Is a receiver needed or in the best interest of your condominium or homeowner’s association to carry on its affairs under certain circumstances? Association and board members may not even understand the duty of a receiver as defined by their state laws and governing documents. “State laws for receiverships vary. Your state may have no provision for receivership in the statutes governing condo or homeowners associations, but there may be a general statute on receivership.”[i]
The need for a receiver comes in to play via court order while prosecuting a lawsuit. Receivership is an extreme remedy to extraordinary circumstances. Typically receivers are appointed for corporations heading into bankruptcy in an arduous attempt to collect debt and/or restructure, similar to the role of a receiver appointed to a case on behalf of a condominium or HOA.
The receiver’s responsibility is to preserve property and support the day to day functions of the association. These responsibilities include, but are not limited to collecting rent, dues, paying vendors and overseeing financial compliance. In extreme cases the corporate status of an association may be in jeopardy thereby a receiver may be needed to maintain that status or work to reinstate if inactivated. Not all states require incorporation for associations, although it is more likely they do, such as in the State of Florida.[ii]
A receiver may also be appointed should there be no one to step in to the role of board member(s). The court may place the HOA in receivership with or without a board or an association approval. Sometimes legal counsel for either side may request the appointment of a receiver during the course of litigation. While this may seem a viable option it is an extreme measure.
Receivers come with a high ticket price. Although the court may approve receiver fees the responsibility to pay them is on the association. Therefore association fees may rise and then pass on to association members by increasing dues or imposing a special assessment. Increased cost to the association may be an additional burden to an association already enduring fiscal hard times. Additionally once a receiver enters the business of the association many unnoticed ‘goings on’ may become revealed. Association members and board members alike may find themselves in litigation as they can be sued for violation of association rules and regulation should they be revealed.
Receivership is not a quick fix. Strongly consider all options before embarking on this journey and contemplate if it is in the best interest of your association. If you’ve found your association in this position it would be wise to have competent legal representation, specializing in condo and association law, by your side.
[i] HOA Financial Matters: What’s Receivership, and When Do Condo and Homeowner Associations Need It? (2009, November). http://www.hoaleader.com/public/353.cfm
[ii]The 2016 Florida Statutes (2016) Title IX Chapter 720 Homeowners Association Act http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/Sections/0720.303.html