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Assignment of Rents

What is the "Assignment of Rents" in Texas?

Rent may emanate out of the ownership of land.  For example, the landowner (the landlord) may lease the land to a third party (the tenant), and the tenant agrees to pay rent for the use of land (for example, a strip shopping center unit, or an office in an office building, or a grazing lease for rural land).  If the landlord borrowed money to finance the purchase of the land, the lender will more than likely demand the ownership of this income stream while the note remains unpaid.  The borrower/landlord is then required to assign or transfer the ownership of the income produced by the land to the lender.  This is most commonly known as an assignment of rents.  The assignment of rents may appear in the deed of trust, or it may be a separate document.

What is the purpose of an "Assignment of Rents" in Texas?

But the purpose of an assignment of rents remains the same.  If the landlord/borrower files bankruptcy, the lender wants to be in the position of claiming the first right to collect the income produced by the land over any and all other creditors.  And the assignment of rents is the instrument which attempts to secure this very important right.

The borrower's leverage with the lender will dictate whether or not the terms of the assignment or rents may be revised during the negotiation of the commercial loan documents.

I assist clients in drafting, reviewing, interpreting, modifying, and negotiating assignment of rents.

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