Construction Projects Going Into Receivership and Financial Distress



Receivership and financial distress are two different events, but they can both occur in the same construction project. Receivership is when a third party takes over the project and has the power to make decisions about how it is run. Financial distress occurs when a party with an interest in a project cannot do what they need to do because of problems with their own finances or other things going on in their lives. Both events can lead to delays in completing work on construction projects, which can cause many issues for everyone involved.

Project observations

  • Project delays
  • Cost overruns
  • Quality issues (e.g., structural, electrical, or mechanical)
  • Project management issues (e.g., lack of resources or qualified personnel)
  • Schedule issues (e.g., due to weather, delays in receiving materials)
  • Change order inflexibility or overreaction to change orders from the owner/architect/engineer
  • Construction-related problems including: site safety issues; environmental concerns; inadequate construction workmanship; and poor quality control measures.
  • Legal disputes among parties involved in the project such as contractors v parent company v subcontractors v owners etc., which can lead to lien claims against your real estate holdings.[1]

Why is the project in receivership?

A project can be sent into receivership for a variety of reasons. The owners may lack the cash to complete the project, which is the most common reason for receivership. Another possibility is that there are no resources available, or adequate ones at least, to complete the project.

It’s also possible that an owner has little or no experience in managing a construction project and could use some help from someone with expertise in this area. Supervision and oversight are necessary for any construction project, but it seems as though many owners don’t see this until it’s too late. Communication between all parties involved is extremely important throughout the duration of any construction process; if communication breaks down between those responsible for making decisions on behalf of both parties involved (owners and contractors), then there will likely be problems down the line at some point during said process. Planning goes hand-in-hand with communication because without proper planning there will be no way to ensure accuracy regarding dates when certain tasks must take place during different stages throughout each phase associated with completing a building project successfully – especially one involving multiple companies doing work simultaneously! Lastly but certainly not leastly: commitment by all parties involved helps ensure success too because everybody needs motivation from time-to-time during what could potentially become stressful situations due to unforeseen circumstances occurring unexpectedly.”

Financial distress

Financial distress

If a construction project is bleeding money, lost money for several months, or has not been profitable for a long time, it is in financial distress. This means that the owner of the project does not have enough cash to get through its completion period. The owner will need additional financing from investors or lenders to finish the project. If these sources cannot be found, receivership may become necessary if there are no other options available (see below).

How to recover

If you find yourself in the position of being appointed as receiver or trustee, there are steps that you can take to ensure a positive outcome for your project. First, it is important to understand the history of the project and why it has been placed into receivership or financial distress. This will help you determine where things went wrong, how far along they are currently, and what needs to happen next for them to be successful.

Once you have determined this information, do a project analysis with your team and make sure that everyone is on the same page with respect to what needs to get done next: completing the work as soon as possible while staying within budget and legal parameters (which may change). If any changes occur during construction due to external factors such as weather delays or other unforeseen circumstances outside of anyone’s control (such as earthquakes), make sure these projects are reflected accurately before proceeding so there aren’t any surprises at closing time later down the line (or worse yet—during litigation proceedings).

A due diligence assessment

A due diligence assessment is a thorough review of the project from start to finish. It can help identify potential problems and risks early on, as well as cost savings, opportunities and issues that may arise throughout construction.

There are steps that you can take to prepare for these events and make sure that you can recover from them.

If a project goes into receivership or financial distress, there are steps you can take to prepare for these events and make sure that you can recover from them.


If you are involved in a project or have one going on that is at risk of receivership or financial distress, there are steps that you can take to prepare for these events and make sure that you can recover from them. We recommend getting an opinion from a third-party expert like The GeoFocus Group who understands the construction industry and knows how to navigate through legal issues, financial distress and receiverships.


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