous Court order. The owner's counsel is often directly involved in the preparation or support of the Supreme Court application, collecting or helping to provide supporting affidavits, appraisals and further data. Stipulations made in the Civil Court in either Housing or the Commercial part should be made conditional upon the receiver making application before the Supreme Court and seeking approval from a Supreme Court Judge.

In summary, the owner's counsel should effectively communicate with receivers, management representatives, tenants and forwarding legal counsel in order to properly represent the interest of the receiver in both the collection of rents, maintenance of the premises and furtherance of the goals and strategies associated with the particular and unique relationship of the receiver and the respective premises.

Mindful of these relationships and their special nature, counsel should act swiftly, economically and effectively in order to serve the best interests of the receiver and ultimately the record owner of the premises for the duration of the receivership.
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Title Annotation:Legal Review; takeover of failed banking institutions by Resolution Trust company and collapse of property owners in New York, New York creates increase of Court appointed receivers as litigants in Landlord and Tenant Court
Author:Rudd, Mark S.
Publication:Real Estate Weekly
Article Type:Column
Date:Jul 21, 1993
Previous Article:DHCR to loosen grip on tenant windfalls.
Next Article:0wners, lenders find working out is hard to do.

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