August 18, 2020

Appointment of a Receiver: (1) Foreclosure on Real Estate

The party seeking the appointment of a receiver may nominate a person to serve in that position.  A.R.S. §33-2606(D).  Interestingly, the Arizona legislature eliminated a clause from ARECRA §7(d) which provides that “but the court is not bound by the nomination.”  The author has found nothing in the legislative history regarding the rationale for not adopting this clause.  Given the fact that a court has discretion whether or not to grant the appointment of a receiver under Section 33-2605(A) & (B) and the use of the word “nominate”, which generally means “to propose for appointment”, an argument that the legislature’s failure to adopt that clause from Section 7(d) of ACRECRA means that a court is required to appoint the movant’s candidate as the receiver seems meritless.

The candidate must submit a declaration consistent with the requirements of Section 33-2606(A) & (B).

In connection with a foreclosure or other mortgage enforcement action, a Court may appoint a receiver for seven identified reasons under the Act.  A.R.S. §33-2605(B). A court also may appoint a receiver in one of four other identified circumstances under the Act.  A.R.S. §33-2605(A).

(1)  Foreclosure or Enforcement.

A court may obtain the appointment of a receiver over property covered by the Act as part of the foreclosure process or other action to enforce a lender’s rights under the deed of trust or mortgage if:

  1.         A receiver is necessary to prevent waste, loss, transfer or other damage to the property;
  2.         There is a provision in the deed of trust, mortgage or other agreement allowing for the appointment of a receiver after a default;
  3.         After a default, the owner agreed to the appointment of a receiver in a “signed record”[1];
  4.         The value of all the lender’s collateral is less than the aggregate amount owed to the lender;
  5.         The owner fails to turnover rents or other cash collateral to the lender;
  6.         A junior lender obtains the appointment of a receiver for the property; or
  7.         The property or the rights of the parties need to be protected and preserved. 

See A.R.S. §33-2605(B).

Significantly, even if there is a breach of a promissory note or other default under the terms of a deed of trust and there is a contractual right to the appointment of a receiver, a judge still has the discretion not to grant the appointment.  The Arizona legislature made the decision to reject an option provided by the Commissioners in the analog to Section 33-2605(B) in UCRERA that a lender “is entitled to appointment of a receiver” after one of the enumerated events has occurred.  Unfortunately, there is nothing in the Act to guide the exercise of the judge’s discretion.

[1] The term “record” is defined very obliquely at Section 33-2601(17).   An agreement which either is in writing or stored electronically is a record.

View Full Article


Back to News & Events

Copyright © 2024 Tiffany & Bosco PA. All rights reserved. Site by Blufish

Legal Disclaimer

The owner of this website has made a commitment to accessibility and inclusion, please report any problems that you encounter using the contact form on this website. This site uses the WP ADA Compliance Check plugin to enhance accessibility.