Sunday, January 20, 2013

So a receiver was appointed for your community, does this mean the end of your troubles?

For some folks. the mention of a receiver sends chills down their spines while for others it signals salvation for a community with troubles. Typically, in a community association setting a receiver would be appointed when the following occurs:

  • No one wishes to serve on the board or a board refuses to fill vacancies sufficient to constitute a quorum;

  • The board is unwilling or unable to act in the aftermath of a natural disaster or just as a result of dysfunction and the community's assets are being wasted as a result;

  • The association is being dissolved;

  • There are a number of abandoned units that the association wishes to rent out; and

  • Prior to the change in Florida law allowing associations to demand rents from tenants in delinquent properties, receivers were usually sought to fill this function.

Often, lawyers, managers and accountants are appointed to serve as receivers in shared ownership communities. However, there are no specific requirements as to who is eligible to serve as a receiver; it is up to the court's discretion to appoint same. Receivers are required to post a bond at the time of their appointment to cover the complete inventory over which they will be exercising control and discretion. It is very important at the outset then that the bond is high enough to cover any failures or misdeeds on the receiver's part.

Receivers are entitled to fees subject to the court's approval. Unless the Order appointing the receiver contains an automatic removal provision (i.e. upon dissolution of the association, election of a new board or other triggering event) the receiver will remain in place until someone moves the court to terminate the receivership.

Receivers have helped return many communities to health but, as is often the case in life, there are also examples where receivers have done damage. The last few years saw several receivers going to jail and others embroiled in litigation over excessive fees, questionable judgement calls and failure to relinquish control.

In Florida, we are looking at possible legislation in the 2013 Session that will facilitate the appointment of more receivers in community associations. It is in a community's best interests to always ensure a system of checks and balances is in place and that applies even when a court-appointed receiver is running the show.


  1. In a condo association with a three member board and only two members, is it necessary for the board to appoint a third member to avoid going into receivership, given that the two members constitute a quorum?

  2. The State of Florida requires a minimum of three board members to operate a corporation. The short answer is that your board should fill the third seat or it risks having an association member petition to appoint a receiver.

  3. Should Board Members be simply "an owner" or "a majority resident owner"? Is there any verbiage that can be used to prevent a non-resident owner from running for a Board seat? So this be in the by-laws?