assignment of rents example

Assignment Of Leases And Rents

Jump to section, what is an assignment of leases and rents.

The assignment of leases and rents, also known as the assignment of leases rents and profits, is a legal document that gives a mortgage lender right to any future profits that may come from leases and rents when a property owner defaults on their loan. This document is usually attached to a mortgage loan agreement.

Assignment of leases and rents allows lenders to a degree of financial protection in case a loan default occurs. This document is an agreement made between a borrower and a lender of mortgage loans. It often details an exact amount the lender will be entitled to if a default happens.

Common Sections in Assignments Of Leases And Rents

Below is a list of common sections included in Assignments Of Leases And Rents. These sections are linked to the below sample agreement for you to explore.

Assignment Of Leases And Rents Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.9 10 d368735dex109.htm ASSIGNMENT OF LEASES AND RENTS , Viewed October 4, 2021, View Source on SEC .

Who Helps With Assignments Of Leases And Rents?

Lawyers with backgrounds working on assignments of leases and rents work with clients to help. Do you need help with an assignment of leases and rents?

Post a project  in ContractsCounsel's marketplace to get free bids from lawyers to draft, review, or negotiate assignments of leases and rents. All lawyers are vetted by our team and peer reviewed by our customers for you to explore before hiring.

Meet some of our Assignment Of Leases And Rents Lawyers

Jared Fields is an experienced business lawyer and litigator with experience in diverse industries and practice areas. Prior to launching his own practice, he served as the chief legal officer for a group of privately-owned companies, including a real estate development group, construction companies, multiple franchisees, and a professional soccer team. As a result, he is experienced in real estate transactions, commercial agreements of varying degrees of sophistication, employment matters, and litigation, as well as general business legal advice. He was also an in-house attorney for a renewable energy company, where he was responsible for litigation, investigations, enforcement actions, and related securities filing disclosures. Mr. Fields also spent many years as a litigator in private practice, representing clients in matters ranging from securities litigation, to breach of contract, to cases involving real estate and financial services. Mr. Fields has particular experience in legal matters that may involve complex financial, accounting, valuation, and other quantitative issues.

V. Yvette S.

I am a highly skilled attorney, fluent in English and Spanish with 20 years of legal experience and 8 additional years of real estate, project finance, banking, financial, securities, and start-up company experience. I worked 6 years with 2 international law firms and handled extremely complex work for all types of clients, 3 years with a Federal Government Regulator, and 5 years in various compliance management positions at national and international financial institutions. I am licensed in New York and North Carolina. I will handle federal litigation on a non-contingency basis. I also practice Appellate Advocacy for constitutional, employment, consumer, and corporate laws. I am skilled in many different NY and NC laws. I have successfully represented clients with state and federal regulatory investigations. I can help you with the FDA, SEC, OCC, CFPB, FDIC, FR and certain state regulators.

Bradford T.

I have been practicing law for almost 23 years.

Born in Cleveland, Ohio - 9/15/1974 Lived in Cleveland all my life went to college at Ohio Wesleyan University - graduated in 1996 went to law school at Cleveland Marshall College of Law - graduated in 2001 passed the OH bar exam in 2003 worked at the OH Atty General's office, at cuyahoga county prosecutor office and as a solo practitioner

I am a Swiss-American lawyer based in Florida and specialize in business, investments, and other civil matters. I have won many cases in both state and federal litigation, and arbitration. Before litigation or arbitration, however, I like to prevent these legal disputes by ensuring my clients base their business on strong concrete contracts that will protect them even decades down the road. My clients are my top priority, which is why they get my personal cell and can reach me anytime. My firm is also established on the extremely high standards of professionalism, transparent itemized billing, fast turnaround times and more. For more information, visit: https://www.transnationalmatters.com/

Matt Curry is a seasoned attorney specializing in real estate law and contract matters. With a deep understanding of contract law and extensive experience in negotiating and drafting contracts, Matt has earned a reputation for providing exceptional legal counsel to clients. As the founder and principal attorney at MPC LAW, Matt is committed to delivering tailored legal solutions. MPC LAW is renowned for its expertise in real estate transactions, lease agreements, contract negotiations, and dispute resolution. Matt's approach combines legal acumen with a client-centered focus, ensuring that every client receives personalized attention and strategic advice. Whether navigating complex real estate deals or resolving contractual disputes, Matt and his team at MPC LAW consistently achieve favorable outcomes for their clients. With a track record of success and a commitment to excellence, Matt Curry and MPC LAW are trusted partners for individuals and businesses seeking reliable legal counsel in real estate and contract matters.

I am a Partner at Kashyap Partners (operating in California, New York and New Jersey), along with it's sister firm in India. I have been working as a technology, transactional and data privacy lawyer for 5 years with a specialisation in start-up law.

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Assignment of rents

Assignment of rents clause samples

Section 1.2 Assignment of Rents. Borrower hereby absolutely and unconditionally assigns to Lender and Trustee all of Borrower's right, title and interest in and to all current and future Leases and Rents; it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Nevertheless, subject to the terms of the Assignment of Leases, the Cash Management Agreement, and Section 7.l(h) of this Deed of Trust, Lender grants to Borrower a revocable license to collect, receive, use and enjoy the Rents. Borrower shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Debt, for use in the payment of such sums.

03/25/2020 (Lodging Fund REIT III, Inc.)

Assignment of Rents. Borrower hereby presently and unconditionally assigns to Lender and Trustee a security interest in all of Borrower's right, title and interest in and to all current and future Leases and Rents; whether now owned by Borrower or hereafter acquired and whether now existing or hereafter corning into existence, as security for repayment of the Debt and performance of the Obligations and to provide a source of future payment of the Debt, it being intended by Borrower that this assignment constitutes a present, unconditional assignment that is immediately effective.

Assignment of Rents. Borrower hereby presently and unconditionally assigns to LenderandTrusteeasecurityinterestinallofBorrower'sright,titleandinterestin andtoallcurrentandfutureLeasesandRents;whethernowownedbyBorroweror hereafter acquired and whether now existing or hereafter coming into existence, as security for repayment of the Debt and performance of the Obligations and to provide a source of future payment of the Debt, it being intended by Borrower that thisassignmentconstitutesapresent,unconditional assignmentthatisimmediately effective.

Assignment of Rents. Mortgagor hereby absolutely assigns and transfers to Mortgagee all the leases, rents, issues and profits of the Property (collectively “Rents”). Although this assignment is effective immediately, so long as no Default exists, Mortgagee gives to and confers upon Mortgagor the privilege under a revocable license to collect as they become due, but not prior to accrual, the Rents and to demand, receive and enforce payment, give receipts, releases and satisfactions, and sue in the name of Mortgagor for all such Rents. Mortgagor represents there has been no prior assignment of leases or Rents, and agrees not to further assign such leases or Rents. Upon any occurrence of Default, the license granted to Mortgagor herein shall be automatically revoked without further notice to or demand upon Mortgagor, and Mortgagee shall have the right, in its discretion, without notice, by agent or by a receiver appointed by a court, and without regard to the adequacy of any security for the Obligations, (i) to enter upon and take possession of the Property, (ii) notify tenants, subtenants and any property manager to pay Rents to Mortgagee or its designee, and upon receipt of such notice such persons are authorized and directed to make payment as specified in the notice and disregard any contrary direction or instruction by Mortgagor, and (iii) in its own name, sue for or otherwise collect Rents, including those past due, and apply Rents, less costs and expenses of operation and collection, including attorneys’ fees, to the Obligations in such order and manner as Mortgagee may determine or as otherwise provided for herein. Mortgagee’s exercise of any one or more of the foregoing rights shall not cure or waive any Default or notice of Default hereunder.

08/14/2020 (Legacy Education Alliance, Inc.)

Section 1.2. Assignment of Rents. Mortgagor hereby assigns to Mortgagee all of Mortgagor’s right, title and interest in and to all current and future Leases and Rents; it being intended by Mortgagor that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Nevertheless, subject to the terms of Section 8.1(h) of this Security Instrument, Mortgagee grants to Mortgagor a revocable license to (i) collect, receive, use and enjoy the Rents and Mortgagor shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Debt, for use in the payment of such sums, and (ii) enforce the terms of, and perform the obligations of the landlord under, the Leases.

05/12/2017 (Phillips Edison Grocery Center REIT III, Inc.)

The security granted to the Junior Lender pursuant to the Second Trust Deed and the Assignment of Rents is subordinate to the rights of Southwest Farms, Inc. (the “ Senior Lender ”) as set forth in the Deed of Trust, Security Agreement and Financing Statement dated as of August 7, 2015 granted by EWSD in favor of Senior Lender and the Assignment of Rents and Leases by and between EWSD and Senior Lender dated as of August 7, 2015. Such subordination is documented in a Subordination Agreement dated as of August 23, 2016 by and among Senior Lender, Junior Lender, Company, EWSD, and Pueblo Agriculture Supply and Equipment, LLC, another wholly-owned subsidiary of the Company, as amended by a First Amendment to Subordination Agreement dated as of September 19, 2016 (collectively, the “ Subordination Agreement ”) pursuant to which Senior Lender consented to the Second Trust Deed and the Assignment of Rents. The Subordination Agreement also provides that the Junior Lender may not increase the principal amount of indebtedness pursuant to the Securities Purchase Agreement beyond $1,500,000.

12/21/2017 (Notis Global, Inc.)

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Demystifying Assignment of Lease: Your Go-To Guide

LegalGPS : July 29, 2023 at 8:17 AM

When you’re talking about property leasing, it’s important to understand that there are a lot of terms and concepts that you may have never heard before. One of them is the assignment of lease, which refers to a situation where a tenant transfers their rights and responsibilities under the lease agreement to another party.

What is an Assignment of Lease, and why is it so crucial?

An Assignment of Lease is a term you may have heard thrown around, especially if you're involved in rental properties. It’s a pretty important document. But what exactly is it? Well, in simple terms, an Assignment of Lease is an agreement where the original tenant of a property transfers their leases and all of its rights and obligations to a new tenant. Now, you might be wondering, "When would this scenario ever occur?"

Let's imagine you're a tenant who signed a three-year lease for an office space. However, two years in, you need to relocate due to unprecedented growth of your business. Instead of breaking the lease, you might choose to assign your lease to another business looking for office space. This means that you, as the original tenant, no longer have any obligations under the lease. The new tenant is now responsible for paying rent and complying with all of the terms of the previously signed agreement.

Now that you understand, let's get into the step-to-step guide on how to create an Assignment of Lease!

Steps to Write an Assignment of Lease

Creating a thorough Assignment of Lease agreement doesn't need to be an overwhelming task. Simply follow these steps to ensure your agreement is both comprehensive and legally binding:

Step 1: Identify the Parties

The information of each party should be included. For the existing tenant (the assignor), make sure to include:

Full legal name or business name

Postal mailing address

Phone number and email address

Do the same for the new tenant (the assignee). Make sure all the information is up-to-date and accurate to avoid any unnecessary confusion or disputes. For example, if the assignor is a business, make sure they have updated their mailing address with the post office to reflect their new building location. If a party has multiple addresses, be sure to list them all.

Step 2: Specify the Lease

This section requires exact information from the original lease agreement, including:

Property address and description

Lease start and end date

A reference to the original lease agreement (for instance, a sentence like "the lease agreement dated...")

Remember to include a copy of the original lease as an attachment to ensure the assignee understands the terms they're adhering to. If not already included in the original lease agreement, be sure to add the following information: Description of rental property, Lease term (how long the lease is good for), Rent amount, and Security deposit amount.

Step 3: Detail the Assignment

State that the assignor is transferring all their interests and obligations in the lease to the assignee. Here, write something like:

"The Assignor hereby assigns, transfers, and conveys to the Assignee all of the Assignor's rights, title, and interest in and to the Lease, together with all the Assignor's obligations, liabilities, and duties under the Lease."

This means that the assignor is transferring all of their interests and obligations in the lease to the assignee. This includes any future rent payments, repairs and maintenance responsibilities, notices of default by either party, and so on.

Step 4: Landlord's Consent

Many leases require the landlord's consent to assign the lease. The assignor should request written consent from the landlord and include a clause like:

"The assignment of the lease is not valid unless and until the landlord provides written consent."

This is followed by a place for the landlord to affirm consent by signing or initialing. This is important because the landlord can elect to withhold consent and the assignment will not be valid. If this is the case, you may need to provide additional consideration for your landlord's assent (for example, an increase in rent).

Step 5: Assignee Acceptance

Include a statement in which the new tenant agrees to the assignment and the terms of the lease. It may look like:

"The Assignee hereby accepts this assignment, assumes all duties and responsibilities under the Lease, and agrees to perform all of the Assignor's obligations under the Lease."

You need to do this because the new tenant needs to have an affirmative acceptance of the assignment in order for it to be valid. This is typically done through a letter from the assignee stating that they agree to perform all of your obligations under the lease.

Step 6: Signature and Date

Every binding legal document needs a date and a signature. Make sure that there is a proper place for the assignor and the assignee to sign and print their names, with a line for the date.

By following these clear, actionable steps, you'll be able to construct an effective Assignment of Lease agreement. Remember, every situation is unique, so adjust the template as necessary, being sure to include all relevant details.

Clear so far? Great! Now, let's focus on the tips to draft a perfect Assignment of Lease.

Tips to Draft a Perfect Assignment of Lease

Accurate Dates: Be sure to include the date when this agreement will take effect. Precision avoids any confusion about durations, when the assignee takes over, or when the assignor's obligations end.

Clear Terms: This document should restate the terms of the original lease. The assignee needs a clear understanding of what they're stepping into. Bit ambiguous? Think of it like this: the assignee should be able to step into the assignor's shoes comfortably.

Specify Rent Terms: Stating the rent amount, due dates, and method of payment in the assignment helps create a record of the agreed-upon rent terms, ensuring no misunderstanding arises in the future.

Specify the Term: The assignment should state how long the new lease lasts. For example, if the original lease is for one year, then the assignee will assume only a one-year term.

Specify Other Conditions: If there are other conditions in place—such as tenant improvements or utility allowances—then specify these too.

An assignment of lease doesn't have to be a formidable task to overcome. With a cautious and considered approach, these documents can be a smooth and seamless part of managing a successful lease transition.

Our contract templates can offer you even more support, empowering you towards crafting an excellent and individualised Assignment of Lease ready for your task. So why not take your next step towards leasing success and check them out today? Click here to get started!

• Estate Planning & Probate

Assignment of Rents & Leases

Assignment of rents and leases in business and real estate transactions.

An “Assignment of Rents and Leases” is a crucial legal instrument that significantly impacts commercial and residential real estate, and mergers and acquisitions of real estate. Having a properly drafted and executed assignment means the rights and assets that are transferred give the new party (the assignee) the right to receive payments.

What is an assignment of rents and leases?

An assignment of rents and leases is a legal agreement in which the individual or company entitled to receive payments transfers that right to another party. Most often, this occurs (1) when a property owner hires a property manager, or (2) in acquisitions, such as a property management company selling their accounts to another property management company or a commercial landlord selling their portfolio to a buyer.

How is an assignment of rents and leases used?

This arrangement is often utilized in business sales, account sales, financing, and investment transactions as a means of securing debt or protecting the interests of the lender or property owner.

In the financing context, an assignment often grants the lender or assignee the authority to collect and apply the rents from the property should the borrower default on their loan; this is important when the borrower collateralizes real estate in order to receive the loan. In a property management context, an assignment often serves to effectively transfer management rights to the new company.

An assignment of rents and leases is probably most commonly used in a commercial real estate context when there is a sale of a commercial property, or in the residential real estate context when there is a change in property managers.

What terms should be included in an assignment of rents and leases?

Certain components should be included in a proper assignment. Here are a few of the foundational terms for an assignment of rents and leases:

• Parties. All parties should be clearly identified and defined. This can include the borrower, lender, assignee, assignor, successor, etc.
• Property description. The real estate parcel(s) involved in the assignment should be described by legal description, street address, and more.
• Lease terms, rents, and disclosures. The actual lease agreements that are being transferred to the new landlord, property manager, lender, etc. should be provided to the assignor/successor, along with an easy-to-read schedule of rents and other crucial details per parcel or premises.
• Rights and obligations. Each party should have their rules, permissions, and contractual rights and obligations outlined in the assignment language. The rights and obligations of each stakeholder will be widely varied based on the needs and financial position of each party, the existing leases being assigned, and the specifics of the subject properties.

Best Commercial Real Estate Attorneys in Oklahoma

It is crucial to engage an attorney with experience in properly negotiating, drafting, and executing assignments of rents and leases. They can guide you through the process, ensuring that the assignment is tailored to your specific needs and complies with all relevant legal requirements. The attorneys of Avenue Legal Group have the experience you need and want in your transaction. Contact our firm to discuss your transaction, assignment of rents and leases, or other real estate documentation.

Looking for local counsel in Oklahoma for your commercial real estate transaction? Our firm frequently works with attorneys, investors, and lenders from outside the state. Contact us by call, text, email, or website submission to discuss your matter.

Other helpful information:

• Commercial Real Estate Transactions in Oklahoma
• Due Diligence in Oklahoma Real Estate Transactions
• Essential Terms for Every Commercial Lease
• Attorney for Real Estate Contract Review
• Estate Planning
• Real Estate and Investing

Have Questions?

Free Lease Assignment Agreement Template for Microsoft Word

Download this free Lease Assignment Agreement template as a Word document to easily assign a lease to another party with consent from the landlord.

Lease Assignment Agreement

THIS ASSIGNMENT OF TENANCY AGREEMENT dated this [Insert date]

[Insert name] (the “Assignor”)

– AND-

[Insert name] (the “Assignee”)

A. This is an agreement (the “Assignment”) to assign a residential tenancy agreement in real property according to the terms specified below.

B. The Assignor wishes to assign and transfer to the Assignee that tenancy agreement (the “Tenancy Agreement”) dated June 11, 2020, and executed by the Assignor as tenant and by _________________________ as landlord (the “Landlord”).

IN CONSIDERATION OF the Assignor agreeing to assign and the Assignee agreeing to assume the Tenancy Agreement for the Premises, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, both parties agree to keep, perform and fulfill the promises, conditions and agreements below:

1. The Tenancy Agreement governs the rental of the following described premises (the “Premises”) to the Assignor: ______________________________________________

Assigned Tenancy Agreement

2. The Assignor assigns and transfers to the Assignee all of the Assignor’s right, title, and interest in and to the Tenancy Agreement and the Premises, subject to all the conditions and terms contained in the Tenancy Agreement.

Effective Date

3. This Assignment takes effect on June 11, 2020 (the “Effective Date”), and continues until the present term of the Tenancy Agreement expires on June 11, 2020.

Assignor’s Interest

4. The Assignor covenants that:

a. the Assignor is the lawful and sole owner of the interest assigned under this Assignment; b. this interest is free from all encumbrances; and c. the Assignor has performed all duties and obligations and made all payments required under the terms and conditions of the Tenancy Agreement.

Breach of Tenancy Agreement by Assignee

5. Consent to this Assignment will not discharge the Assignor of its obligations under the Tenancy Agreement in the event of a breach by the Assignee.

6. In the event of a breach by the Assignee, the Landlord will provide the Assignor with written notice of this breach and the Assignor will have full rights to commence all actions to recover possession of the Premises (in the name of the Landlord, if necessary) and retain all rights for the duration of the Tenancy Agreement provided the Assignor will pay all accrued rents and cure any other default.

Governing Law

7. It is the intention of the parties that this Assignment, and all suits and special proceedings under this Assignment, be construed in accordance with and governed, to the exclusion of the law of any other forum, by the laws of the State of New South Wales, without regard to the jurisdiction in which any action or special proceeding may be instituted.

Miscellaneous Provisions

8. This Assignment incorporates and is subject to the Tenancy Agreement, a copy of which is attached hereto, and which is hereby referred to and incorporated as if it were set out here at length. The Assignee agrees to assume all of the obligations and responsibilities of the Assignor under the Tenancy Agreement.

9. This Assignment will be binding upon and inure to the benefit of the parties, their successors, assigns, personal representatives, beneficiaries, executors, administrators, and heirs, as the case may be.

10. All rents and other charges accrued under the Tenancy Agreement prior to the Effective Date will be fully paid by the Assignor, and by the Assignee after the Effective Date. The Assignee will also be responsible for assuming and performing all other duties and obligations required under the terms and conditions of the Tenancy Agreement after the Effective Date.

11. There will be no further assignment of the Tenancy Agreement without the prior written consent of the Landlord.

IN WITNESS WHEREOF the Assignor and Assignee have duly affixed their signatures under hand and seal on this [Insert date]

SIGNED BY THE ASSIGNOR

_____________________________ Assignor: _________________________

in the presence of (Name of witness) _______________________

(Signature of witness) _____________________________

SIGNED BY THE ASSIGNEE _____________________________ Assignee: _______________________

in the presence of (Name of witness) ___________________

(Signature of witness) _______________________________

CONSENT OF LANDLORD

The Landlord in the above Assignment of Tenancy Agreement executed on [Insert date] consents to that Assignment. The Landlord also agrees to the Assignee assuming after [Insert date] the payment of rent and performance of all duties and obligations as provided in the Tenancy Agreement. Dated: [Insert date]

Landlord: _________________________

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• What is an Assignment of Rents?

WHAT IS AN ASSIGNMENT OF RENTS?

An assignment of rent is a binding contract between a lender and a borrower stipulating that in the event the borrower defaults on the mortgage, the lender will be entitled to collect any rent payments made by a tenant occupying the property. If the lender is aware that the borrower intends to use the mortgaged property as a rental property, the lender may include an assignment of rents clause in the mortgage agreement to further protect its interest. A lender may choose to enter a general assignment of rents or a specific assignment of rents.

In a general assignment of rents, the agreement is binding on all future leases. A specific assignment of rents is only binding on the specific parties listed in the agreement. In the context of a real estate transaction, an assignment of rents, whether general or specific, may be registered on title. An assignment of rent may also be registered under the Personal Property Security Act as a secured interest. An assignment of rents is typically only deleted from the title when the corresponding mortgage is discharged and paid in full.

Contact us if you require legal assistance with your real estate transaction. Our real estate law team has the experience and knowledge to assist you throughout every step of the transaction.

Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.

About the Author:

Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here .

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Securing Interests: Navigating the Intricacies of Assignment of Rents in California Real Estate

Article by:

Steven e. ernest, esq., share this post:.

• November 23, 2023

Your borrower has an income generating property (generally tenants who are paying monthly rent) and is (presumably) collecting it. He isn’t paying you, though. Where is the money going? You ask, and he tells you ghost stories about Wimpy paying for a cheeseburger on Tuesday, but Tuesday never comes. What can you do? As with all things litigation, folks respond to one thing – pressure. You need to gain leverage on him and make it easier for the borrower to do what you want him to do (pay) than it is for him to do what he wants to do (not pay). Gaining that leverage typically requires a lawsuit.

So, sue him! Get a receiver appointed and have the rent paid to you. Suppose that will get the attention of your borrower? I do as well.

I write today to provide a detailed overview of the concept of Assignment of Rents as it pertains to real estate holdings in California. This is a significant aspect for both lenders and property owners, and understanding its implications is crucial for informed decision-making.

1. Definition and Purpose:

Assignment of Rents is a legal mechanism used in real estate where a property owner assigns their right to collect rents from the property to a lender as security for a loan. This arrangement is particularly common in commercial real estate transactions. The primary purpose is to provide additional security to the lender; in the event of a default, the lender has the right to collect rents directly from tenants.

2. Legal Framework in California:

In California, the Assignment of Rents is governed by the California Civil Code § 2938. The statute outlines the conditions and procedures under which rents may be assigned and the rights of both the lender and borrower in such scenarios. It is essential to understand this law balances the interests of lenders, borrowers, and tenants.

3. Activation of Assignment:

Typically, the assignment becomes active (or “absolute”) upon a default by the property owner. Prior to default, the owner usually retains the right to collect and use the rents, often referred to as a “conditional” assignment.

4. Enforcement and Collection:

Upon default (generally, your borrower missing an installment payment), the lender gains the ability to enforce the assignment of rents. This may involve notifying tenants to pay rents directly to the lender or taking legal action to collect the rents (sue your borrower!). The lender’s right to collect rents is subject to existing tenancy agreements and state laws regarding tenant rights.

Your lawsuit will be filed seeking appointment of a receiver (the guy who will collect the rent, deposit them with the Court, which will account them to you). The lawsuit may also include any other causes of action which lie against your borrower (i.e. conversion, judicial foreclosure, breach of contract, breach of guaranty, child support, … whatever).  The motion to appoint a receiver will come about one month after filing, and you can expect to begin seeing the rent deposited during the following rent cycle.

5. Implications for Property Owners and Lenders:

For property owners, it’s crucial to understand assigning rents can impact their cash flow and control over the property in case of a default. This is a high leverage proposition. Without their revenue, it is extraordinarily difficult for them to operate. You’ll have their full attention (perhaps for the first time since default). For lenders, while it provides an additional security layer, it also imposes the responsibility of managing rent collection and possibly dealing with tenants directly.

6. Best Practices:

• For Property Owners: Carefully review the terms of any loan agreement that includes an assignment of rents. Consider the implications of default and seek legal advice if necessary.
• For Lenders: Ensure compliance with California law when drafting assignment of rents clauses and enforcing them. Clear communication with borrowers and tenants is key to smooth enforcement. Use counsel who is experienced in these matters. This isn’t an area to experiment with.

Conclusion:

The Assignment of Rents is a critical tool in real estate financing in California, offering additional security to lenders while imposing certain obligations and risks. Both lenders and property owners should approach this arrangement with a clear understanding of their rights and responsibilities under California law. Contact the team at Geraci with any questions you may have about Assignment of Rents.

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• What is an assignment of rents?

by Brian D. Moreno, Esq., CCAL | General Real Estate Law , Homeowners Association

With the collection of assessments, community associations are always looking for creative ways to increase the chance of recovery.  One underutilized remedy that may provide associations good results is an assignment of rents.  If an owner-landlord fails to pay HOA assessments but continues to collect rent payments from his or her tenant, the association should consider rent assignment.  There are prejudgment and post-judgment rent assignment remedies that can be pursued with regard to the delinquency.  A post-judgment rent assignment can be pursued by way of a request to the court after a Judgment is entered against the owner-landlord.

A prejudgment rent assignment can be pursued even before filing a lawsuit if executed properly.  In California, Civil Code Section 2938 regulates the formation and enforcement of the assignment of rents and profits generated by a lease agreement relating to real property.  It provides that “[a] written assignment of an interest in leases, rents, issues, or profits of real property made in connection with an obligation secured by real property. . .shall, upon execution and delivery by the assignor, be effective to create a present security interest in existing and future leases, rents, issues, or profits of that real property. . . .”   Once a written assignment of rents is properly authorized and formed, the law creates a security interest (i.e., lien) against the rents and profits paid by a tenant. 

The question then is whether the association’s CC&Rs, by itself, creates an assignment of the right to a tenant’s rent payment in favor of the association.  Indeed, section 2938(b) provides that the assignment of an interest in leases or rent of real property may be recorded in the same manner as any other conveyance of an interest in real property, whether the assignment is in a separate document or part of a mortgage or deed of trust.  Since a homeowners association’s CC&Rs is a recorded document and contains covenants, equitable servitudes, easements, and other property interests against the development, it follows that the assignment of rents relief provided in Section 2938(b) can be extended to community associations provided the CC&Rs contains an appropriate assignment of rents provision.

Section 2938, however, does not clarify whether the CC&Rs document on its own creates a lien and enforceable assignment right.  Moreover, a deed of trust is much different than a set of CC&Rs, in that the deed of trust creates a lien against the trustor’s property upon recordation, while a homeowners association would not have a lien until an owner becomes delinquent with his or her assessments and the association records an assessment lien against the property.  Therefore, depending on the scope of the assignment of rents provision in the CC&Rs, a homeowners association would likely need to record an assessment lien first before pursuing rents from a tenant.  Moreover, even after a lien is recorded, homeowners associations should consider adding a provision in the assessment lien giving notice to the delinquent owner that an assignment right is in effect upon recordation of the assessment lien.  Nevertheless, association Boards should consult with legal counsel to ensure proper compliance with the law.

Once the assignment right becomes enforceable, the next issue is how the Association can and should proceed.  Section 2938(c)(3) allows the association to serve a pre-lawsuit demand (a sample of which is included in the statute) on the tenant(s), demanding that the tenant(s) turn over all rent payments to the association.  This can be a powerful tool for homeowners associations.  Moreover, if the tenant complies, the association will receive substantial monthly payments that can be applied towards the assessment debt, and collecting the funds does not appear to preclude the association from pursuing judicial or non-judicial foreclosure proceedings at a later time.

While homeowner associations have the option of pursuing a lawsuit against the delinquent owner and seeking to collect the rent payments after a judgment has been obtained, there are obvious advantages to enforcing the assignment of rents provision prior to pursuing litigation.  A pre-lawsuit assignment of rents demand may prove to be more effective and cheaper.  Additionally, the tenant affected by the assignment of rents demand may place additional pressures on the delinquent owner/landlord having received such a demand.  Given this, the options available pursuant to Section 2938, including the pre-lawsuit demand for rents, should at least be considered and analyzed before action is taken.

Truly, the initial pre-lawsuit demand for rents may persuade the landlord-owner to resolve the delinquency with the association in the face of the potential disturbance of the landlord-tenant relationship.  Even if the tenant fails to comply with the demand and/or the owner fails to bring the account current, the association could nonetheless pursue foreclosure remedies and/or seek to have a receiver appointed to specifically enforce the assignment of rents provision.

In sum, if a delinquent homeowner is leasing the property to a tenant, the homeowners association should consider making a pre-lawsuit demand for rent payments.  If the association’s CC&Rs does not contain an assignment of rents provision, the board of directors should consider amending the CC&Rs to include an appropriate provision.  Without question, the pre-lawsuit demand for rents could provide an excellent opportunity for recovery of unpaid assessments during these difficult economic times.

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Properly Enforcing an Assignment of Rents

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In Florida, lenders typically obtain an “assignment of rents” if the property produces income by collecting rent, such as an apartment complex, rental home, rental space, or office building. An “assignment of rents” allows the lender to collect the rent payments, if the borrower defaults on their loan payments. Although the lender and borrower may agree to the assignment of rents in the loan documents, the procedure for enforcing the assignment of rent is governed by   Section 697.07, Florida Statutes .

The Assignment of Rents Should be Recorded

If a lender and borrower agree to the assignment of rents as security for repayment of debt in a mortgage document, the lender will hold a lien on the rent payments.  However, to perfect its rents lien against third parties, the lender must record the mortgage in the public records of the county in which the real property is located. Fla. Stat. § 697.07 (2).

How Can a Lender Enforce the Assignment of Rents?

Section 697.07 provides two methods for the lender to enforce the assignment of rent: (i) the actual assignment of rent to the lender, and (ii) the sequestration of rents into the court registry. Wane v. U.S. Bank, Nat’l Ass’n , 128 So. 3d 932, 934 (Fla. 2d DCA 2013) (“Section 697.07 draws a clear line between a motion seeking sequestration of rents into the court registry [under subsection (4)] and a motion seeking an actual assignment of rents to the lender pending foreclosure [under subsection (3)].”).

(i) Actual Assignment of Rent to the Lender

The first method, the actual assignment of rent to the lender, is provided in Section 697.07 (3). If the borrower defaults on the loan, the lender can make a written demand to the borrower to turn over “all rents in possession or control of the [borrower] at the time of the written demand or collected thereafter,” minus any expenses authorized by the lender in writing. Fla. Stat. § 697.07 (3). If the borrower does not turn over rent payments after the lender has made a written demand, the lender may foreclose on the rents lien and collect rent payments, without having to foreclose on the underlying mortgage. Ginsberg v. Lennar Fla. Holdings, Inc. , 645 So. 2d 490, 498 (Fla. 3d DCA 1994) (“[A]n assignment of rent creates a lien on the rents in favor of the mortgagee, and the mortgagee will have the right to foreclose that lien and collect the rents, without the necessity of foreclosing on the underlying mortgage.”).

To receive a court order for the actual assignment of rent, the lender will have to prove that there was a default, and that it made a written demand to the borrower to turn over rent payment. Wane , 128 So. 3d at 934. Additionally, an evidentiary hearing will be required.

(ii) Sequestration of Rent Into the Court Registry

The second method, the sequestration of rent into the court registry, is provided in Section 697.07 (4). This method can only be used if there is a pending mortgage foreclosure lawsuit. Unlike the first method, the lender does not have to prove that there was a default or make a written demand, and an evidentiary hearing is not required.

Either the borrower or lender may make a motion to the court for sequestration of rent into the court registry. Upon such a motion, a court, pending final judgment of foreclosure, may require the borrower to deposit the collected rents into the court, or in such other depository as the court may designate. The court must hear the motion on an expedited basis, and the moving party will only be required to show that there is a pending foreclosure lawsuit, and that there is a provision in the loan documents for the assignment of rent. Wane , 128 So. 3d at 934.

Moreover, a borrower cannot avoid sequestration of rents by raising defenses or counterclaims. Id. ; Fla. Stat. § 697.07 (4). In addition, the borrower will be required to submit records of receipt of rent to the court and lender, typically on a monthly basis throughout the lawsuit. The rents will remain in the court registry until conclusion of the foreclosure action.

To properly enforce the assignment of rents, the first thing lenders should do is record the assignment of rents in the public records of the county in which the real property is located. In the event the borrower defaults on their loan, the lender will have two options to enforce the assignment of rents: the actual assignment of rent to the lender (Section 697.07 (3)), or the sequestration of rents into the court registry (Section 697.07 (4)). If the lender is seeking the actual assignment of rent, the lender must send a written demand to the borrower to turn over the rent payments and provide proof of default. On the other hand, the lender may seek sequestration without proof of default or written demand. Showing the existence of an assignment of rents provision in the loan documents is sufficient to obtain sequestration of rents into the court registry.

• Austin B. Calhoun, Esq.
• Melissa G. Murrin, JD Candidate

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Assignment of Rents

What you need to know about Assignment of Rents and Leases

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REAL ESTATE LAW

What is a deed of trust with assignment of rents.

By Rebecca K. McDowell, J.D.

February 24, 2020

Reviewed by Michelle Seidel, B.Sc., LL.B., MBA

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• What Is a Corporate Assignment of Deed of Trust?

A deed of trust is a written instrument granting a lien on real property. While slightly different from a mortgage, they are functionally nearly the same. Some states use deeds of trust instead of mortgages while others allow both. Either way, a deed of trust used to secure a commercial loan may also include an assignment of rents , which gives the lender the right to collect rental income from the property in the event of default.

What Is a Deed of Trust?

A ​ deed of trust ​ is a document that a borrower may execute in favor of a lender to give the lender a lien on a parcel of real estate. Like a mortgage, a deed of trust secures the loan by allowing the lender to foreclose on the real estate if the loan isn't paid (although in some states that use deeds of trust, a foreclosure isn't necessary).

​ Read More: ​ How to Research a Deed of Trust

Deed of Trust vs. Mortgage

A deed of trust is very similar to a mortgage in that it pledges property to secure a loan. A mortgage, however, is simpler; the property owner executes a mortgage document in favor of the lender, and the lender records the mortgage and has a lien , but the property owner still holds title to the property.

A deed of trust, on the other hand, grants an actual ownership interest in the property to a trustee, who holds the property in trust for the lender until the obligation is paid.

What Is an Assignment of Rents?

An ​ assignment of rents ​ is extra security granted to a lender that provides a commercial loan. Commercial loans are loans that are not made for family or household use but for business purposes.

When a borrower grants a mortgage or deed of trust on real estate and the real estate has tenants who pay rent, the lender can demand an assignment of rents in addition to the mortgage or deed of trust.

The assignment of rents means that if the borrower defaults on the loan, the lender can step in and collect the rents directly from the tenants.

Deed of Trust With Assignment of Rents

A deed of trust may contain an assignment of rents clause for that same property. In addition to a clause in the deed of trust, the lender may also require the borrower to execute a separate document called an "Assignment of Rents" that is recorded with the register of deeds.

Whether the assignment is written in the deed of trust only or is also contained in a separate document, it is binding on the borrower as long as its language is clear and sufficient to create an assignment under state law.

Exercising an Assignment of Rents

When a lender decides to collect the rents on the borrower's property, the lender is said to be exercising the assignment of rents. The lender cannot exercise the assignment unless the borrower has defaulted on the loan. Once that happens, the lender can send a written demand to the tenant or tenants, requiring that the rents be paid directly to the lender.

Absolute Assignments of Rents

An assignment of rents most likely will contain language that the assignment is an ​ absolute assignment ​. In most states, an absolute assignment gives the lender an immediate interest in the rents. This means that the lender actually owns the rents and is simply allowing the borrower to collect them on license until an event of default. Once a default occurs, the lender can intercept the rents without taking any court action; a letter to the tenants is all that's needed.

Every state's laws are different; the law of the state where the property is located will dictate how a lender can exercise an assignment of rents.

​ Read More: ​ What Is the Difference Between a Deed and a Deed of Trust?

• Companies Incorporated: Mortgage States and Deed of Trust States
• American Bar Association: Commercial Real Estate FAQs
• Schulte Roth & Zabel: Sixth Circuit Upholds Assignment of Rents to Secured Lender
• Findlaw: California Civil Code - CIV § 2938
• Legal Beagle: What Is the Difference Between a Deed and a Deed of Trust?
• Legal Beagle: How to Research a Deed of Trust
• Legal Beagle: Documents Needed to Refinance a Mortgage
• Legal Beagle: How to File a Property Lien

Rebecca K. McDowell is a creditors' rights attorney with a special focus on bankruptcy and insolvency. She has a B.A. in English from Albion College and a J.D. from Wayne State University Law School. She has written legal articles for Nolo and the Bankruptcy Site.

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