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Selling Free and Clear of Liens By Wald, David* David Wald of the LA/OC Chapter, with some further words on the ongoing discussion as to sale of real property by receivers: “Yes, receivers can (and continue to) sell real estate free and clear of subordinate liens and claims. There is still much confusion – even among experienced professionals. As a technical matter, 'free and clear' really means that the receivership sale order serves to attach subordinate liens and claims to the proceeds of the sale in the order of their recorded priority. To the extent that there aren’t sufficient proceeds from the sale to pay one or more of the subordinate claims, then those liens and claims are then effectively extinguished, just as a conventional foreclosure sale would. To the extent that there are surplus proceeds allowing one or more subordinate claims to be paid, then the court typically determines in a separate post-closing hearing which claimants receive the surplus proceeds. For those who are interested in specific California case law regarding the sale of property by receivers, the best article I’m aware of is “Receivership Sales of Troubled Projects: A Better Alternative to Foreclosure in California,“ by Alfred M. Clark, III, a partner in the Los Angeles office of the law firm Locke Lord Bissell & Liddell, LLP.” *David Wald is President of Wald Realty Advisors and has completed assignments for more than 200 clients, including more than 65 lenders, with a focus on complex projects. |