As a practical matter, in many cases, even if every tenant paid the full rent, a receiver may not have enough money to make the necessary repairs. Here are some ways to get more money for the receivership.
- Get banks or organizations that lend groups money, such as local revolving loan funds, to lend money to the receiver by offering them what's called a "priority lien" or "super lien." This means that when the building is sold, the bank or organization that gave the loan can get back the money they lent before any other bank or person recovers what they are owed.42 They have first priority. In some cases, tenant groups and local nonprofit development groups have used specific projects as the motivation to actually create local revolving loan pools.43
- Negotiate with the bank that holds the mortgage on the property to give the receiver money for repairs. Since the bank has an interest in preserving the value of the property, it has a reason to pay for repairs. Because banks do not want to be held legally responsible for the condition of the property, if you propose that a bank take steps that make it look like it is legally responsible, such as paying for repairs, it may not cooperate. You may relieve a bank of these fears by having a judge indicate in an order that the bank's money for repairs will not make it legally responsible for the property.44
- Investigate other possible sources of funds, such as local Community Development Block Grant (CDBG) funds; funds from a local affordable housing trust fund; local rehabilitation, energy conservation, and deleading funds; or state funds.
- Ask the court to order the landlord to provide funds from other property that she owns.
Endnotes
42 . Pursuant to G.L. C. 111, §127I, receivers can have a lien with priority over all other liens except municipal liens. Such liens may be assigned to lenders for purposes of securing loans for repairs, operations, maintenance, and management of priority. See also Turner v. State Wharf and Storage Co., 263 Mass. 92 (1928).
43 . In Lowell, the Coalition for a Better Acre, a nonprofit community development corporation, when seeking financing for the redevelopment of a 267‑unit subsidized apartment complex, was instrumental in creating the Lowell Development Financial Corporation (LDFC), which set up a special loan pool to increase affordable housing development in Lowell. Start‑up funds for LDFC came from nine local banks. For information about how the loan pool was set up, see Everybody in the Pool, HOUSING MATTERS, Vol. 4, #3 (December 1990), published by the Massachusetts Law Reform Institute.
44 . In Garcia v. Shea, Mena v. Shapiro, and Cardona v. Sheedy, endnotes 30, 23 and 36, respectively, mortgagees of the properties involved agreed to advance to the receivership money for repairs to the extent rent money collected was insufficient. Depending upon the language of the bank's mortgage agreement with the landlord, money given by the bank to the receiver may be added to the landlord's mortgage and may have the same priority as the bank's original mortgage.
Produced by Susan Hegel Created July 2008
