Winter 2013 • Issue 46, page 18

Hard Core Receiverships: Taking Over Tough Properties

By Martin, Nancy *

There’s no rule book or best practices guide for taking over tough properties1 in receiverships. I have a taste for walking on the wild side so, for other receivers who develop similar tastes, and for receivers who find themselves inadvertently walking wild, this article outlines a few useful precautions. Some of these precautions are wholly obvious, and some will seem overly paranoid. But you know what they say. Just because you’re paranoid doesn’t mean that they’re not out to get you.

Not long ago I took over a property that was headquarters for a number of thriving enterprises. Drug dealing. Prostitution. Fencing stolen goods. Chop shop. Working with law enforcement, I shut down all operations and secured the building. I submitted my report, and promptly got a call from the asset manager. “Nancy!” he yelled, “You killed my cash flow!”

Rule #1: Protect yourself.
Don’t underestimate your jeopardy. Really. If you have reason to believe that you may be in danger,2 engage armed guards through a licensed security service. Request off-duty police officers, preferably from the same jurisdiction as that of the property. Ask the security service to give notice of the date and time of your takeover to the police/sheriff divisional HQ for the property’s location, requesting a squad car to accompany you, if appropriate.

Meet your guards in a nearby shopping center, where there is constant activity, and travel to the property in your guards’ vehicle. Never drive your vehicle to the property. Your license plate makes it all the easier to obtain your home address, and you may avoid costly damage to your vehicle.3 Stow all your equipment/papers/materials in your guards’ vehicle, and do not go back and forth to your vehicle, because it is likely that you will be followed.4

Obey your guards, and keep your eyes open. It may seem silly — like some TV cop drama — but don’t risk life or limb by entering any area first. Your guards must “clear the space” before you enter, even open space. If your guards are not staying alert and clearing all spaces before you enter, leave immediately and call the security service for replacements.

Rule #2: Be Prepared.
Wear casual clothes, with pockets, and wear sturdy gym shoes or low-heeled boots. Always carry a photocopy of your order in your pocket. If staff will be with you, try to have staff members named in your order, and instruct your staff to carry a photocopy of your order at all times. Everyone should also carry a photocopy of their government-issued, photo ID.5

Do not carry purses or wallets or any personal papers other than photocopies of your order and photo ID. Carry your vehicle key only — no other keys. Keep your phone in an inner pocket, preferably in a light-weight jacket with lots of pockets. Pre-program the phone number of the police/sheriff divisional HQ on speed dial.

Rule #3: Gather as much information as possible on your first visitation.
Bad actors and scared actors6 don’t care what’s in appointing orders and restraining orders. Things will disappear, and people will develop amnesia.

Carry a tablet/netbook and a portable scanner in a small, easily clipped, nondescript tote that you can wear bandolier style. You may have one chance, and one chance only, to make copies of relevant documents that you may not or cannot take away. If possible, take documents to a location in the property where you or your staff can use your equipment to make copies without being observed.

Take photographs of every inch of everything. Video is even better. For your inventory, you are documenting the premises and all personal property, and you are protecting yourself from the sure-to-follow claims of theft or damage. Do not photograph or video persons, even from a distance, until you have their permission.

If possible, make a continuous voice recording, describing the premises, personal property, persons, activities, attitudes. Interview everyone. If possible, record conversations, with permission. It’s unlikely you’ll ever get permission, but I always ask anyway. If you anticipate language barriers, take translators with you.

Rule #4: Diffuse hostility.
The bad actors will antagonize you ceaselessly.7 Remaining calm, never reacting, showing unflagging respect to everyone — these are surprisingly effective methods of diffusing hostility. As much as the blackguards deserve to be smacked down, hostility is your real enemy. Hostility breeds more hostility, wasting your time and energy, and potentially preventing you from garnering the information and cooperation you need to control the property for the duration of the receivership. If taunts or threats of violence require response, your security guards will respond in proportion to the actual level of danger.8

Carry small denomination bills — no change. Depending on the numbers involved, it can be quite useful to send someone to buy coffee/snacks/lunch for employees/tenants, or have pizza delivered, to show goodwill and gain cooperation, and to reduce tension and tamp down hostility. Offering to pay a few dollars for small services is another useful method of gaining cooperation or deflecting hostility.

Rule #5: Secure the premises.
If you discover illegal activities or contraband, summon law enforcement immediately. Thoroughly inspect basements, attics, storage rooms, utility rooms, closets, garages, covered vehicles, and every other potential hiding place. Engage a licensed locksmith to meet you at the property at a specified time. If you anticipate removing personal property, engage a licensed removal firm to cart out and transport the property in their commercial vehicle(s).

If the property is vacant, or if it has been closed down by law enforcement, engage a licensed contractor as soon as possible for board-up and fencing. Board-up on the inside only, though, so that nothing indicating a board-up is visible from the exterior. The plywood covering street-facing windows should be painted flat black. Chain-link fencing should be at least 10' with (permitted) barbed or razor wire topper.

If the property or neighborhood is high crime,9 engage 24-hour security guards, starting immediately upon takeover, for as long as necessary to establish control and to limit access by unauthorized persons. Remove all former tenants’ signage, and cover the owner’s signage. Promptly install the appropriate “No Trespassing” and “Closed to the Public.” Replace onsite management and all owner-hired security guards, as soon as possible, in accordance with contracts, state/local employment laws, and landlord/tenant laws. Comply with state and local “exterior upkeep” mandates, including landscape maintenance, trash removal and graffiti removal.

My top-shelf advice: stay safe, and alert, and cool as a cucumber. Taking over a tough property is not everyone’s dream appointment, but meeting the unusual challenges and crafting solutions that best preserve and protect the estate, those achievements are certainly satisfying.

*Nancy L. Martin is President of Resolution Equity Partners, Inc. Her practice includes real estate, investment consulting, and fiduciary services, specializing in receiverships and asset administration. The firm provides services to financial institutions, servicers, investment funds, attorneys, accountants, private parties and government agencies.

1 “Tough properties” are assets of any type — businesses, investment funds, real estate, etc. — that are occupied or controlled by bad actors who have a ruthless disregard for the law and for the life, limb and well-being of others.
2 Property owner’s pre-appointment comment about a seemingly innocuous triplex: “I wouldn’t go there without a .357 Magnum.”
3 I learned this one the hard way, back in the 1990's, when I came out of the property to find my car with no antenna, deeply scratched paint, four slashed tires, and a smashed-out windshield.
4 If you are in territory controlled by organized crime or gangs, your presence will be observed and reported by lookouts, and you will be monitored every moment while you are there. No kidding.
5 Anyone can call law enforcement and report that you are conducting illegal activity on the premises. Your order and a photo ID, even if you don’t have off-duty officers with you, should suffice to establish your bona fides if you are confronted by on-duty officers who were called to the scene by the bad actors. Once I came out of a property to face a semi-circle of squad cars and officers with guns drawn. My hands shot up in the air so fast, I looked like a Super Bowl ref signaling the winning TD.
6 Employees and tenants who are not felonious themselves are usually, justifiably, scared to death of the bad actors who are in control.
7 I thought I knew every vicious insult and vile curse that had ever been uttered. Boy, was I wrong.
8 Our “normal” lives leave us quite unprepared to evaluate the likelihood of violence correctly, and overestimating is as hazardous as underestimating.
9 Yes, there are tough properties in middle class, urban neighborhoods, and in quiet, suburban neighborhoods, and in gated, mega-mansion neighborhoods. You’re really not surprised, are you?