LoanFunders.com Newsletter
Posts
From Receivership to Refi: Legal Steps to Package Distressed Assets for Private Capital

From Receivership to Refi: Legal Steps to Package Distressed Assets for Private Capital

George Tsividakis
July 28, 2025

An attorney-centric roadmap for turning court-controlled headaches into lender-ready, cash-flowing real estate—without waiting on a bank committee.

1 | Receivership 101—Why Private Capital Loves (the Right) Distress

Item	Conventional Lender View	Private-Capital View
Court Control	“Come back after final disposition.”	✔ Predictable timeline & reporting.
Deferred Maintenance	Collateral downgrade.	Renovation upside = higher IRR.
Sponsor Default	Automatic loan kill.	New sponsor can step in via stalking-horse or note purchase.

Key Insight: Private lenders and equity funds want sub-performing assets—if the legal packaging is tight enough to close inside 30 days.

2 | Legal Preparation Timeline (30-Day Fast Track)

Day	Action	Deliverable for Lender
0-5	Confirm Receiver Authority—review order for sale or refinance powers.	Court order & bonding proof.
5-10	Title & Lien Sweep—run updated title, clear mechanic’s liens via stipulation.	Clean title commitment (or mapped exceptions).
10-14	Entity Readiness—form NewCo (take-out borrower), draft assignment of purchase & sale.	EIN, operating agreement, K-1 structure.
14-18	Collateral Audit—environmental reliance letter, updated rent roll, cap-ex schedule.	One-stop “Due-Diligence Binder” PDF.
18-24	Court Motion to Approve Sale / Refi—file, notice parties, set hearing.	Draft order approving financing & lien priority.
25-28	Loan Docs Circulate—receiver, lender, and NewCo sign; file motion order.	Executed commitment & pro-forma ALTA.
30	Funding & Recordation—receiver conveys or pledges asset; private loan funds.	First-lien deed of trust + payoff of existing note.

3 | Document Checklist—What Every Private Lender (👋) Expects

Category	Must-Haves	Attorney Tips
Court Filings	Original receivership order; motion & order approving disposition; bond.	Ensure explicit language authorizing new debt at closing.
Title & Survey	60-day title commitment; plat or ALTA survey; lien-release affidavits.	Request gap insurance endorsement to cover post-petition liens.
Environmental	Phase I within 150 days (Phase II if REC flagged); reliance letter to lender.	Courts almost always grant reliance authority—ask early.
Financials	12-month receiver P&L; rent roll; cap-ex ledger.	Label receiver vs. pre-receivership expenses for clarity.
Entity & Authority	NewCo LLC docs; certificates of authority; receiver joinder.	Draft receiver estoppel stating no further claims against asset after closing.

4 | Structuring the Capital Stack

Layer	Typical Terms (LoanFunders.com Network)	Legal Considerations
Senior Bridge Loan	70–80 % of “as-is” value, 12–24 mo I/O, non-recourse	Deed of trust + assignment of rents; receiver released at funding.
Preferred Equity / Gap	10–20 % of cost, 10–12 % coupon + accrual	Intercreditor: cure rights, standstill, step-in.
Sponsor Equity	5–15 % last-loss cash	Operating agreement shows preferred return waterfall.

Attorneys who deliver a clean intercreditor and estoppel shorten funding by 7–10 days—often the edge that wins your client the deal.

5 | Exit Strategy—From Bridge to Agency/DSCR Refi

Stabilize NOI—receiver P&L shows trend, but pro-forma must pencil to ≥1.20 DSCR.
Receiver Discharge—file notice of completion; court closes case.
Clean Title UCC—terminate receiver’s UCC financing statements.
Permanent Loan Closing—LoanFunders.com can roll bridge file into DSCR or agency take-out with minimal re-docs.

6 | Common Legal Pitfalls (and Fixes)

Pitfall	Impact	Fix
Receiver lacks power to encumber	Lender declines	File nunc pro tunc order clarifying authority.
Undisclosed tax liens surface at closing	Title exception → delay	Bond receiver or escrow payoff from proceeds.
Mech-lien cloud over post-petition work	Title won’t insure	Court-ordered lien bar; carve escrow.
Environmental reliance denied	Lender orders new Phase I → 30 day slip	Motion for reliance; receiver indemnity.

7 | Case Study—$12 M Chicago Hotel to Multifamily Conversion

Problem: COVID-era CMBS default, court receiver in place, 65 % occupancy.
Solution: Attorney packaged full doc set in 23 days; LoanFunders.com funded $8 M bridge + $2 M pref.
Outcome: Receiver discharged at closing, sponsor began gut-renovation; DSCR refi scheduled month 18.
Legal Fee: $148 K vs. $90 K projected—client happy to pay premium for speed that saved deal.

8 | Attorney Action Plan—Week-One Checklist

Need a Bridge Term Sheet for Your Receivership File?

Email the order and rent roll—LoanFunders.com returns a non-binding quote in 24 hours and our counsel coordinates document language with yours.

When the court clock is ticking, close with capital that moves at the speed of your pleadings.