Michigan Enacts the Uniform Commercial Real Estate Receivership Act
The Michigan Uniform Commercial Real Estate Receivership Act was signed by Governor Rick Snyder on February 6, 2018 and becomes effective on May 7, 2018. Providing clarity to a receiver’s powers this new legislation authorizes receivership sales free of certain liens and allows a creditor to submit a credit bid at the operative sale.
Expanding on the previously established Michigan Court Rules, once in effect, a commercial lender will be entitled to the appointment of a receiver to conduct a foreclosure of a mortgage where the mortgagor had previously agreed to the appointment of a receiver when in default. Upon appointment, the receiver obtains the status of a lien creditor as to both real and personal property. Should foreclosure become necessary, the sale will be free and clear of a lien of the person that obtained the appointment of the receiver, any subordinate lien, and any right of redemption, unless an agreement of sale provides otherwise (a significant deviation from Michigan’s foreclosure statutes which typically grant a six month right of redemption). Of course, such a sale would still remain subject to any senior lien.
An additional benefit is that the receivership act will provide more certainty as to the validity of a receiver’s sale of property. Such certainty should give title companies the additional assurance necessary to insure said sales.
It should be noted that the receivership act only applies to receivers appointed by Circuit Courts subsequent to the effective date of May 7, 2018.
Please click here for a copy of the legislation.