Assignment of Rent Clause- Interception!


Do you own a real estate investment?  Are you in default on your loan?  Be aware that most lenders have a clause in the loan documents that allows for an absolute assignment of rents when the borrow is in default.  The lender files a Notice of Default and then, the lender intercepts the rents before the owner of record can collect.  If the owner tries to interfere, the owner could be liable for the attorney’s fees to get an injunction against the owner collecting rents.

The typical clause is as follows:  “In the event of a default, lender shall be entitled to accelerate all sums due under the loan secured by deed of trust and is authorized to enter into and upon the property for the purposes of collecting the rents, issues and profits from the property.”

At MacFarlane Real Estate, we often take control of a property before the trustee sale (foreclosure).  Basically, once the Notice of Default is filed, MacFarlane Real Estate seizes the rental income for our hard money clients.  At this point, the borrower has to make up the payments owed without help from the rental income.

Posted in Income Property, Property Management

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