The New Jersey Appellate Court has recently ruled that a receiver can be sued for injuries sustained in a building under the receiver’s control.  The case involved a dilapidated apartment building in Passaic and injuries sustained thirteen months after the receiver was appointed by judge overseeing the foreclosure case of the first mortgage holder.  The receiver was charged with responsibility to collect rent; manage, insure and repair the premises; pay taxes and assessments; and “do all things necessary for the due care and proper management of the mortgaged premises.”  According to the court, the building was in horrendous condition when the receiver took over, and remained so when the accident occurred some 11 months later.

The trial court dismissed the case as to the receiver.  The appeals court reversed that decision.  It said that while the receiver could not be sued in his individual capacity, he could be sued as  the receiver, since any negligence in his failure to inspect and repair was a result of his official duties.  Both courts agreed that expert testimony was required to establish the standard of care, and the appeals court determined that the trial judge should have allowed plaintiff’s real estate professional to testify as an expert on the subject even though he had no formal education in the area.  The trial court will now hear the expert’s testimony and reconsider the decision on liability and damages.

The question is how will the injured party recover if there is liability and damages?  The receiver is not personally liable.  Only the receivership is liable.  Does this mean there is no recovery if the receiver has not money derived from the building?  If there are no excess rent receipts to pay the judgment, will the court allow the building to be encumbered?  By the way, the court ruled that since the foreclosing mortgagee did not enter into possession, the mortgage lender could not be held liable, but that is the subject of a separate post.  Stay tuned!