Arent Fox’s Jacqueline Weiss, a partner in the firm’s real estate practice in New York, has been published in the Financier Worldwide’s “Global Reference Guide 2012—Real Estate and Construction.”

Jackie’s article, titled “Is the Appointment of a Receiver the Answer?,” explores the pros and cons for lenders in deciding whether or not to have a receiver appointed by the court during foreclosure proceedings.

Jackie writes:

Foreclosure proceedings may take several months or even years to reach conclusion in many US jurisdictions. As a result, a foreclosing lender is forced to face the fact that control of its collateral, and perhaps more importantly, the rental and other income generated by the collateral, remains in the hands of the defaulting borrower who is now the lender’s adversary in the foreclosure proceedings. During the pendency of the foreclosure, the borrower could be delaying maintenance and repairs or simply allowing the real estate to deteriorate instead of using property income to make repairs. Taxes could be going unpaid and insurance policies could be allowed to lapse for failure to pay premiums, leaving the property exposed to numerous risks. Perhaps more troubling, the income generated by the collateral that may be diverted by the borrower from the care and maintenance of the property could be used to fund the legal maneuvers deployed to forestall or thwart the foreclosure proceedings, rather than to pay to the lender the overdue debt service.

In such situations, lenders feel compelled to take action.… As a result, many foreclosing lenders instead consider whether a receiver should be appointed.

A receiver is a person appointed by the court – almost always following an application by the lender to do so – to manage, protect, and control real estate collateral and the income generated by the real estate. The receiver’s primary obligation is to assure that the property does not deteriorate and operates smoothly during the foreclosure proceedings.

But, Jackie warns:

While the borrower is no longer in control, however, neither is the lender. The receiver is a neutral party who has no obligation to take direction from either the lender or the borrower. The receiver’s goal is to protect the property, not to maximize the lender’s economic recovery. … In short, the appointment of a receiver is not a panacea.

To read Jackie’s article in its entirety, please click here.

Financier Worldwide’s “Global Reference Guides,” which are read by corporate leaders, investors, and advisors around the world, deliver valuable insight and extensive professional coverage of issues and developments driving the international business community.