When can a New York court appoint a receiver to collect a judgment?

This page explains New York law. A receiver is a person the court appoints to take control of property for the benefit of a creditor. In judgment enforcement, a creditor may seek a receiver where the debtor's value sits in something that produces income or needs managing, such as rental property, a business or an interest that cannot simply be levied and sold. Opposing creditor motions to appoint a receiver over a debtor's assets, business or income stream is one of the matters listed on KOR Law LLP's post-judgment and enforcement defense page.

What does the statute allow?

Once a receiver is appointed, any later court order directing payment or delivery of the debtor's property sends it to the receiver rather than to a sheriff (CPLR 5228(a)). That is the main practical difference from an execution, where a sheriff levies on and sells property under fixed statutory steps; we explain that route in what a sheriff can seize under a property execution in New York.

Where and how is the motion made?

A receiver is sought by motion in the enforcement court, on the notice the court requires (CPLR 5228(a)). Under CPLR 5221(b), an enforcement motion may be made in any court where a special proceeding against the person served could be brought. For most judgments of a New York court, that means the Supreme Court or a county court in a county where the debtor lives, is regularly employed or regularly does business in person (CPLR 5221(a)(4)). A judgment from the Civil Court of the City of New York is enforced in that Civil Court when the debtor lives, works or does business in the city (CPLR 5221(a)(3)).

So a motion against a Brooklyn owner on a Supreme Court judgment can be heard in Kings County; our page on foreclosure and judgment defense for Brooklyn (Kings County) cases covers that courthouse. Before moving, a creditor can use subpoenas under CPLR 5224 to require testimony, documents or written answers about the debtor's property, such as leases and rent records. If you have received an information subpoena, see whether you have to answer an information subpoena in New York.

Is a judgment receiver the same as a rents receiver in a foreclosure?

No, and the difference matters. A receiver in a foreclosure can come from the mortgage itself. Under Real Property Law 254(10), a mortgage covenant that the holder is entitled to a receiver means the lender is entitled to a receiver of the rents and profits "without notice and without regard to adequacy of any security of the debt." RPAPL 1325 adds that no notice of the motion is needed where the mortgage allows appointment without notice, that the court may direct the receiver to apply rents to accrued mortgage interest in certain cases, and that the owner must turn over tenants' security deposits to the receiver. In New York City, an order appointing a rents receiver for a multiple dwelling must require the receiver to register with the city and give priority to correcting hazardous housing violations (RPAPL 1325(3)). The foreclosure receiver is covered in full in whether a lender can take over a building's rents with a receiver during a New York foreclosure.

A judgment receiver under CPLR 5228 has none of that contractual footing. There is no mortgage covenant; the creditor must persuade the court, on notice the court sets, that a receiver should be appointed at all and over what. Owners of rental buildings facing a lender's receiver should read which protections apply in a commercial or residential foreclosure.

How can a debtor respond to a receiver motion?

• The appointment is discretionary. CPLR 5228 says the court "may" appoint a receiver. A debtor can argue that the creditor's ordinary tools, such as a restraining notice, an execution or a turnover proceeding, are available and enough. Our page on what a restraining notice on a bank account does explains the most common of those tools.
• Scope. The order must specify the property and the duties. A request that sweeps in an entire business or every asset can be challenged, and CPLR 5240 lets the court deny, limit, condition or regulate any enforcement procedure, as explained in whether a court can limit or stop a creditor's collection efforts.
• Exempt property. Property exempt under CPLR 5205 and 5206 does not become reachable because a receiver is appointed; see what property a New York judgment creditor cannot take.
• Other people's interests. Co-owners, partners or a spouse may hold interests the receiver cannot touch, which the court can address when it decides the scope of the order.
• Cost. Commissions of up to 5% and, if authorized, counsel fees come out of the money collected, which a debtor can raise in arguing for a narrower order or a different device.

Where the creditor wants specific property paid over rather than managed, the device designed for that is turnover; see what a turnover proceeding is in New York and how to respond to one.

What changes once a receiver is appointed?

The order is the document to read closely. It fixes which property the receiver may take, what the receiver may do with it, and how, and it decides whether the receiver may hire a lawyer at all, since CPLR 5228(a) bars counsel unless the order expressly allows it. From then on, any court-ordered payment or delivery of the debtor's property goes to the receiver. A receivership started by one creditor can also grow: on another judgment creditor's motion, the court must extend it to that creditor's judgment (CPLR 5228(b)), and the statute already asks that the debtor's other judgment creditors receive notice of the original motion where practicable. If circumstances change, the debtor can return to the court under CPLR 5240 to ask that the receiver's role be limited or conditioned.

CPLR 5228(a) also makes four rules for temporary receivers apply. Before starting, the receiver is sworn to discharge the trust faithfully and fairly, although all parties can consent to waive the oath (CPLR 6402). The receiver gives an undertaking in an amount the court fixes (CPLR 6403). The receiver keeps written accounts of receipts and spending, describing the property and naming the depository that holds the funds, and those accounts are open to inspection by anyone with an apparent interest in the property (CPLR 6404). The court that appointed the receiver may remove the receiver at any time, on a party's motion or on its own (CPLR 6405).

What changes the answer for your case?

• What the property is. A receiver can reach real or personal property in which the debtor has an interest (CPLR 5228(a)), but property exempt under CPLR 5205 or 5206 stays exempt.
• Whether it is your home. A home you own and live in is a homestead up to a value set by county; the sale of a homestead worth more than that takes a separate special proceeding in the county where it sits, by a sheriff or receiver (CPLR 5206(a), (e)).
• Whether a lender's mortgage is involved. A foreclosure receiver can rest on a mortgage covenant and be appointed without notice (Real Property Law 254(10); RPAPL 1325(1)); a judgment receiver cannot.
• Whether someone else claims the property. Before a receiver applies property to the judgment, any interested person may bring a special proceeding to determine rights in it, and disputed facts get a separate trial (CPLR 5239).
• Who is appointed. A judgment creditor appointed as its own receiver is not entitled to compensation (CPLR 5228(a)).
• How much the receivership collects. Commissions are capped at 5% of sums received and disbursed, with up to $100 allowed for small amounts, and if nothing is left the court can make the moving party pay (CPLR 8004).

For example: a receiver motion over a rental building

Common mistakes when a creditor seeks a receiver

• Opposing only the appointment, not the scope. The order sets the property, the duties and whether counsel may be hired (CPLR 5228(a)). Even if a receiver is appointed, a narrower order can matter more than the yes or no.
• Collecting rents yourself after the order. Refusing or willfully neglecting to obey an enforcement order is punishable as contempt of court (CPLR 5251).
• Leaving exempt property unnamed. If a homestead or exempt funds are mixed in with what the creditor lists, say so with documents before the order is signed.
• Never asking for the accounts. CPLR 6404 opens the receiver's accounts to anyone with an apparent interest and lets the court require that they be presented.
• Assuming foreclosure rules apply. No notice is needed for a receiver under a mortgage covenant (RPAPL 1325(1)). A judgment receiver is different: the court sets the notice and decides whether to appoint at all.

What to do this week

1. Find the return date of the motion and the date and method of service, and calendar your deadline to oppose.
2. List each property the creditor names, who owns it, and any liens on it.
3. For rental property, gather the leases, rent roll and security deposit records.
4. For a business, gather its formation documents and operating or shareholder agreements, which show what the debtor actually owns.
5. Collect records of every other enforcement step already under way on the same judgment, following our checklist of what to gather when enforcement starts.
6. Write down the narrower order you could live with, property by property, and arrange to speak with a lawyer before the return date.

Frequently asked questions

Can a receiver sell my home?

A home you own and occupy as your principal residence is exempt up to the county homestead limit in value above liens (CPLR 5206(a)). For a homestead worth more, the creditor must start a special proceeding in the county where it is located for a sale by a sheriff or receiver, and the court divides the proceeds by each person's interest (CPLR 5206(e)). For co-ops, see whether the homestead exemption protects a co-op apartment.

Can a receiver be removed?

Yes. The court that appointed a receiver may remove the receiver at any time, on the motion of any party or on its own initiative (CPLR 6405, made applicable by CPLR 5228(a)). A debtor can also ask the court to limit or condition the receivership under CPLR 5240.

Does the receiver have to post a bond?

The receiver must give an undertaking, in an amount fixed by the court, that the receiver will faithfully discharge the duties (CPLR 6403). The receiver must also take an oath before starting, unless all parties consent to waive it (CPLR 6402).

Who pays the receiver if nothing is collected?

If a receivership ends with no funds in the receiver's hands, the court may fix the receiver's compensation and the receiver's attorney's fees and direct the party who moved for the appointment to pay them, along with necessary expenses (CPLR 8004(b)).

What if my spouse or a co-owner has an interest in the property?

Any interested person may, before the receiver applies the property to the judgment, start a special proceeding against the creditor to determine rights in it (CPLR 5239). The court can vacate the order, direct what happens to the property, or award damages. Married owners should also read whether a creditor of one spouse can force the sale of a home owned as tenants by the entirety.

Can I still challenge the judgment itself?

Sometimes. CPLR 5015(a) lets the court that entered a judgment relieve a party from it for reasons such as excusable default, lack of jurisdiction or fraud; the excusable default ground must be raised within one year after service of the judgment with written notice of its entry. See whether you can undo a default judgment in New York.