Limited Hotel Receivership Overview Once a Court Appointed Receiver is assigned in a limited-purpose capacity to collect the hotel TOT, he or she will perform similar duties as in a full-purpose hotel receivership. This includes taking control of all of the bank accounts and performing an evaluation as to the economic feasibility of the property to support the Court Appointed Receiver’s actions during the limited-purpose hotel receivership. This economic evaluation includes understanding the impact of the bank deposits portion the Court Appointed Receiver will set aside for payment of the current hotel TOT as well as those payments toward any hotel TOT installment plan for back taxes and how it affects the day-to-day operations cash flow. Provided there are no surprises and the limited-purpose hotel receivership is economically feasible, the Court Appointed Receiver will proceed with their duties. Unlike a full-purpose hotel receivership, typically the only assets the Court Appointed Receiver will inventory and control for purposes of enforcing and collecting the hotel TOT judgment are those set aside from the daily deposits, accounts receivables and FF&E reserves accounts. In today’s age of electronic banking, the Court Appointed Receiver can easily set up a simplified off-site accounting system separate from the hotel’s accounting to monitor, control and transfer monies from the bank deposit accounts on a daily basis to the respective parties other bank accounts. Depending on the agreed plan between the parties, the Court Appointed Receiver will often set aside those monies each day to be paid to the city or county as well as deducting the hotel receivership costs as part of the court order. The remaining sums will then be transferred to the hotel’s operating accounts to fund its operations. As part of the Court Appointed Receiver’s duties, a monthly accounting and report will be submitted to the court and the respective parties as in any other receivership. Ocean ResortSome of the primary advantages to a limited-purpose hotel receivership are less cost and intrusion to the day-to-day operation, as opposed to the Court Appointed Receiver taking over all of the hotel assets and operating its entire business during a full-purpose hotel receivership. There is also a significant savings in time and travel for the Court Appointed Receiver and its staff since regular visits to oversee the hotel’s day-to-day operation will not usually be necessary. However, the disadvantages can include among others a lack of cooperation from the owner and its staff and the added time this causes the Court Appointed Receiver to incur to carry out his or her duties during the hotel receivership. This is especially true if the hotel’s daily reporting and banking information is not readily available or the Court Appointed Receiver’s requests for answers and clarification are continually delayed. A Court Appointed Receiver’s lack of total control over the entire hotel and its business in a limited-purpose hotel receivership may also be a problem if the hotel is facing another default or judgment by an outside party. These other defaults or judgments may have preference in another court action whereas the Court Appointed Receiver may need to petition the court in this action to get further guidance about their continued duties. In summary, a limited-purpose hotel receivership as an alternative to a full-purpose hotel receivership could provide a greater economy of scale in terms of costs and efficiency in order to collect a city or county TOT judgment. It can also provide the owner with a suitable recourse to satisfy its hotel TOT obligations with the city or county while continuing to operate its business with minimal outside interference. Of course, this is provided the parties are open to such an arrangement. When moving to assign a Court Appointed Receiver in a limited capacity such as this, it is especially important that the court order giving authority to the Court Appointed Receiver is both comprehensive and addresses the issues specific to a hotel and its operating environment. Lastly, cooperation is a primary consideration between the parties if the Court Appointed Receiver is going to be successful in carrying out his or her duties in a timely and cost-effective manner. Otherwise, the city or county may be better off petitioning the court to collect its TOT judgment using a full-purpose hotel receivership.
