Government of the District of Columbia
UNIFORM LAW COMMISSION
September 19, 2023
The Honorable Phil Mendelson
Chairman
Council of the District of Columbia
The John A. Wilson Building,
1350 Pennsylvania Avenue, NW
Washington, DC 20004
RE: Request for introduction of the Uniform Commercial Real Estate Receivership Act
of 2023.
Dear Chairman Mendelson:
Pursuant to Rule 401(b)(1) of the Rules of Organization and Procedure for the
Council, this is to request, on behalf of the District of Columbia Uniform Law
Commission, that you introduce the proposed “Uniform Commercial Real Estate
Receivership Act of 2023.”
A receiver is someone appointed by a court to take possession of another person’s
property and manage it. Receivers of commercial real estate are used in a variety of
situations, including: (1) when the property is the subject of a lawsuit and its value must
be preserved while the issue is litigated; (2) when the property includes an operating
business, to sell its assets in an orderly manner and maximize the return for its owners
and/or creditors; and (3) when requested by a creditor, to collect, preserve, and distribute
the property of an insolvent or defaulting debtor.
Presently, receivership law in the District is made by judges on a case-by-case
basis. Every receivership case is unique, and in every such case, there are lingering
questions about whether a broad appointment order from a court of equity can override
other laws governing liens, debt-collection remedies, and foreclosure procedures.
The Uniform Commercial Real Estate Receivership Act is designed to fill this
legal vacuum and, thus, to reduce litigation costs regarding receiverships. The Act
provides comprehensive rules regarding the appointment and powers of commercial real
estate receivers. In particular, the Act authorizes a receiver to use, sell, or lease
receivership property in the ordinary course of business, and to take such actions outside
the ordinary course of business with court approval. The Act thus allows a mortgagee,
through a receiver, to assume control of the mortgaged property, operate the property as a
going concern, and sell the property in an arms-length transaction. In addition, the Act
allows a receiver to conduct a unified sale of encumbered real estate and related personal
property, such as equipment, a franchise agreement, and intellectual property. This
process will likely yield a higher recovery than a distressed foreclosure sale would,
thereby benefiting both the mortgagee and the owner.
The Uniform Commercial Real Estate Receivership Act was completed by the
National Conference of Commissioners on Uniform State Laws in 2015 and has been
enacted, thus far, in 12 states, including Maryland.
A proposed “Uniform Commercial Real Estate Receivership Act of 2023.” is
being filed with this letter. In addition, the following documents have been filed: (1) a
summary of the Uniform Act; (2) a statement as to why the Uniform Act should be
adopted; and (3) the official version of the Uniform Commercial Real Estate
Receivership Act with comments.
I would be pleased to answer any questions and to provide any additional
information requested.
Sincerely,
James C. McKay, Jr.
Chair
D.C. Uniform Law Commission
cc: Uniform Law Commissioners
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4 ~ P h i l Mendelson at the request of the
5 District of Columbia Uniform Law Commission
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10 A BILL
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14 IN THE COUNCIL OF THE DISTRICT OF COLUMBIA
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16 To enact the Uniform Commercial Real Estate Receivership Act to establish uniform standards
17 under which a court may appoint a receiver; to give any interested parties the right to
18 notice and an opportunity for a hearing before a court issues an order under this act; to
19 require a receiver to be independent; to give a receiver the status of a lien creditor with
20 respect to receivership property, subject to pre-existing perfected security interests; to set
21 forth the receiver's presumptive powers and those the receiver may exercise only with
22 court approval; to set forth the duties of both the receiver and the owner of receivership
23 property; to authorize receivers to use or sell receivership property in the ordinary course
24 of business, but require that they obtain get court approval for uses or transfers of
25 property outside the ordinary course of business; and for other purposes.
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27 BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this
28 act may be cited as the "Uniform Commercial Real Estate Receivership Act of 2023".
29 Sec. 1. Short title.
30 This act may be cited as the Uniform Commercial Real Estate Receivership Act.
31 Sec. 2. Definitions.
32 In this act:
33 ( 1) "Affiliate" means:
34 (A) With respect to an individual:
35 (i) A companion of the individual;
36 (ii) A lineal ancestor or descendant, whether by blood or adoption, of:
37 (I) The individual; or
38 (II) A companion of the individual;
39 (iii) A companion of an ancestor or descendant described in clause (ii);
40 (iv) A sibling, aunt, uncle, great aunt, great uncle, first cousin, niece,
41 nephew, grandniece, or grandnephew of the individual, whether related by the whole or the half
42 blood or adoption, or a companion of any of them; or
43 (v) Any other individual occupying the residence of the individual; and
44 (B) With respect to a person other than an individual:
45 (i) Another person that directly or indirectly controls, is controlled by, or
46 is under common control with the person;
47 (ii) An officer, director, manager, member, partner, employee, or trustee or
48 other fiduciary of the person; or
49 (iii) A companion of, or an individual occupying the residence of, an
50 individual described in clause (i) or (ii).
51 (2) “Companion” means:
52 (A) The spouse of an individual;
53 (B) The domestic partner of an individual; or
54 (C) Another individual in a civil union with an individual.
55 (3) “District” means the District of Columbia.
56 (4) “Executory contract” means a contract, including a lease, under which each party has
57 an unperformed obligation and the failure of a party to complete performance would constitute a
58 material breach.
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59 (5) “Governmental unit” means an office, department, division, bureau, board,
60 commission, or other agency of the District or a subdivision of the District.
61 (6) “Lien” means an interest in property which secures payment or performance of an
62 obligation.
63 (7) “Mortgage” means a record, however denominated, that creates or provides for a
64 consensual lien on real property or rents, even if it also creates or provides for a lien on personal
65 property.
66 (8) “Mortgagee” means a person entitled to enforce an obligation secured by a mortgage.
67 (9) “Mortgagor” means a person that grants a mortgage or a successor in ownership of
68 the real property described in the mortgage.
69 (10) “Owner” means the person for whose property a receiver is appointed.
70 (11) “Person” means an individual, estate, business or nonprofit entity, public
71 corporation, government or governmental subdivision, agency, or instrumentality, or other legal
72 entity.
73 (12) “Proceeds” means the following property:
74 (A) Whatever is acquired on the sale, lease, license, exchange, or other disposition
75 of receivership property;
76 (B) Whatever is collected on, or distributed on account of, receivership property;
77 (C) Rights arising out of receivership property;
78 (D) To the extent of the value of receivership property, claims arising out of the
79 loss, nonconformity, or interference with the use of, defects or infringement of rights in, or
80 damage to the property; or
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81 (E) To the extent of the value of receivership property and to the extent payable to
82 the owner or mortgagee, insurance payable by reason of the loss or nonconformity of, defects or
83 infringement of rights in, or damage to the property.
84 (13) “Property” means all of a person’s right, title, and interest, both legal and equitable,
85 in real and personal property, tangible and intangible, wherever located and however acquired.
86 The term includes proceeds, products, offspring, rents, or profits of or from the property.
87 (14) “Receiver” means a person appointed by the Superior Court as the court’s agent,
88 and subject to the court’s direction, to take possession of, manage, and, if authorized by this act
89 or court order, transfer, sell, lease, license, exchange, collect, or otherwise dispose of
90 receivership property.
91 (15) “Receivership” means a proceeding in which a receiver is appointed.
92 (16) “Receivership property” means the property of an owner which is described in the
93 order appointing a receiver or a subsequent order. The term includes any proceeds, products,
94 offspring, rents, or profits of or from the property.
95 (17) “Record”, used as a noun, means information that is inscribed on a tangible medium
96 or that is stored on an electronic or other medium and is retrievable in perceivable form.
97 (18) “Rents” means:
98 (A) Sums payable for the right to possess or occupy, or for the actual possession
99 or occupation of, real property of another person;
100 (B) Sums payable to a mortgagor under a policy of rental-interruption insurance
101 covering real property;
102 (C) Claims arising out of a default in the payment of sums payable for the right to
103 possess or occupy real property of another person;
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104 (D) Sums payable to terminate an agreement to possess or occupy real property of
105 another person;
106 (E) Sums payable to a mortgagor for payment or reimbursement of expenses
107 incurred in owning, operating, and maintaining real property or constructing or installing
108 improvements on real property; or
109 (F) Other sums payable under an agreement relating to the real property of
110 another person which constitute rents under law of the District other than this act.
111 (19) “Secured obligation” means an obligation the payment or performance of which is
112 secured by a security agreement.
113 (20) “Security agreement” means an agreement that creates or provides for a lien.
114 (21) “Sign” means, with present intent to authenticate or adopt a record:
115 (A) To execute or adopt a tangible symbol; or
116 (B) To attach to or logically associate with the record an electronic sound,
117 symbol, or process.
118 (22) “State” means a state of the United States, the District of Columbia, Puerto Rico,
119 the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction
120 of the United States.
121 (23) “Superior Court” means the Superior Court of the District of Columbia.
122 Sec. 3. Notice and opportunity for hearing.
123 (a) Except as otherwise provided in subsection (b), the Superior Court may issue an
124 order under this act only after notice and opportunity for a hearing appropriate in the
125 circumstances.
126 (b) The Superior Court may issue an order under this act:
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127 (1) Without prior notice if the circumstances require issuance of an order before
128 notice is given;
129 (2) After notice and without a prior hearing if the circumstances require issuance
130 of an order before a hearing is held; or
131 (3) After notice and without a hearing if no interested party timely requests a
132 hearing.
133 Sec. 4. Scope; exclusions.
134 (a) Except as otherwise provided in subsection (b) or (c), this act applies to a
135 receivership for an interest in real property and any personal property related to or used in
136 operating the real property.
137 (b) This act does not apply to a receivership for an interest in real property improved by
138 one to four dwelling units unless:
139 (1) The interest is used for agricultural, commercial, industrial, or mineral-
140 extraction purposes, other than incidental uses by an owner occupying the property as the
141 owner’s primary residence;
142 (2) The interest secures an obligation incurred at a time when the property was
143 used or planned for use for agricultural, commercial, industrial, or mineral-extraction purposes;
144 (3) The owner planned or is planning to develop the property into one or more
145 dwelling units to be sold or leased in the ordinary course of the owner’s business; or
146 (4) The owner is collecting or has the right to collect rents or other income from
147 the property from a person other than an affiliate of the owner.
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148 (c) This act does not apply to a receivership authorized by law of the District other than
149 this act in which the receiver is a governmental unit or an individual acting in an official capacity
150 on behalf of the unit except to the extent provided by the other law.
151 (d) This act does not limit the authority of a court to appoint a receiver under law of the
152 District other than this act.
153 (e) Unless displaced by a particular provision of this act, the principles of law and equity
154 supplement this act.
155 Sec. 5. Power of Superior Court.
156 The Superior Court has exclusive jurisdiction to direct the receiver and determine any
157 controversy related to the receivership or receivership property.
158 Sec. 6. Appointment of receiver.
159 (a) The Superior Court may appoint a receiver:
160 (1) Before judgment, to protect a party that demonstrates an apparent right, title,
161 or interest in real property that is the subject of the action, if the property or its revenue-
162 producing potential:
163 (A) Is being subjected to or is in danger of waste, loss, dissipation, or
164 impairment; or
165 (B) Has been or is about to be the subject of a voidable transaction;
166 (2) After judgment:
167 (A) To carry the judgment into effect; or
168 (B) To preserve nonexempt real property pending appeal or when an
169 execution has been returned unsatisfied and the owner refuses to apply the property in
170 satisfaction of the judgment; or
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171 (3) In an action in which a receiver for real property may be appointed on
172 equitable grounds; or
173 (4) During the time allowed for redemption, to preserve real property sold in an
174 execution or foreclosure sale and secure its rents to the person entitled to the rents.
175 (b) In connection with the foreclosure or other enforcement of a mortgage, the Superior
176 Court may appoint a receiver for the mortgaged property if:
177 (1) Appointment is necessary to protect the property from waste, loss, transfer,
178 dissipation, or impairment;
179 (2) The mortgagor agreed in a signed record to appointment of a receiver on
180 default;
181 (3) The owner agreed, after default and in a signed record, to appointment of a
182 receiver;
183 (4) The property and any other collateral held by the mortgagee are not sufficient
184 to satisfy the secured obligation;
185 (5) The owner fails to turn over to the mortgagee proceeds or rents the mortgagee
186 was entitled to collect; or
187 (6) The holder of a subordinate lien obtains appointment of a receiver for the
188 property.
189 (c) The Superior Court may condition appointment of a receiver without prior notice
190 under section 3(b)(1) or without a prior hearing under section 3(b)(2) on the giving of security by
191 the person seeking the appointment for the payment of damages, reasonable attorney’s fees, and
192 costs incurred or suffered by any person if the court later concludes that the appointment was not
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193 justified. If the court later concludes that the appointment was justified, the court shall release
194 the security.
195 Sec. 7. Disqualification from appointment as receiver; disclosure of interest.
196 (a) The Superior Court may not appoint a person as receiver unless the person submits to
197 the court a statement under penalty of perjury that the person is not disqualified.
198 (b) Except as otherwise provided in subsection (c), a person is disqualified from
199 appointment as receiver if the person:
200 (1) Is an affiliate of a party;
201 (2) Has an interest materially adverse to an interest of a party;
202 (3) Has a material financial interest in the outcome of the action, other than
203 compensation the Superior Court may allow the receiver;
204 (4) Has a debtor-creditor relationship with a party; or
205 (5) Holds an equity interest in a party, other than a noncontrolling interest in a
206 publicly-traded company.
207 (c) A person is not disqualified from appointment as receiver solely because the person:
208 (1) Was appointed receiver or is owed compensation in an unrelated matter
209 involving a party or was engaged by a party in a matter unrelated to the receivership;
210 (2) Is an individual obligated to a party on a debt that is not in default and was
211 incurred primarily for personal, family, or household purposes; or
212 (3) Maintains with a party a deposit account as defined in D.C. Code § 28:9-
213 102(a)(29).
214 (d) A person seeking appointment of a receiver may nominate a person to serve as
215 receiver, but the Superior Court is not bound by the nomination.