Currently before the Senate is Substitute House Bill 9 (“ Sub. H.B. 9”), passed by the House on April 10, 2013, which seeks to modify Ohio Revised Code sections 2333.22, 2715.21, 2735.01, 2735.02 and 2735.04. The proposed amendments would clarify the nature and extent of a receiver’s authority and codify permissible language typically found in orders appointing receivers, as well as grant a receiver express authority to sell property free and clear of liens. Generally, the new law would codify many of the salient aspects of existing receivership practice and provide clarity for receivers, and the lenders that seek their appointment.
New Statutory Grounds for the Appointment of a Receiver
- With this change, lenders would have statutory support for appointing a receiver when “the mortgagor has consented in writing to the appointment of a receiver,” and when a receiver is sought “to enforce a contractual assignment of rents and leases.” In addition, the amended 2735.01 would also expressly clarify that limited liability companies, partnerships and limited partnerships are subject to the appointment of a receiver, in addition to corporations.
Expanded Statutory Authority
One of the major overhauls to be made by H.B. 9 would be a complete repeal and rewrite of § 2735.04. While a receiver’s existing powers would remain, subsections (A) and (B) of the amended 2735.04 would expressly authorize the receiver’s ability to take those actions often written into receiver orders, permitting receivers to, generally, take possession of real or personal property, collect rents and other obligations, enter into contracts (including sale contracts), sell and make transfers of real or personal property, execute conveyance documents, and open deposit accounts.
In addition, subsection (C) mandates that a receiver’s fees and expenses, including attorneys’ fees, either be taxed as costs or given administrative expense priority. Further, to cover a receiver’s expenses under a contract, subsection (C) would give the Court discretion to require an additional deposit from the “parties that have requested or expressly consented to the receiver incurring those expenses.”
Express Authority for Receiver’s Sales Free and Clear of Liens
Most notably, Sub. H.B. 9 would amend 2735.04(D) to expressly grant a receiver the authority to sell real and personal property free and clear of liens by private sale, private auction, public auction, or “by any other method that the court determines is fair” to the parties involved and which “will maximize return from the property to the receivership estate.” Amended subsection D would contain a whopping ten subsections, outlining the procedures established in current receivership practice, such as seeking court approval for a sale and providing notice to all lien holders identified by preliminary judicial report (required to be filed with the court), with liens attaching to the proceeds of sale in the receiver’s hands. Importantly, an order of sale for real property would expressly be a final appealable order. After closing, the new 2735.04 would require a report of sale with certification of the items specifically delineated in subsection (D)(10).
Practically, these changes would provide certainty for the parties involved in a receivership and pave the way for a more streamlined process to have a receiver appointed, manage property, and sell it free and clear of liens.
This Client Alert is a summary only, prepared for general informational purposes, and is not an exhaustive legal description of receivership law. Nothing in this letter is intended or is to constitute a legal opinion or legal advice by Meyers, Roman, Friedberg & Lewis.
As Sub. H.B. 9 continues on its current path to becoming Ohio law, the attorneys at Meyers, Roman, Friedberg, & Lewis will continue to follow its progress. If you would like to discuss how these changes could affect your business, please contact Peter D. Brosse, Chair of our Creditors’ Rights & Bankruptcy Law Group, at firstname.lastname@example.org (216-831-0042, ext. 144) or Alan Dailide, at email@example.com (ext. 187).
 Sections 2333.22 and 2715.21 are amended to expressly incorporate the actions of a receiver permitted under proposed section 2735.04.