Case Study: Estate Drive

Partial Abatement

Partial abatement receiverships in Tennessee involve a two-step process whereby the receiver would: (1) immediately address the severe health and safety risks posed by the property; and, after the statutorily required redemption period, (2) auction the property to a qualified buyer who had proven development experience and financial capacity, and who would guarantee (via bond or similar security) to complete the full remediation of the property within 9 months, thereby abating the public nuisance.

The appointment of Tennessee Receivership Group as receiver for the property on Estate Drive was the first ever partial-abatement receivership in the state of Tennessee. The entities involved agreed to invest whatever time and resources were necessary to launch a successful initial project.

TRG aspired to (1) bring about direct community benefit by the abatement of a severe public nuisance in one neighborhood; and (2) demonstrate the potential of partial abatement receivership in Memphis as a tool for nuisance abatement in complex circumstances. TRG’s community benefit goal was clearly achieved at Estate Drive. A disastrous multi-year hoarding situation was converted to a pristine occupied home that is now one of the most beautiful homes on the street. TRG’s goal of showing the potential of partial abatement receivership in Memphis was accomplished, since the process yielded a fully rehabilitated property developed by a private party (the qualified buyer) who was able to sell the Property less than five months after purchasing it at auction.

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Receivership Detail

On August 27, 2019, the Court appointed Tennessee Receivership Group (“Receiver”) as receiver for Estate Drive, Memphis, Tennessee (“Property”). The Court directed the Receiver to take possession and control of the Property to immediately address the severe health and safety risks posed by the Property pursuant to a development plan previously approved by the Court.

Conditions at the Property included severe health and safety hazards at a long-abandoned property:

Extensive mold growth on ceilings, walls and floors throughout the interior.
Rooms packed with personal property that had apparently been hoarded for many years and which was also covered with extensive mold growth.
Abandoned and disconnected refrigeration and freezer units with decayed contents.
Pest infestation and feces from ingress and egress of wild animals.
Decaying building materials throughout and an unmaintained and overgrown exterior.

The Receiver’s approach to the work was to subcontract the work, supervise it, and pay for it directly rather than to hire a general contractor.

On November 14, 2019, less than ninety days from being appointed as Receiver, the Court determined that the severe health and safety risks posed by the conditions at the property were abated and that the Receiver’s work pursuant to the development plan was completed.

In December 2019, once it became clear that no owner or interested party would be coming forward to pay the lien, the Receiver retained two contractors to provide quotes for the full rehabilitation of the Property to assist the Court in determining the amount of the security required from a qualified buyer for the Property.

On January 23, 2020, the Court authorized the Receiver to sell the Property to a qualified buyer by public auction on February 21, 2020. The Receiver advertised the details of the auction in a local paper and also retained a local realtor to implement additional marketing procedures to maximize participation in the auction.

On February 21, 2020, the Receiver conducted the auction, resulting in a prevailing bidder among the qualified buyers (“the Buyer”) whose bid was $115,000.00. After the auction and prior to the subsequent hearing, the Receiver spent significant time and effort communicating with the Buyer to coordinate the submission of a satisfactory plan, budget and timeline.

On February 25, 2020, this Court approved the sale of the Property to the Buyer, after the Buyer provided the Court with a satisfactory development plan for the Property’s full remediation. The estimated cost for full remediation was $79,820.00. The Court required the full remediation of the Property within nine months.

On March 11, 2020, 14 days after the approval of the sale of the Property to the Buyer, the World Health Organization declared the novel coronavirus (COVID-19) outbreak a global pandemic. Needless to say, TRG, NPI, CRGF, the Court, and the Buyer were all severely, directly impacted by the global pandemic and resulting emergency orders, and both uncertainty and delays were unavoidable despite best efforts of all involved. Through diligent work and commitment, parties all agreed to move forward in good faith to consummate the auction transaction. However, there was likely a minimum of six weeks of delay due to the pandemic. On May 12, 2020, the Receiver closed the transfer of the Property to the Buyer.

The Buyer commenced rehabilitation of the Property on May 22, 2020 and completed the work in less than five months. On October 15, 2020, this Court found that the Buyer completed the full rehabilitation of the Property and that the public nuisance previously located at the Property was abated. On November 13, 2020, the Buyer sold the Property for $309,000.

Subsequently, the Court determined that the Receiver’s work was complete and terminated the receivership on January 5, 2021.

Community Impact

After completion of the receivership, CRGF staff spoke to Clint and Carolyn Powell, immediate neighbors of the property, to discuss their experience. The Powells have lived in their Memphis home since 1979. Most of their neighbors are young couples in single- family homes, many with children; there’s an elementary school nearby and a junior high down the street.

The Powells recounted that the receivership property was previously owned by an elderly invalid who was unable to keep up with needed maintenance. The home had suffered interior and exterior neglect for decades. In addition, the former owner was a hoarder. When she passed away, the property sat vacant for two years, resulting in the extensive mold and pest infestation noted above. The rooms were packed with decaying belongings. The Powells opined that it may have been the worst property within the entire zip code. Although there were complaints, little changed until August 2019, when the Environmental Court appointed a health and safety receiver. Work began immediately upon appointment, with removal of eight large dumpsters of clean-out debris. The mold was rampant, and removal required that walls be torn out of the home. Per the Powells, “The property actually smelled.” But the crew worked hard, and the initial clean-out was complete in six weeks. Within 90 days of appointment, the Court determined that the severe risks were abated.

The buyer who purchased the property continued improvements. He retained the exterior design, but completely rebuilt the interior. As Mrs. Powell said, the property “went from a blighted house to a showplace.” The Powells are certain the receivership experience impacted their lives for the better. They now live next to a beautiful property, and the successful receivership raised local property values. “There’s no question about it. It was the best thing to happen in our neighborhood.”

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Entities Involved

Tennessee Receivership Group (TRG), an entity of the CRG Foundation (CRGF) Neighborhood Preservation, Inc. (NPI)

Health and Safety Receiverships for Nuisance Properties in Tennessee