Legal Updates

Uniform Receivership Act Enacted in Michigan

On February 6, 2018, Governor Snyder signed Public Act 16 of 2018, the Uniform Commercial Real Estate Receivership Act. This Act provides guidance for receiverships in Michigan. Michigan was one of many states without a standard set of receivership rules before this Act was enacted.  In 2015, the Uniform Law Commission, the same organization that wrote the Uniform Commercial Code, drafted this model act to govern receiverships of commercial property. The Uniform Commercial Real Estate Receivership Act will provide greater predictability for litigants, lenders, and receivers. Michigan joins Oregon, Nevada, and Utah in enacting this law. Four other states have introduced the model act: Kentucky, Oklahoma, Tennessee, and West Virginia.

            The Uniform Commercial Real Estate Receivership Act applies to a receivership of an interest in real property and any personal property related to or used in operating the real property. A receivership order will operate as a stay against actions to enforce a judgment against receivership property, and receivers will have the status of lien creditor. The Act provides the powers and duties of a receiver, which can be modified, expanded, or limited by a court order. Unless limited by a court order, a receiver will be able to:

  • operate a business constituting receivership property, including the use, sale, lease, collection, or disposition of the property in the ordinary course of business;
  • incur unsecured debt and pay expenses in the ordinary course of business; and
  • assert a right, claim, or cause of action that relates to receivership property.

A receiver will also be able to do the following with court approval:

  • make improvements to receivership property;
  • use or transfer receivership property other than in the ordinary course of business;
  • adopt or reject executory contracts;
  • recommend allowance or disallowance of a claim of a creditor, or make distributions of receivership property; and
  • pay compensation to the receiver and to each professional engaged by the receiver.

The Act also sets forth the responsibilities of owners of receivership property. Owners are required to assist and cooperate with the receiver in the administration of the receiver’s duties. Owners are also expected to preserve and turn over to the receiver all receivership property.