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Problem Property Receiverships: A Tool for Local Government By Alsbrook, Blake* |
Nomenclature: Sometimes the words we use to describe legal tools matter. Over the course of our discussion at Loyola VIII, it became clear to me that the lawyers and practitioners in our community (including me) often refer to all receiverships involving local governments and problem properties as “Health and Safety Code receiverships,” and that we invariably discuss how “the city” should proceed in such cases. I think that is a mistake. Receivership is a broad remedy that is available to local governments to address problem properties, and the Health and Safety Code is not the only – or even necessarily the best – legal basis for the appointment of a receiver. By way of example, during our panel we touched on receiverships involving multifamily properties where drug sales, prostitution, or other illegal activities take place. While our discussion took place in the context of “Health and Safety Code” receiverships, a local governmental agency can also address such a problem through an action under Business & Professions Code Section 17200, which allows for the appointment of a receiver over a business that has engaged in any “wrongful” business practice. “Wrongful” business practice has been given a broad definition by California courts. For instance, in People ex rel. City of Santa Monica v. Gabriel (2010) 186 Cal. App.4th 882, 889, the City of Santa Monica used Section 17200 to obtain the appointment of a receiver over a multifamily property where the landlord sexually harassed a tenant. Likewise, as the Court of Appeal recently made clear in City of Sierra Madre v. SunTrust (2019), 32 Cal. App.5th 648, Code of Civil Procedure Section 564 can serve as the basis for a receiver’s appointment even where the underlying lawsuit is brought pursuant to a provision of the Health and Safety Code. Put simply, the Health and Safety Code shouldn’t be our only reference-point for discussions regarding receiverships over problem properties. While our panel discussion often focused on the proper steps for “the city” to take in seeking the appointment of a receiver over a problem property, the receivership remedy is not exclusively available to cities: county counsel, related county agencies, and the State can similarly seek the appointment of a receiver where an owner fails to comply with regulations regarding the use of real property. Perhaps this is an unnecessarily bookish way of getting to my underlying point: shoe-horning all receiverships concerning problem properties under the title “Health and Safety Code receiverships” is probably unwise. One of the goals of the California Receivers Forum is to increase awareness and educate practitioners on the receivership remedy and how and when it can be used. When we discuss receiverships over problem properties, focusing on the relatively complex provisions of the Health and Safety Code, and only considering options available to “the city,” does us a disservice. One of the biggest challenges we face as receivers is basic awareness. I can say with certainty that each and every member of the California Receivers Forum has experienced the challenge of attempting to explain what a receiver is and what we do. By broadening and simplifying discussion we are likely to do a better job of spreading the word about a powerful tool available to local governments. *Blake Alsbrook is a partner at Ervin Cohen & Jessup, LLP in Los Angeles. Blake acts as a receiver and partition referee and provides legal services to prominent receivers and other court-appointed fiduciaries throughout California. |