Page 24 - CooperatorNews Chicagoland EXPO 2021

24 COOPERATORNEWS CHICAGOLAND —EXPO 2021 CHICAGO.COOPERATORNEWS.COM Innovating for You, Your Business & Your Customers (888) 734-4567 allianceassociationbank.com | 1 All offers of credit are subject to credit approval. To learn more, talk with a banking professional today: Craig Huntington President (888) 734-4567 chuntington@ allianceassociationbank.com Joanne Haluska , CMCA, AMS Senior Vice President East Coast (216) 314-9100 jhaluska@ allianceassociationbank.com ■ Innovative Software Integrations with ConnectLive™ ■ Lending Services 1 ■ No-Fee Lockbox ■ Full Banking Services ■ Online Banking ■ Dedicated Customer Service ■ Scan to Lockbox Diane White , CMCA Vice President Association Financial Partner (312) 823-2181 dwhite1@ allianceassociationbank.com 8/19 (6) a court exercising its own equitable powers.” Sima Kirsch, an attorney who repre- sents numerous condominium associa- tions in Illinois drills down a bit further. “A Receivership is an extraordinary legal remedy that results when a chancery court divests the owner, through the board, of control of their property and puts it un- der the control of a court-appointed in- dependent agent—the receiver, acting as a neutral, which may be an individual or a management company. The receiver may be authorized to manage assets or to act as a liquidator of the association.” “A Receivership is ordered, among other reasons, to preserve property and maximize value during a lawsuit if it is found that the property will be further dissipated,” ex- plains Kirsch. “A receiver may be appointed for purposes of liq- uidation or to restructure; each has different out- comes for those involved. Each individual state’s statute desig- nates who may bring the action. The rules for re- ceivership of dif- ferent entities, excluding condo- miniums, HOAs, or co-ops, are different. When an association is assigned a re- ceiver, the associ- ation is generally dysf unc t iona l and/or the property is distressed and no longer solvent or close to insolvency. This could be due to different factors includ- ing failure to maintain a properly consti- tuted board or there is no board, unex- pected or higher than expected building repairs due to failure to properly budget and maintain appropriate reserves, mem- bers not paying their HOA dues coupled with poor collection habits, or the asso- ciation paying for expensive legal fees in a lawsuit due to a breach of fiduciary duty or arising from an association that lacks proper governance and policies and rules to protect the association or a combina- tion of the above.” Other Uses Receivership can have multiple uses. “Sometimes it can be used when dealing with a corrupt co-op board,” says William McCracken, a partner with Ganfer Shore Leeds & Zauderer, a New York based law firm. "We have had occasions where the best solution is a receiver—for instance, a co-op board controlled by an entity not looking out for co-op,” perhaps a sponsor or investor, “and there is no other alterna- tive other than to seek a receiver. It’s a drastic remedy.” On a more micro level, “I’ve seen it brought against unit owners with serious problems like hoarding, bed bugs, etc.,” says Jen Barnett, an attorney with Mar- cus, Errico, Emmer & Brooks, located in Braintree, Massachusetts. “I recall that a municipality brought an action against an association over lack of elevator repairs. The association said they didn’t have money to do repairs. We got them to a ta- ble with the receivership to get the repairs done. It’s also used in instances where a property can’t operate because of lack of formal organization or disfunction. It’s appropriate when a property can’t be run effectively and is needed to operate a building.” Barnett cites a small associa- tion in Dorchester. “No bills were get- ting paid. The client had been paying in- voices as they came in, so court institut- ed a receivership." Scott Piekarsky, a partner at Phillips Nizer in Hacken- sack, New Jersey re- counts a case some years ago where an association filed for bankruptcy protec- tion. He represent- ed the management company. “Some- times there’s such problems the court says we need to get things on track to straighten things out, so let’s bring in a receiver. In New Jersey this is known as a special fiscal agent. We got the property on track in a year’s time and then had new elections for a new board.” One important factor to keep in mind is that receivers are appointed by the court and answer only to the court. They aren’t beholden to any other interested party which might seek to influence the process or outcome. Receivership is de- signed to be impartial. Its reputation, though, may appear otherwise. Receiv- ers, like those who send properties into financial turmoil, are subject to human frailties. Many attorneys are reluctant to push for receivership out of fears that the receiver will be no more honest than the entity that caused the problem. Receiver- ship fees can be high as well. Co-ops vs. Condos If you are a shareholder in a co-op and RECEIVERSHIPS... continued from page 1 “We have had occasions where the best solution is a receiver. For instance, a co-op board controlled by an entity who’s not looking out for co-op, and there is no other alternative other than to seek a receiver.” —William D. McCracken