Receivership: What Is It? Do We Need It In Our Divorce?

By Melissa Fain, J.D.

The most expensive purchase for most couples is their home. When they file for divorce, preserving the equity in that home becomes a natural priority. Equity can be a source of retirement income, starting over cash, or part of a property settlement. A "receivership" is when a family court judge places property under the court's control and appoints a person called a "receiver" to preserve it. The receivership stops lenders from foreclosing, attaching, garnishing, sequestering, or selling the property without the court's permission.

Is there a law that allows the court to appoint a receiver?

The Texas Family Code allows for a receiver to be appointed to preserve and protect the property of the parties or to enforce the division of marital property made in a decree.

Who can be appointed as receiver?

The receiver must be a Texas resident who is qualified to vote. The receiver cannot be one of the divorcing spouses. The receiver does not have to be a licensed professional, although a court generally prefers licensed professionals for their expertise and potential cost savings. A receiver is typically a licensed realtor, attorney, or someone with a dual license of realtor and attorney.

Who needs a receivership?

  1. Neither party can afford the home on his or her own and there is equity. The advantage of having a receiver in this situation is that foreclosure is stayed, meaning the lender cannot foreclose without permission of the court. The receivership allows time for the receiver to market the property, find a buyer, and obtain the lender's approval of the sale. The parties continue to benefit from the equity in the home.
  2. The parties cannot agree on a value of the home. The receiver is a neutral party, who will work to sell the home for the best price a buyer will pay. The receiver will be able to justify the sales price to the court, thereby limiting the fighting between the parties over price.
  3. The parties owe more for the home than it is worth, but want to limit the damage to their credit ratings. A receiver can work to sell the home as a short sale.I live in the house.

Will I have to move out?

Typically, the party living in the home is allowed to stay. It is in everyone’s best interest to have a party in the home in to maintain it, and, if possible, to pay the mortgage, taxes and insurance. If the party who is living in the home does not maintain it or does not work with the receiver in marketing the property for sale, the receiver will file a motion to vacate with the court. If the court grants the motion, the person living in the house will be forced to move out and will be ordered to pay the receiver's costs and fees.

How does a receiver get paid?

Ideally, the receiver gets paid from the proceeds of the sale of the home, but payment depends on the terms the receiver sets with the court. It is a good idea to get a receiver as soon as you think you might need one, especially if you cannot afford the monthly payments on your property. Interest adds up every month and equity can disappear very quickly.

Reprinted by permission. Melissa Fain, J.D. is an attorney and a licensed realtor with Ueckert Realty in Keller, Texas who practices family, business, and real estate law and serves as a receiver in divorce cases. Contact her at 817.846.8032.