Also known as: original receivers · initial receiver
Written by attorneys · grounded in primary & secondary sources — see below
A court-appointed custodian of mortgaged property installed at the request of a junior mortgagee. The custodian collects rents and applies them first to taxes and reasonable maintenance before retaining any net proceeds for the junior mortgagee. A later-appointed receiver for a senior mortgagee cannot recover those net amounts already collected.
Osprey Aviation held a junior mortgage on an office building owned by Oliver Okeke. Osprey obtained appointment of a receiver who collected $60,000 in net rents after paying taxes and maintenance. Oakridge Manufacturing, the senior mortgagee, later secured its own receiver. The original receiver retained the $60,000 for Osprey.
Oswald Orozco defaulted on two mortgages secured by an industrial park. The junior mortgagee appointed a receiver who paid operating expenses and held the remaining rents. The senior mortgagee then obtained appointment of its own receiver and sought the funds already collected. The original receiver kept the net rents for the junior mortgagee.
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The original receiver retains the net rents for the junior mortgagee after paying taxes and reasonable maintenance. The senior mortgagee cannot recover those amounts even after displacing the receiver.
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No. The junior mortgagee who first obtains a receiver keeps the net rents collected before the senior acts. This rule rewards the junior's diligence without prejudicing the senior.
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The receiver must have applied rents to taxes and reasonable maintenance to avoid waste. Unauthorized prepayments or commercially unreasonable leases may create accountability to the successor receiver.
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