By Marc J. Chalfen

A useful tool for secured lenders to attempt to protect mortgaged commercial property and to maximize recoveries concerning defaulted mortgage loans, can be to request the Court for appointment of a receiver to take possession of, manage, and operate the subject property.  There are strategic considerations for such a request, including: whether the property is deteriorating, or otherwise in jeopardy; whether rents are being withheld or dissipated; whether real estate taxes or insurance premiums are unpaid; and, the costs associated with a receiver.

Illinois law in essence provides that the Court shall appoint a receiver for commercial property if a mortgage or other written instrument so authorizes, and if the Court is satisfied that there is a reasonable probability that the mortgagee will prevail on a final hearing.  If these requirements are met, a mortgagor may only stay in possession of the property by objecting and showing “good cause” to remain in possession.  This showing has generally proven difficult for borrowers/mortgagees to establish in reported Illinois cases.

Our firm has successfully represented lenders in requests for appointment of receivers, or for lenders to be mortgagees in possession.  We can assist a mortgage lender in such proceedings, and in evaluating the economics and considerations involved.