Effective Date Approaches for Ohio's Revised Receivership Statute

Practical Law Legal Update 4-603-4167 (Approx. 4 pages)

Effective Date Approaches for Ohio's Revised Receivership Statute

by Practical Law Real Estate

Published on 10 Mar 2015 • Ohio

Ohio's revised receivership statute, which clarifies and expands the receivership guidelines in the existing statute, will go into effect on March 23, 2015.

On March 23, 2015, Ohio's revised receivership statute will go into effect, clarifying the practices governing receiverships in the state (Ohio Rev. Code Ann. §§ 2735.01 to 2735.06). Although not a dramatic departure from the current law, the revised receivership statute clarifies and expands the existing law, providing clear and detailed procedures and guidelines for lenders and receivers. Lenders' counsel in Ohio should familiarize themselves with these new rules prior to the effective date of March 23, 2015. Property owners should be especially cognizant of the new redemption requirements, as they may make it more difficult for owners to redeem their property. Some of the key additions are described below.

Appointment of Receiver

Section 2735.01 of the Ohio Revised Code Annotated specifies and alters the circumstances that must exist for a receiver to be appointed. Ohio courts can now appoint a receiver:

With written consent of the mortgagor.
To enforce a contractual assignment of leases and rents.
When an entity (such as a corporation, limited liability company, partnership or limited partnership) has been dissolved or is insolvent.

Qualifications of Receiver

Section 2735.02 of the Ohio Revised Code Annotated expands the parties that may be selected as a receiver. The law now permits interested parties to serve as a receiver as long as consent is given from all:

Parties to the action.
Other persons holding a recorded ownership interest in or a recorded or filed lien on the subject property.

In addition, courts are required to give priority consideration to qualified persons nominated by the party seeking the receivership.

Powers of Receiver

Section 2735.04 of the Ohio Revised Code Annotated contains a much more detailed list of both the powers of a receiver and the process a receiver must follow for the sale of real property.

A receiver's powers now include the ability to:

Bring and defend actions in the receiver's own name.
Take and keep possession of real or personal property.
Collect rents and other obligations, and compromise demands.
Enter into contracts, including sale and lease contracts or, as long as existing lien rights will not be affected, for construction.
Sell or transfer real or personal property.
Execute deeds, leases or other documents conveying real or personal property.
Open and maintain deposit accounts in the receiver's name.
Do any other activity that the court authorizes.

In addition to giving receivers the power to sell or transfer real property, the statute clarifies the procedures for doing so. A receiver may sell encumbered property free and clear of all liens by:

Private sale.
Private action.
Public auction.
Any other method the court determines:
- is fair to all parties;
- is reasonable under the circumstances; and
- will maximize the return from the property to the receivership estate.

A receiver that wishes to sell real property must first apply for an order authorizing the sale, as the power to sell is subject to approval from the court.

The statute also provides guidance for parties that wish to exercise their right of redemption prior to the receiver's sale of the property. Courts now must set a reasonable time, although not less than three days after the approval of the sale, during which parties may exercise their right of redemption. In addition, the redemption amount for the fee owner is now the greater of:

The sale price of the real property.
An amount equal to the total of all liens on the real property that were to be cancelled as a result of the sale.

Effective Date Approaches for Ohio's Revised Receivership Statute | Practical Law