Written by attorneys · grounded in primary & secondary sources — see below
A judicial proceeding in which a court appoints a receiver to take custody of property, collect rents, prevent waste, and manage assets for the benefit of creditors or lienholders pending foreclosure or other resolution.
Sources & Authorities· 9 primary sources
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How it applies
Common Examples
5
Senior Mortgagee Priority Over Junior
Metro Bank holds a senior mortgage on Riverfront Retail LLC's shopping center that mentions neither rents nor receivership authority. Harbor Finance holds a junior mortgage that assigns rents and authorizes a receiver on default. After default, Harbor obtains a receiver who collects rents. Metro then seeks its own receiver. The court grants priority to Harbor's receivership because the senior mortgage lacks both protections while the junior mortgage supplies them.
Joint Receivership Agreement Controls
Creek Power and National Oil both hold mortgages on Alpha Oil LLC's wind farm and qualify for receivers. They agree to a single receiver who will apply collected rents first to taxes and maintenance then to the senior obligation. The court enforces the agreement and appoints the agreed receiver rather than entertaining separate competing petitions.
Junior Receiver Rights to Collected Rents
National Oil obtains a receiver for Alpha Oil LLC's operations center before Creek Power acts. The receiver collects $80,000 in rents, pays taxes and structural repairs, and applies the balance to the junior mortgage. When Creek Power later obtains a senior receiver, the junior receiver must account for any uncollected accrued rents and unauthorized prepayments but retains the properly applied excess.
Illustration of Junior Priority Exception
Sky Housing holds a senior mortgage on National Properties LLC's mixed-use building that is silent on rents and receivership. Liberty Estates holds a junior mortgage that mortgages rents and authorizes a receiver. After default, Liberty obtains a receiver. The court awards the receivership to Liberty because the senior mortgage lacks both protections while the junior mortgage supplies them.
Junior Mortgagee Obtains Priority Receiver
First Bank holds a senior mortgage on Oak Plaza LLC's retail center silent on rents and receivership. Second Bank holds a junior mortgage that both assigns rents and authorizes a receiver on default. After default Second Bank petitions and the court appoints its receiver. First Bank later seeks to replace the receiver. The court denies the request and confirms Second Bank's priority under the Restatement exception.
Granfinanciera, S.A. v. Nordberg492 U.S. 33, 42 (1989)
Common questions
Frequently Asked
4
When does a junior mortgagee's receivership request take priority over a senior mortgagee's request?+
A junior mortgagee's receivership takes priority when the senior mortgage and any accompanying agreement contain neither a mortgage on rents nor authorization for appointment of a receiver upon default, and the junior mortgage or accompanying agreement contains either such a mortgage on rents or receivership authorization. This exception applies even if a receiver was previously appointed under the junior mortgage.
Supporting sources
What rights does a junior receiver have to rents collected before a senior receiver is appointed?
The junior receiver may collect rents until a senior receiver is appointed. The junior receiver must first apply those rents to real estate taxes and other reasonable expenses associated with maintenance and repair of the real estate. Only the excess may be applied to the junior obligation.
Supporting sources
Does a mortgagee's broad collateral description of real property and improvements automatically include rents for receivership priority purposes?+
No. A general description of the real property and improvements does not substitute for an express mortgage on rents or receivership authorization when determining priority between competing mortgagees under the Restatement rule. The senior mortgage must contain one of those specific protections to retain priority.
Supporting sources
What law governs whether a receivership order transfers an interest in real property located in another state?+
The law of the situs of the land governs whether an interest in that land has been transferred by operation of law and the nature of any interest transferred. A court in the situs state applies its own local property law to determine the effect of a foreign receivership order on title to land within its borders.
Supporting sources
Real PropertyMortgages/security devices · Security relationshipsUBEFoundational