ARE RECEIVERSHIPS EVER A GOOD IDEA?

Regardless of what issues your community may be facing, receivership should only be considered as an absolute last resort, and only in the most dire of circumstances. Receiverships are expensive, time-consuming and transfer decision/making power to someone outside of the community.

In the community association context, the receivership requires an owner in the community or member(s) of the Board to file a lawsuit in Superior Court against the Association asking for the equitable remedy of having a court appointed receiver.  The Court then typically conducts an emergency hearing within 2-3 weeks of the lawsuit being filed.  The judge will only appoint a receiver if, after hearing all the evidence at the hearing, there is a compelling reason to do so (e.g. immediate threat of injury, damage or destruction to property and/or to property values) and all other possible efforts to resolve the problems have been explored and have been unsuccessful.

The two most common scenarios where receivership becomes a possible legal remedy are (1) lack of willing board candidates; and (2) financial insolvency.  If your community is having difficulty finding volunteer board members, make every effort to reach out to the membership (repeatedly, if necessary) to communicate the importance of board volunteerism, and explain the possible consequences (i.e. receivership) of failing to assemble a board to run the affairs of the community.  If your community finds itself in a desperate financial situation, closely examine your community’s financials and governing documents to identify possible opportunities to increase revenues and decrease expenses.

If your community is facing any of the above-discussed (or similar) issues, please contact Mulcahy Law Firm, P.C. for legal assistance in avoiding receivership.

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