10.4 Appointment of a Receiver to Enable a Secured Creditor to Enforce Its Claim and Preserve and Protect the Lienholder’s Collateral

• Library: Enforcement of Liens and Judgments in Virginia (Virginia CLE) (2019 Ed.)

10.4 APPOINTMENT OF A RECEIVER TO ENABLE A SECURED CREDITOR TO ENFORCE ITS CLAIM AND PRESERVE AND PROTECT THE LIENHOLDER'S COLLATERAL

10.401 Real Property.

A. Protection of Collateral. A receiver may be appointed to assist a creditor holding a mortgage lien to enforce its claim against the debtor. ⁷³ The general rule for the appointment of a receiver over real property is that a court of equity will only appoint a receiver when (i) it is clear that the security is inadequate to satisfy the creditor's claim; and (ii) there is imminent danger of waste, destruction, or removal of the property. ⁷⁴ In other words, a receiver will only be

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appointed when clearly driven by pressing and exigent circumstances. ⁷⁵ Under these circumstances, a creditor would also most likely proceed under the emergency receiver statutes. ⁷⁶

B. Rent. In certain situations, a receiver can be appointed to collect the rents and preserve the status of the property. ⁷⁷ But if the creditor has sufficient security that is adequately protected or an adequate remedy at law by which to collect the rents, the court will not appoint a receiver. ⁷⁸

A creditor can only directly collect the rents under one of two circumstances. There may be language in the lien documentation allowing the mortgagee to collect the rental income. ⁷⁹ If there is no contractual language, then the creditor or the court must be in possession of the mortgagor's property that is the subject of the lien in a manner consistent with the lien...