Receivership Basics - Responsibilities & Hiring Brokers

By
Commercial Real Estate Agent

Note that this is a very basic explanation and applicable to the State of Ohio.  Other states may be different and many counties have various Local Rules established by the Court.  It is strongly encouraged to engage competent counsel to assist you.

 

If the idea of acting as receiver is of interest, it is important to understand the position, responsibilities and liabilities.  A quick reading of the Ohio Revised Code, Section 2735 will outline when a receiver may be appointed, the qualifications needed, the need for oath and bond as well as the general powers that may be granted to a receiver.

 

From a legal and technical standpoint being a receiver in the state of Ohio requires only that a receiver of property be a resident of the state.  From a practical standpoint, acting in this capacity is much more complicated. 

 

One thing auctioneers are usually concerned about is liability and insurance.  It would be wise to contact your insurance company and inquire as to (a) if they will provide coverage for this type of work and (b) the cost.  You could reasonably expect your global coverage for real estate/personal property auctions and acting as a receiver to be about $15,000 a year. 

 

If you are able to obtain coverage or are willing to go without, the requirement of being appointed is fairly simple.  As noted about, the only true requirement is being a resident of the State of Ohio.  Unlike the Bankruptcy Code that outlines processes and procedures, there are limited guidelines for the operations of a receivership and it is expected that the receiver will make decisions based on their best business and legal judgment.  As such, familiarity with general business operations, IRS guidelines, etc. are helpful if taking possession of an operating entity.  If conducting a liquidation of real property for example, an in depth knowledge of various sales methodologies, real estate law, contracts and negotiating are a must.  An auction may not always be the best option, contracts need to be negotiated and drafted and sometimes deals fall apart.  A receiver needs not only be a broker or auctioneer, but also a solid business person.

 

Once you have been appointed, the law also requires that each receiver post a bond for each case and this bond level is determined by the Court.  The bond amount can be anywhere from $1 up to the expected value of the assets within your control.  The more projects you undertake, the lower (typically) your case to case bonds will be.   An experienced receiver could reasonably expect to post bonds of $100 to $1,000 per case which is generally posted in cash with the Clerk of Courts.  This is good and bad however as a good receiver will run multiple files at a time and deposits with the Clerk can add up quickly.  At the finalization of the case, the bond amount will be returned if posted in cash or cancelled if purchased through a bonding company.

 

If you have gotten this far in the process and have been appointed by the court, it is extremely important to understand the importance of the role just assumed.  While you may have been contacted by the bank or some other party and your appointment has been requested by them, the role of receiver is to act as an independent party for the benefit of all sides.  In the eyes of the law, you work directly for the judge who appointed you and are now an “arm of the court”.  The Court is looking to you to advise it on how to proceed.  For example, in a real estate transaction you as receiver may want or need to hire a broker to assist with the sale.  You as the judges eyes and ears will need to file a Motion with the court to approve the broker.  Within this Motion, you will essentially be telling the court that this broker is the best for the situation and you are recommending this person as the best option for the situation.  By extension, when it comes time to contract for the sale of the property, you as receiver are going to file a motion with the court to approve the sale of the asset.  In this motion, you are advising the court that a marketing effort was undertaken, offers were received and reviewed and in your expert opinion, the offer being presented is the best offer possible after the asset has undergone a “commercially reasonable” marketing effort.  While there is not an “approved” process  or statewide approved definition of “commercially reasonable” it could loosely be defined as undertaking a comprehensive effort including but possibly not limited to web postings, email and direct mail outreach, print advertising, public / media relations and possibly inspection periods. 

 

More to follow...............

Posted by

Richard Kruse, Managing Director

Gryphon Parker, LLC

Sperry Van Ness Ohio / Gryphon Parker

Parker Kruse Asset Management

Gryphon Auction Group

90 Northwoods Blvd., Columbus, OH 43235

Phone 614.774.4118

 

rfk@svn.com I www.svngp.com I www.svn.com I www.svnauctions.com

 

About Richard Kruse

 

Mr. Kruse began his real estate career full time in Virginia in 1997.  Over the past 17 years, he has conducted real estate and equipment sales across the country.  In August of 2003, Mr. Kruse, in partnership with his wife Melissa, opened Gryphon Asset Advisors, the predecessor to Gryphon USA., Ltd.  In June of 2014, Kruse and Shawn Parker formed Sperry Van Ness Gryphon Parker Commercial Realty and Parker Kruse Asset Management.  Prior to July, Kruse and Parker were each others largest competitor.

 

In addition to sitting on the Ohio Auctioneers Commission, Mr. Kruse leads Sperry Van Ness Auction Services efforts in the State of Ohio, teaches at the Ohio Auction School and is regularly consulted as an expert in auctions and distressed assets by Columbus Business First and the Columbus Dispatch.  He is an active member CenterPoint Church and lives with his wife, Melissa, and daughter, Savannah, in North Columbus. 

 

About Gryphon Parker, LLC

 

 

Gryphon Parker, LLC is a multi-faceted group of companies operating under the names Parker Kruse Asset Management, Sperry Van Ness Gryphon Parker, Gryphon Auction Group & Parker Realty. The entities providing distressed asset management, real estate brokerage, management, leasing and auction services throughout the State of Ohio. The SVN Gryphon Parker Special Assets Group, working closely with Parker Kruse Asset Management, advises financial institutions, borrowers and the Courts on troubled asset administration throughout the United States.

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