court appointed receiver + real estate Archives - Ira SmithTrustee & Receiver Inc.

Court appointed receiver real estate: Introduction

Over the last 5 years, (and of course for many years before then), we have taken on many Court appointments for commercial real estate receivership files. In August 2017 we wrote BUYING REAL ESTATE FROM A RECEIVER: READ, REMEMBER AND FOLLOW THE CONTRACT LAW FINE PRINT. In that blog, we described a BC Court of Appeal decision to show how tricky both the sale and purchase of court appointed receiver real estate can be. For this Brandon’s Blog, I list certain purchaser terms normal in an arm’s length non-distress situation. I explain why they can’t always work when purchasing from a receiver.

Court appointed receiver real estate: 558 Dovercourt Road, Toronto

One of our current assignments is the sale of real property with a civic address of 558 Dovercourt Road, Toronto. This is a residential income property (with a commercial storage component). Given the potential for competing claims, the second mortgagee wanted to go the court appointed receiver route, rather than a traditional mortgagee power of sale. This is so the Court is available to sort out any issues of competing claims or other claims.

We have to date received two offers to purchase. Unfortunately, both offers weren’t acceptable. Our sign back of the first offer was not accepted by the potential purchaser. The second offer was not even worthy of a sign back.

It was not only an issue of price. The potential purchasers also included various terms that were unacceptable to any court appointed receiver. This is notwithstanding that they may be fine to a normal vendor.

Court appointed receiver real estate: Unacceptable terms

Below are some common terms that we see potential purchasers include in an offer. I give the reason(s) why a court appointed receiver cannot include them in an acceptable agreement of purchase and sale. Keep in mind that the court appointed receiver is not trying to be difficult or mean. Hopefully, these explanations will help.

The seller – The seller is not just the court appointed receiver’s company name. Rather, the vendor is court appointed receiver’s company name, solely in its capacity as court appointed receiver of [legal name of property owner]. It is only the official court appointed receiver capacity selling the real estate. The court appointed receiver’s power to offer the property for sale and enter into an agreement as seller comes from the court appointment order. The Court also supervises the administration and sale.

All equipment/appliances will be in good working order on closing – A court-appointed receiver cannot give such a warranty. A private receiver or a court-appointed receiver sells assets on an “as is where is” basis, with no warranties. It’s just the way it is.

The court appointed receiver will obtain court approval for the sale before the purchaser has waived all of the purchaser’s conditions – A court appointed receiver can’t and won’t go to Court to obtain approval to a transaction that may not even exist later on because the purchaser won’t waive one or more conditions and the deal goes dead. The court appointed receiver won’t incur the cost of preparing its motion and going to Court before knowing there is a firm deal. This obviously includes the payment of the deposit funds.

Seller will discharge work orders – A court appointed receiver will not do the repairs or upgrades to the property in order to discharge work orders. The court appointed receiver will, of course, give clear title to the property by discharging mortgages or liens. The Court approval Order, called a Vesting Order, does this. The purchaser has the time to have his/her/its lawyer inspect title. The deal ends if proper title can’t be given. If the purchaser does not want to inherit certain work orders, then that should be another condition.

Seller will provide the buyer with keys that work to every exterior and interior door lock – A court appointed receiver will not agree to this. The court appointed receiver will certainly provide any keys in its possession.

These are the most common buyer conditions that a court-appointed receiver real estate sale won’t be able to handle. In my next blog, I will look at common conditions a court appointed receiver seller uses.

Court appointed receiver real estate: Is your mortgagor in trouble?

Are you a mortgagee over a commercial real estate property where the mortgagor is in default? Are there reasons why you need to consider applying to Court for a court appointed receiver + real estate sale?

If yes, contact the Ira Smith Team. Our philosophy for every person and company is to develop an outcome where Starting Over, Starting Now happens, beginning the minute you come in the door. You’re just one call away from taking the essential action steps to get back to leading a healthy and balanced stress-free life.

Buying real estate from a receiver: Introduction

Buying real estate from a receiver is a little different from a normal real estate transaction. In this Brandon’s Blog I describe a recent Court of Appeal Decision that shows it can even be tricky for the receiver.

Buying real estate from a receiver: Court appointed receiver+real estate

K was the court-appointed receiver (the “Receiver”) of the assets, properties and undertaking of a lakeside hotel in British Columbia, Carmel Cove Resort & Spa Inc. On October 25, 2013, the Receiver went into a contract in writing to sell the real property owned by the company in receivership to the participant, B.C. Ltd. (the “Purchaser”). The Contract of Purchase and Sale (the “Contract”) was in the form of the standard agreement of the British Columbia Real Estate Association and the Canadian Bar Association (B.C. Branch).

Buying real estate from a receiver: Contract fine print example

One of the conditions in the Contract was that the deal was subject to approval by the Supreme Court of British Columbia (the “Court”). It had to be obtained within twenty-one (21) days of acceptance of the Contract by both parties. Clause 3 in the Contract (“Clause 3”) stated that unless each condition was either waived or satisfied by written notice provided by the benefiting party to the other party on or before the date specified for every condition, the Contract would end.

On November 14, 2013, the twenty-first day after the Receiver’s approval of the deal, an application for court authorization was heard and approved. Five days later, on November 19, 2013, the Receiver gave the Purchaser written notice of the Receiver’s fulfillment of the condition for court approval.

Buying real estate from a receiver: Fine print matters

The Purchaser chose not to finish the transaction. The Purchaser refused to do so. The Purchaser claimed it was partly because it thought the Contract was terminated due to the Receiver’s failing to offer written notification on time. The Receiver ultimately sold the asset to another purchaser. It sold the property for $925,000 less than it would have obtained if the Receiver completed the sale to the Purchaser.

The Receiver expended $312,150.96 to run the resort and administer the receivership in between the collapse of the sale to the Purchaser and the sale to the succeeding buyer closing. Therefore, the Receiver began an action, suing the Purchaser for $1,237,150.96. It applied to Court for a summary trial.

Buying real estate from a receiver: Fine print can’t lie

At the trial, both sides set out their disagreements and arguments on the condition precedent issue:

the Purchaser recognized that the Receiver met the need for court authorization by the twenty-first day adhering to the Receiver’s acceptance of the agreement.
The Purchaser pointed out, nonetheless, that the Receiver did not conform with Clause 3 by offering the Purchaser written notice of satisfaction of the condition on or before the day specified for the condition; i.e.: on the twenty-first day.
The Receiver’s position was that Purchaser knew the outcome of the court application on the day that it was heard.
The Receiver stated therefore written notice was superfluous, unnecessary, and duplicative.

Buying real estate from a receiver: Here comes the judge

The Court kept in mind that the trouble with the Receiver’s position right here was that it was, truly, an invitation to the court to reword the terms of the contract. The notification stipulation in Clause 3 was quickly parsed by any type of literate individual. It was not unclear. The clause did not need interpretation. There was no need to refer to evidence to figure out what it suggested.

By its clear language, the notification arrangement in Clause 3 needed the party benefiting from the condition– in this situation the Receiver– to give written notification– e.g.:

a letter.
an e-mail.
a written note in crayon on the back of an envelope.

The notification that the condition– court authorization–was obtained on or before the day defined for the condition– i.e.: not greater than twenty-one days’ after the Receiver’s acceptance.

Did the Receiver do just what Clause 3 required? It did not. Rather, it offered the Purchaser written notification 4 days later which was also 4 days too late.

The trial judge held that the failure to give written notice of fulfillment of the condition as specifically stated in Clause 3 ended the Contract. For that reason, the Court rejected the Receiver’s claim.

Buying real estate from a receiver: The appeal

The Receiver appealed the decision. The appellate court dismissed the Receiver’s application. The Court of Appeal noted that it is necessary to give effect to notice arrangements included in commercial agreements to offer assurance between the participants who contract with each other.

Buying real estate from a receiver: What if you have too much debt?

Do you or your company have too much debt due to a contract gone wrong, losing in litigation or for any other reason? If you’re trying to find a way to restructure your debt, contact Ira Smith Trustee & Receiver Inc.

Our philosophy for every person is to develop an outcome where Starting Over, Starting Now happens, beginning the minute you come in the door. You’re just one call away from taking the essential action steps to get back to leading a healthy and balanced stress and anxiety free life.

You may read the entire Court of Appeal decision by clicking here KPMG Inc. v. 0747825 B.C. Ltd., 2017 BCCA 277 (CanLII) BUYING REAL ESTATE FROM A RECEIVER 4