In business litigation proceedings involving foreclosures, a Plaintiff, often a bank or mortgage lender, requests the court to appoint a receiver for their benefit. The receiver has the job of managing real property after the loan’s principal has defaulted. Most often, the court appoints a neutral third party, usually a prominent attorney, as the receiver. Because the receiver acts as a fiduciary, he must file a receiver bond to guarantee his utmost good faith in complying with the orders of the court.

A receiver must also file an oath along with the receiver bond. An oath typically states:

I, (NAME OF RECEIVER), duly appointed Receiver for the benefit of the Plaintiff of all rents, issues, and profits of premises described in the Complaint in the above entitled action by order of this court made on or about the (DATE OF ORDER) and entered by the County Clerk shortly thereafter, do swear that I will faithfully, honestly, and impartially discharge the trust committed to me as such Receiver.

The court grants the receiver many powers and directions. First and foremost, the receiver must collect all rents and payments due from tenets of the mortgaged premises, and he or she may use litigation to collect anything due if necessary. The receiver also must ensure the building complies with all insurance, fire codes, and any other laws, regulations, and ordinances of the jurisdiction the property falls under.

Because receivers have a lot of responsibility over property and monies, the surety has to ensure the principal has the highest character and creditworthiness. Sureties will therefore evaluate the prestige of an attorney when underwriting, and they will not underwrite a receiver bond for a non-attorney lacking substantial legal representation. The receiver has to ensure the property under his control conforms to many different laws, and the average citizen may not know all the ins and outs of such duties.

Claims may easily arise during receivership bonds because banks and other lenders may claim the receiver failed to upkeep the standards and quality of the building, and thus decrease the property’s value. Therefore, receivers sometimes must hire contractors to make repairs and improvements on the buildings they manage.

To discharge a receiver bond, the receiver must show the surety the final accounting and an Ex Parte order releasing the surety from any and all liability associated with the bond. The receiver must first file these documents with the court.  Visit our services page to learn about bonds other than receiver bonds.