Law Offices of Edythe L. Bronston

Must/May a Receiver Appeal Real Property Tax Assessments?
A Thorny Problem
By Edythe L. Bronston and Les Rodin

One of the more notable and pressing issues with which receivers have recently been grappling involves whether a rents, issues and profits receiver, within his or her obligation to “maintain, protect and preserve” receivership assets, has the duty to review property tax bills and, if in his or her business judgment it is appropriate to do so (as he or she stands in the shoes of the property owner), apply to the County Tax Assessor for a decrease in the real property tax assessment.

There can be no general rule regarding this issue, as many factors come into play and, even if the receiver is convinced of the value of making such an application, the ramifications for making a public record of the receiver’s opinion of value, supported by evidence, can have far reaching effects on the property owner. Conversely, no receiver wishes to find him or herself facing a surcharge threat at the end of a lengthy judicial foreclosure, for the amount of taxes which could have been saved if the application had been made. Regardless of this potential minefield, some guidelines at least should be reviewed.

First, a receiver should consider whether he or she arguably has the responsibility to attempt to reduce the property taxes . . . (l) How long will the receivership be in place? This itself is often an unknown and depends on whether a judicial or non-judicial foreclosure is pending and in which jurisdiction the action has been filed, as each Court has its own internal guidelines as to how long it will allow a receivership to continue; (2) The nature and type of the real property; (3) A cost/benefit evaluation; (4) The expectations and / or intentions of both the owner and the secured creditor (plaintiff); (5) The availability of competent evidence to support any proposed reduction; and (6) The scope of the receiver’s original appointing order. These factors are not exclusive, and are often just the start of the inquiry.

Next, the receiver should consider whether or not the plaintiff lender intends to sell the property at a judicial foreclosure and proceed against the owner for a deficiency judgment. If so, by filing evidence which establishes a lower property value, the receiver can inadvertently increase the owner’s potential exposure . . . this can, of course, have dire consequences and may put the receiver at extreme risk.

The authors reiterate that there is no correct answer to this conundrum and each receivership and each issue arising thereunder must be addressed on an ad hoc basis. Receivers should, however, be attentive and alert to addressing these issues, should communicate often and effectively with all parties, and , if agreement cannot be reached with all parties, the receiver should always seek further instructions from the Court, upon full and appropriate notice to all parties.