CHAPTER 10.02. Agreement to Assign

• Jurisdiction: United States

10.02. Agreement to Assign

Given the lack of any right to rents absent possession, the lender usually obtains its rights to rents by virtue of an assignment of rents that gives it a right to rents without being in possession. Through such an assignment, the mortgagee need not be in possession to enforce its rights, nor must the mortgagee have a receiver appointed to collect the rents. Typically, the assignment of rents is either part of the mortgage or a separate document, in either event generally recorded in the land records.⁸ Upon a default by the lessor/debtor, the assignee/lender will make demand upon the tenant to pay rents directly to the assignee/lender. In the bankruptcy context, the lender will look to have its interest in those rents protected as cash collateral in the debtor's bankruptcy proceeding. The lender will therefore have to demonstrate that it has a valid perfected security interest in the rents that can survive the powers exercised by the trustee or debtor in possession under Section 544 of the Bankruptcy Code.

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