Health and safety receivers have many tools available to them to aid in the rehabilitation of nuisance properties, but arguably nothing is more important than the availability of super-priority funding. Though super-priority liens have been authorized by courts in California since at least 1915 (Title Ins. & Trust Co. v. California Development Co. (1915) 171 Cal. 227), the 2019 case of City of Sierra Madre v. SunTrust Mortgage Inc. is a landmark development, because it brings this authorization into the 21st century by explicitly reiterating the availability of super-priority funding to receivers.
Over a period of about ten years, Jeffry and Taryn Hildreth performed unpermitted construction projects at their residential property in the City of Sierra Madre. During that time, they refinanced their home loan with SunTrust Mortgage, which then held the first position lien on the property. In December of 2010, Sierra Madre filed its nuisance action against the Hildreths, and a receiver was appointed at the City’s request in August of 2012. On July 5, 2017, the court granted the receiver’s request to borrow $250,000 from a bank in exchange for a receivership certificate with first priority ahead of SunTrust’s lien if SunTrust opted not to fund the remediation. SunTrust did not fund the remediation and appealed the court’s decision.
SunTrust presented multiple arguments against the court’s decision to allow a super-priority receivership certificate, but each argument was rejected in turn. The court noted that courts have “substantial discretion to authorize a receiver to borrow money to fund the preservation and management of property in the receivership estate,” and further indicated that typically a receivership certificate will have priority over all other liens, including those that were previously recorded. Importantly, the court also noted that the availability of other funding methods or lower cost options does not preclude a court from authorizing a super-priority lien.
Griswold Law has extensive experience obtaining court authorization for super-priority funding and has a network of lenders ready to provide the funding necessary for receiverships of all sizes. Receiver Richardson “Red” Griswold has been appointed by California courts over 100 times across 13 counties to act as a Health & Safety Code Receiver for substandard properties. For more information, please contact Griswold Law, APC at (858) 481-1300 or rgriswold@griswoldlawca.com.
