Assignment Of Rents | Propertylogy

Assignment Of Rents

By on September 26, 2018

An assignment of rents is a contract term, or collateral, required by lenders as part of a mortgage agreement that allows the lender to collect rentals from tenants directly for repayment of the mortgage debt should the borrower default on it.

Such contract terms are usually found on commercial properties, but can sometimes also find it’s way into multi-family residential properties.

As the foreclosure is a long tiring and costly process, an assignment of rents gives a lender an alternative to foreclosure when an income generating property has enough cash flow to fully or significantly meet the required monthly payments.

However, executing is can also be a challenge.

Lenders would have to inform tenants in a timely manner about changes in payment information, might have to set up new accounts, and face the common problems with rental collection.

If lenders are willing to go to such extents to collect payments, then it should give you an idea how much they loathe cases of foreclosure.

When the original borrower is able to meet the payments himself, then he has to request for reinstatement of the original payment arrangements, ,subject to the lender’s approval.



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