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Oct 2020
23
October 23, 2020

Michigan Expands the Commercial Real Estate Receivership Act

This is an update to a previous publication dated March 12, 2018, entitled “Commercial Real Estate Receiverships Gain Clarity.”
 
On October 15, 2020, Governor Gretchen Whitmer signed into law House Bill 5336 which amends the Uniform Commercial Real Estate Receivership Act to rename it simply as the “Receivership Act.” This amendment makes several changes to the prior law, most notably to expand the application of the act to: (a) commercial personal property in general, regardless of whether such personal property is related to or used in the operation of real property; and (b) fixtures, which term has been added to the definition of “property” under the new law.
 
Under the previous law, the court could appoint a receiver under a variety of conditions including, under certain circumstances, in connection with the foreclosure or enforcement of a mortgage. Under the new law, the term “mortgage” has been replaced with the language “security agreement or lien” with the definition for “security agreement” under the new law now revised to include a mortgage. Thus, in addition to being appointed in connection with the enforcement of a mortgage, a receiver may now be appointed in connection with a creditor’s attempts to enforce any other interest in property that secures payment or performance of an obligation or any other obligation or payment secured by a security agreement. Other notable changes to the law include allowing the court to impose a criminal contempt sanction for a person’s failure to turn over receivership property in addition to the civil sanction allowed under the previous law.
 
Overall, the new law expands Michigan’s receivership law beyond the uniform system of rules the previous law was based on. Additionally, the new law gives courts, creditors and receivers greater flexibility to achieve the stated goals which are to provide a mechanism to recover commercial collateral and to receive, collect, care for and dispose of the property or proceeds of the property.
 
Attorney Ralph Colasuonno regularly assists commercial lenders in obtaining court appointed receivers and routinely acts as counsel for court appointed receivers in both state and federal courts. For more information, please feel free to contact Ralph or any other member of Warner’s Real Property Litigation Practice Group or the Bankruptcy, Restructuring and Insolvency Practice Group.

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