Between the tragedy of the Surfside condominium collapse in Florida and the subsequent placement of the association in receivership, as well as the flurry of recent press around popstar Britney Spears’s yearslong struggle against her own financial and legal conservatorship situation, many may be confused—or just curious—about what exactly those terms mean, and how both an entity like a condo association and a private individual can be in the same legal ballpark. While it’s rare for an entire multifamily community to be placed in receivership, conservatorships for individual residents are much more common—so it’s helpful for both boards and residents to have a basic understanding of both processes, how they come about, and how they may change with a given set of circumstances.
Fundamentally, when a property or individual finds itself or themselves in a situation that threatens the continued economic viability of the asset or estate, our laws provide a level of supervised assistance from qualified third parties to help restore and preserve that viability. In the case of real property, that assistance is known as receivership. In the case of an individual, it is known as conservatorship or guardianship. In both cases, the goal is to stabilize and preserve the value of the real property and/or the personal estate.
William D. McCracken, a partner with Manhattan-based law firm Ganfer Shore Leeds & Zauderer, defines receivership as follows: “A receiver, most broadly, is an officer of the court appointed to step into the shoes of an owner or other interested party. They are appointed for various reasons, but usually it’s when the current owner or steward of the property is putting the value of property at risk.” The receiver could be requested by a creditor, a group of tenant shareholders, or even an individual owner. They will petition the court to appoint a temporary receiver to put everything at the property on an even keel.
According to Jennifer Barnett, a partner with Marcus, Errico, Emmer & Brooks, a law firm located in Braintree, Massachusetts, “The appointment of a receiver is to preserve assets for all parties who have an interest in it.” She adds that it’s only used where it appears that in its absence, the property would be subject to damaging waste or loss.
When Is a Receivership Used?
Receivership is designed to rescue real property from irresponsible management—whether intentional or unintentional. “Somebody has to take control when you’re in a difficult situation,” says Scott Piekarsky, an attorney with Phillips Nizer, located in Hackensack, New Jersey. “When a property has no money—if funds were stolen, for instance—vendors can’t be paid, maybe there’s no manager, and no insurance coverage due to a lapsed policy because the premium wasn’t paid. A mechanism is necessary to stabilize the property for the health and safety of residents, and to rescue a situation. That’s when a receivership is necessary.”