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FLORIDA’S NEW UNIFORM COMMERCIAL REAL ESTATE RECEIVERSHIP ACT (“UCRERA”)

FLORIDA’S NEW UNIFORM COMMERCIAL REAL ESTATE RECEIVERSHIP ACT (“UCRERA”)

On the eve of the onslaught of foreclosures that will unfortunately begin because of the devastating effect of COVID on commercial mortgages, effective July 1, 2020, the Governor signed into law the UNIFORM COMMERCIAL REAL ESTATE RECEIVERSHIP ACT (“UCRERA“). UCRERA specifies the circumstances under which a receiver may be appointed for commercial real estate, the scope of such a receivership proceeding, and the receiver’s powers, duties, and liabilities. Prior to adopting UCRERA, a Florida bar task force determined that existing receivership law in Florida “[d]oes not adequately provide a clear standard for receivership appointment or set forth a receiver’s powers and duties, and that such lack of statutory guidance causes variation from one county to the next, as individual judges differ on when a receivership is an appropriate remedy.” 1 The new law, which has been adopted by 7 states since 2017, provides amplified and expansive guidance for the use of receiverships by lenders, borrowers, creditors, the courts, and the receivers themselves.

Lenders – both institutional and private and whether or not in first, second or any subordinate position – now have the ability to rapidly take charge of a property and quickly move a case to conclusion. For example, a court can order the appointment of a receiver without notice to the owner based on existing standards, as well as new standards premised on substantial diminution in value, dissipation, or other reasons. The law compels the owner’s cooperation to: identify and turn over all property and property records; sit for a deposition by the receiver; and actively help the receiver perform its duties. It may also be used as an entity-piercing weapon to reach officers, directors, managers, and members who fail to cooperate, and subject each to civil contempt sanctions.

Additionally, receivers can order a sale, lease, license, or exchange of the property under certain conditions before a final judgment is entered, other than in the ordinary course of business and free and clear of all liens. Lawyers in this office have represented parties on every side of foreclosure cases for over 40 years. The common denominator in virtually every case is that the foreclosure process is drawn-out, sluggish, creeping, plodding, and slow moving and that sometimes results in bankruptcy, causing more delay and massive expense. We can readily cite personal involvement in hundreds of cases where this has been so – and perhaps more importantly, why. By contrast, the expectation to shorten the time of this process by as much as a third is reasonable if UCRERA is employed. In fact, a bankruptcy court in the Eastern District of Michigan recently dismissed a bankruptcy proceeding in part because UCERA provides for the refinance-or-sell objectives sought in the bankruptcy cases.

IMPORTANTLY, THE OPPORTUNITIES BEGIN NOW, BY EMPLOYING CREATIVE LANGUAGE IN NEW DOCUMENTS AS WELL AS IN MODIFICATIONS, RENEWALS, AND AMENDMENTS TO EXISTING INSTRUMENTS.

There are dozens of opportunities in the statute for use by all. Significant opportunity may now exist—under certain circumstances—for a subordinate lienholder to receive a credit for its debt, purchase the property from the receiver, and pay off the superior lienholder without having to endure a public sale. This will help to avoid circumstances in which the sale may not net enough to satisfy the subordinate lien, or where the subordinate lienholder is outbid by third parties in a public sale of a property that has equity.

At the end of the day, lenders and borrowers should quickly avail themselves of the benefits afforded by UCRERA.

Leonard S. Englander

Englander Fischer is well versed in the benefits that lenders and debtors now have. During the last recession, it was on one side or the other in high profile commercial foreclosures and deficiency claims too numerous to count. If you have any questions, or seek guidance in availing yourself of the rights and duties imparted by UCRERA, we would be happy to help you.


1 Florida House of Representatives staff analysis,
https://www.flsenate.gov/Session/Bill/2020/783/Analyses/h0783c.JUA.PDF

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