Changes to Connecticut Receivership Law Will Likely Have Significant Impact

In a substantial development in the world of creditors’ rights and commercial loan defaults, Connecticut has joined almost a dozen other states in adopting the Uniform Commercial Real Estate Receivership Act (UCRERA) as of July 1, 2023. The United Law Commission (ULC), also known for developing the Uniform Commercial Code (UCC), brings uniformity and clarity when dealing with receiverships for distressed commercial real estate properties. 

While receiverships have been available in Connecticut for years, previously, to obtain a receiver, a creditor had a much higher burden than in many other states. The adoption of UCRERA arguably makes it easier to get a receiver and clarifies a process that had often bedeviled courts and practitioners. A “receiver” can now be an individual or a business entity, and the “receivership property” can include “any proceeds, products, offspring, rents or profits of or from the property.”¹

Most importantly, prior to the adoption of UCRERA, Connecticut law required all three of the following conditions be met for a court to appoint a receiver: 

• Waste or loss 
• A loan provision providing for an appointment 
• The risk of a deficiency²

Now, a foreclosing lender must meet only one of the following criteria to be entitled to having a receiver appointed:

• A receiver is necessary to protect the property from waste, loss, transfer, dissipation, or impairment.
• The borrower agreed in writing to the appointment of a receiver on default.
• The owner, after default and in writing, agreed to the appointment of a receiver.
• The value of the property (including collateral) is insufficient to satisfy the debt.
• The borrower fails to turn over to the lender proceeds or rents the lender is entitled to collect.
• A subordinate lien holder obtains appointment of a receiver.³

The powers and duties of a receiver include managing, protecting, and maintaining records of the receivership property and, with court approval, incurring debts or even transferring the receivership property. These powers and duties can be modified and expanded through a court order.⁴ The obligations of the owner of the receivership property include cooperating with the receiver and providing all records relating to the receivership property.⁵ UCRERA also requires the receivership property be turned over to the designated receiver upon demand, and parties that fail to transfer the property in their possession may be subject to certain sanctions.⁶

In light of these changes, receivers should become a much more obtainable and useful tool for lenders who hold commercial loans in Connecticut.

The Thought Leadership Committee of Barclay Damon’s Restructuring, Bankruptcy & Creditors’ Rights Practice Area issues alerts and blogs on an ongoing basis to keep clients, colleagues, and friends up to date on important developments in the insolvency space. If you have any questions regarding the content of this alert, please contact the author, Joslin Valiyaveettil, summer associate, at jvaliyaveettil@barclaydamon.com; Brian Rich, partner, at brich@barclaydamon.com; Janice Grubin or Jeff Dove, Restructuring, Bankruptcy & Creditors’ Rights Practices Area co-chairs, at jgrubin@barclaydamon.com and jdove@barclaydamon.com; Robert Wonneberger, Thought Leadership Committee chair, at rwonneberger@barclaydamon.com.
                                                                                          
 ¹See UCRERA § 52-620.
 ²Antonino v. Johnson, 113 Conn. App. 72, 77–78 (2009).
 ³See UCRERA § 52-624.
 ⁴See UCRERA § 52-630.
 ⁵See UCRERA § 52-631.
 ⁶See UCRERA § 52-631.