Asking Right Questions

In acting as a receiver, today's challenges are as much about speed as they are about quality. Most special servicers, life companies and banks are looking for both speed and quality of information; when the asset's paperwork gets to the top of the pile, they need to act decisively. For property-management firms, acting as receiver has become a larger portion of their business, and the demands require a faster response.

Many assets come to us with significant complications. In many respects, the decision to proceed with the installation of receiver and foreclosure proceedings is the easy answer and decision. When receiving a property, the barriers to providing a fast takeover of the asset are oft en seen in documentation, accuracy of information, communication, physical issues and legal information. Recently, we had an experience where the records showing maintenance, tax and lease payments and tenant communication were non-existent. Thus, the first step in the receivership assignment was to assess all of those areas.

For the best transition leading to capturing the highest asset value, one must determine:

1. Does the court have all of the documentation needed to manage the asset?
2. Has the lender and its legal team assessed the accuracy of the information?
3. Who is handling the placement of insurance?
4. Is there a physical condition report for the asset?
5. What (if any) communication has been provided to the stakeholders at the property?

A review of whether the court has all of the correct documentation in advance of the receivership can be extremely helpful. Documents like a broker opinion of value; lease abstracts; loan documents; notifications from municipalities; and copies of liens, if any, are extremely valuable and should be reviewed by the project takeover team in advance. Any preliminary review can improve both efficiency and effectiveness, streamlining the process.

These details are important for a variety of reasons: Knowing the opinion of value can assist discussions with the lender; obtaining lease abstracts can accelerate an accurate billing process; and reviewing notifications and liens will help create a plan of action for the lender and court.

Often, while a significant amount of information on the asset is available, the accuracy of the information is questionable. The lender and its legal team will have assessments about the accuracy of what has been provided based on interaction with the borrower. When dependable, information can be used in action plans. It can also save time and require less rework in a sale.

Asking who is carrying the insurance is a simple question, but extremely important since a one-day lapse in coverage could prove to be disastrous. It is not always crystal clear in the court order or in communication with the lender who is responsible in proceeding in the placement of insurance. For obvious reasons, this needs to be on everyone's checklist. We have been involved in situations where borrowers' policies were left in place, lenders provided new blanket coverage or where the receiver needed to obtain new coverage.

The most cumbersome step in this process comes in accurate underwriting of the physical condition of the asset. If no recent reports are available, or those that are available are deemed unreliable, the physical assessment of the asset can take significantly more time. Any immediately obtainable accurate information vastly improves the takeover process. Whether it relates to the HVAC systems, roof(s), security, parking, or other structures or systems, any information in advance of takeover is valuable.

Understanding what communication has already transpired with both the tenants and service providers for the asset can be invaluable. The key is to both avoid duplication and confusion, while also critical to preserving tenants and vendors. Sometimes, previous communication can be obtained from the tenants or the legal teams. By gathering this information in advance, the team can avoid making a stressful and confusing situation worse and, ultimately, save time and money and eliminate duplication. While most receivers have a detailed checklist, we have found that a few basic questions can improve both the speed and accuracy with which a receiver can provide service to the court. Much of the information needed can be obtained easily and assessed prior to management at a very low cost and lead to faster delivery of accurate information to the court.

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