Introduction

A receiver is a court-appointed rental manager for a property.  Once appointed, the property is referred to as being in "receivership."  The receiver should be a disinterested person with experience in managing rental property.  The receiver collects the rents and disburses the rents according to the court's orders.  

A receivership can be beneficial to the association in the following areas:

  • Payment of current assessments
  • Payment of past due assessments
  • Preventing waste and deterioration of the property


Keys to an Effective Receivership

Before an association pursues a receivership on a property, the following keys to an effective receivership should be determined:

  • Assessments are delinquent
  • The property is not occupied by the owner, i.e., the property is vacant or occupied by a tenant
  • The property is not in foreclosure by the first lien lender
  • The property is in relatively good condition and requires minimal cost to make it rentable


Lawsuit Seeking the Appointment of a Receiver

If the key elements reviewed above are met, the association can proceed with a lawsuit requesting that the court appoint a receiver.

The key elements of a receivership lawsuit are as follows:

  • A complaint seeking the appointment of a receiver and other pleadings are filed in either county court or district court.
  • An affidavit is to be a part of the lawsuit, setting forth certain information.
  • The lawsuit is served on the owner.
  • [Personal service of the Summons and Complaint is not required on the owner to get a receiver appointed, but it is desirable to allow the association to seek a money
  • judgment for the delinquent assessments against the owner at the same time as the receiver is appointed.]
  • A bond is required (to ensure the receiver's performance of his duties).
  • The association's attorneys notify the first mortgagee and other lienholders by mailing them copies of the pleadings filed with the court.  These lienholders are not personally "served" with the pleadings.
  • A court hearing is set and attended by the association's attorneys.  
  • At the hearing, the court may require witnesses to testify, and the owner has the opportunity to object to the appointment of the receiver.
  • At the hearing, the court enters an order granting or denying the requested receivership/attachment.
  • If granted, the association provides the order to the receiver.
  • The receiver then provides the order and the receiver's letter of instruction to the tenants, instructing them to pay rent to the receiver.  The order and letter are posted or served on the occupants or, the receiver seeks to rent a vacant property.
  • The receiver manages the property, collects the rents, and applies the money to the receiver's management fee, the maintenance/repair costs for the unit, the attorney fees to obtain the receiver, and to current assessments.  Many courts will authorize the receiver to also apply the rents received against the amount of delinquent assessments.  
  • The court may require the receiver to submit periodic reports to the court.  
  • The receiver handles all rental management issues.
  • The receiver can continue to collect the rents until the assessments are current and the owner demonstrates the likelihood of continued payment or a transfer of the ownership of the property occurs.
  • If the owner fails to pay the mortgage and the property goes into foreclosure, the receivership should be terminated no later than the date of the foreclosure sale.


Colorado Law on Equity Skimming

Colorado law prohibits owners from skimming the equity from a property, in certain circumstances, and not paying the mortgage.  See the attached state statutes on equity skimming and related offenses.



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