Also known as: prepaid expense · prepaid expenses asset · prepayments · deferred expenses
Written by attorneys · grounded in primary & secondary sources — see below
Rent collected in advance by a junior receiver that covers periods after a senior receiver is appointed. The junior receiver must account to the senior receiver for the portion of those prepayments attributable to the later period.
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Pacific Bank obtained appointment of a receiver for an office building after the mortgagor defaulted on a junior loan. The receiver collected $40,000 in prepaid rent from tenants and paid taxes plus reasonable maintenance costs. When Prosperity Investments later secured its own senior receiver, Pacific Bank retained the remaining net amount for its benefit.
Pulse Media held a junior mortgage on commercial property and obtained a receiver who collected $25,000 in unauthorized prepaid rent along with regular collections. After paying taxes and maintenance, the receiver applied the balance to the junior debt. When Platinum Partners appointed a senior receiver, the junior receiver had to account for the portion of prepayments covering periods after the senior appointment.
The junior receiver must account to the senior receiver for any portion of the prepayments covering periods after the senior receivership begins.
The junior receiver has the same duty to avoid waste as any person in possession of real estate, so taxes and reasonable maintenance expenses must be paid before any excess may be applied to the junior obligation.