Q: I am a receiver for a shopping center. I
want to enter into a five year lease for one of the stores. Is there a
statute or rule that limits the term of leases a receiver can execute?
A: There is no California statute or case
that limits the term of leases a receiver can execute. However, limits are
often placed on the term of such leases by the order appointing the
receiver and often depend on the type of receiver appointed, i.e., a
rents, issues and profits receiver versus an equity receiver. You don’t
indicate which you are. In rents cases, the practice developed, at least
in Southern California, to limit the term of such leases to no more than
one year. That practice was based on general receivership law that
receivers should not enter into leases beyond the probable term of the
receivership, so as to not unnecessarily bind the receiver’s successors
and the ultimate owners of the property. See Clark on Receivers, §450
(1992). When the Judicial Counsel form receivership order for rents
receivers was drafted, with the help of a number of receivers from
Southern California, the following provision was included:
“The receiver may without court approval
enter into leases for a term not exceeding one year, obtain and evict
tenants, and set and modify the amounts and terms of leases.”
If you are a rents receiver and you
believe it is in the best interest of the estate to enter into a long term
lease, you can do so if you get court approval. If you are an equity
receiver, this limitation does not apply, unless it is set forth in your
order of appointment. However, the best practice would be to either get
court approval of the proposed long term lease or of parameters for leases
you may enter into. *Peter
A. Davidson is a Partner of Ervin Cohen & Jessup LLP a Beverly Hills
Law Firm. His practice includes representing Receivers and acting as a
Receiver in State and Federal Court. |