Uniform Commercial Real Estate Receiverships Act Meeting Notes – February 20-21, 2015 1.

Section 1 The Drafting Committee concurred in Style Committee’s recommendation to retitle the Act in the singular.

2.

Section 2 Decided to leave “affiliate” as an exhaustive definition rather than a non-exhaustive description (such as of “insider” in the Bankruptcy Code) because the defined term is used in this Act only to disqualify a person from serving as receiver and that needs to be a certain rule rather than an open-ended rule. The definition of “mortgage” in subsection (7) will incorporate the concept of agreement, so as to not include a judgment. The language will seek to exclude the contractor that includes a blanket grant of a lien in the contract. Subsection (8) will probably be rephrased so that instead of referring to “a person that holds a mortgage” to “a person who is entitled to enforce a mortgage.” The Committee agreed to add “tangible or intangible” to § 2(12). The Committee agreed that the definition of “receivership property” in subsection (15) is too narrow because it might not include collections, insurance proceeds, and claims arising from damage to or loss of other receivership property. Cf. § 9-102(a)(64). The comments will explain that, under the definitions, every “mortgage” is a “security agreement.” Subsection (18) will be simplified to refer just to a “security agreement.”

3.

Section 3 Accepted Style Committee’s suggestion that the section should be structured as a rule on how courts may operate, rather than as a definition. Otherwise, the provision will reinsert the original reference to notice and opportunity for a hearing as are “appropriate under the circumstances.” Subsection (b) will be split into three paragraphs.

4.

Section 4 Paragraph (b)(3) will be modified to say “planned or plans”

ULC Real Estate Receivers

5.

page 2

Feb. 2015 Meeting Notes

Section 6 Committee discussed why subparagraph (b)(2)(B) is limited to real property and whether it should include rents. Similarly, the Committee discussed whether paragraphs (b)(1) and (5) would pick up a failure to turn over insurance proceeds of the mortgaged property. The Chair and Reporter will work on this in connection with revisions to § 2(15). The reporter will make it clear in the comments that subsection (a) can be used in connection with a foreclosure. In other words, a mortgagee whose mortgage does not contain a clause on appointment of a receiver can still use subsection (a).

6.

Section 7 Subsection (b) is currently phrased as a safe harbor, rather than a definition. As a result, it does not exhaustively define what makes a person “independent.” This makes if impossible for a nominated person to certify that he or she is independent. The Committee agreed to restructure the section to identify what disqualifies a person from serving as receiver and to require a nominee to certify that he or she is not disqualified.

7.

Section 8 The Committee rejected the Style Committee’s suggestion to add “other than this [act]” to the end of the first sentence of subsection (a). The proposal improperly narrowed the scope of the subsection so that it did not encompass requirements under the act that were not included in a court order.

8.

Section 9 The Drafting Committee agreed to modify the language to make it more clear that the receiver’s status as lien creditor dates to the time of appointment.

9.

Section 16 The comments will explain whether perfection in the proceeds is permanent or subject to future loss of perfection under Article 9. The last phrase of re-designated subsection (d) will be modified as follows: “as sufficient to satisfy all obligations secured by the extinguished liens. A similar change will be made to redesignated subsections (e) and (f).

ULC Real Estate Receivers

10.

page 3

Feb. 2015 Meeting Notes

Section 11 A comment will be added to explain that if a debt is paid to a SP after the receiver is appointed, the debt is discharged (to the extent paid) but the receiver can potentially go after the SP for the amount of the payment received. See § 14. Subsection (c) will be amended to preserve priority, as well as the validity and perfection, of a lien. This could be important if possession is relevant to priority.

11.

Section 12 There was objection to making the receiver record the order on the ground that it is unnecessary and burdensome. Unnecessary because in all likelihood, there will be a filed lis pendens, a recorded mortgage, or the plaintiff will record the order. The Committee decided to remove paragraph (c)(3). Because the court appointing a receiver has exclusive jurisdiction, the flush language of subsection (9) and the language of paragraph (a)(9) will be modified to refer only to “the court.” The Committee agreed to reorder the paragraphs of subsection (b) so that they will be in a more logical sequence.

12.

Section 13 The Committee discussed whether paragraph (a)(3) should be limited in the way that (a)(2) is, such as by limiting it to records in the possession, custody, or control of the owner, but decided not to make that change. The Committee expanded paragraph (a)(3) by requiring the owner to “identify” as well as to “make available” and by adding “authorization” to “passwords.”

13.

Section 14 The Committee concluded that the draft appropriately requires a senior lienor seeking a receiver under § 6(b)(6) to get relief from the stay. This will ensure that the matter gets to the same judge who appointed the receiver for the junior lienor. A comment to both sections 6 and 14 will explain that the stay applies.

ULC Real Estate Receivers

page 4

Feb. 2015 Meeting Notes

The Committee objected to the Style Committee’s suggested removal of “for cause” from subsection (c). The Committee deleted “on motion of a party” from subsection (e), to ensure that the receiver, who is not a party, may request the order.

14.

Section 15 The Committee decided ti move the language “if the court finds it appropriate” to the first sentence and that the last two sentences will be phrased with similar language. The Committee decided to amend subsection (b) to include language that the receiver shall pay the amount approved by the court.

15.

Section 17 The Committee agreed that the definition of “timeshare interest” in subsection (a) will be bracketed and a legislative note will advise states to consider inserting their own definitions of timeshare interest.” In subsection (f), the Drafting Committee agreed to delete “contact and” because it was unnecessary and might prevent assignment if an unenforceable term of the agreement prevented assignment. The Committee will resist the Style Committee’s suggested change to paragraph (g)(1).

16.

Section 20 A legislative note will alert states consider whether to alter the language of paragraph (a)(2) if there is – or in the future might be – no newspaper of general circulation in the county. A comment will indicate that the references in subsections (e) and (g) to “the law of this state other than ths act” includes this state’s choice-of-law rules. The Committee agreed that the phrase “creditors holding perfected liens” in subsection (e) will be rephrased as “each creditor holding a perfected lien.”

ULC Real Estate Receivers

17.

page 5

Feb. 2015 Meeting Notes

Section 21 The Committee agreed to delete “or proceeds” from subsection (a) because “receivership property” is defined to include them. The Committee agreed to a proposed redraft that expanded the court’s ability to assess fees against a person whose conduct would have justified the appointment of a receiver under § 6(a)(1).

18.

Section 22 The Committee the agreed to expand the scope of paragraph (d)(2) to cover any person harmed by the wrongful appointment of a receiver, not merely the owner. The phrase “assess against the person that procured the appointment” will be moved from the beginning of paragraph (d)(1) to the flush language immediately preceding it.

19.

Section 23 The Committee deleted the words “for all matters in the report” from the second sentence of subsection (b). The point is that the discharge operates on the receiver’s responsibilities; it does not necessarily indicate that the receiver is immune from repercussion’s relating to the receiver’s misdeeds as receiver.

20.

Section 24 The Committee agreed to resist the Style Committee’s substantive change to subsection (b), which limited that subsection to instances in which an ancillary receiver was appointed. If the Style Committee concurs, the section will need a new caption.

21.

Section 25 The Committee agreed to modify subsection (b) to bracket the state’s anti-deficiency statute and indicate that the anti-deficiency statute apples.