Assignment of Rents

[John Bateman]

Hi, I have a question and hope someone can help. We live in Gallatin TN and we just bought our third revenue property. We're using a new lawyer. First they want copies of DL, CCs and Passports??, we've never been asked for this info before, I don’t even have a passport! Second, we're now being asked to sign an Assignment of Rents for the bank. We've used this bank before (BA) and haven't had to sign this. Looking for advice on what my rights are to say no. Our other revenue property is running fine, never defaulted. Our credit is excellent with a high yearly income...
Thanks,
Jobamo

[Bill Gulley]

Hi, asking for picture ID is customary, it sounds to me like the passport is one item that you can use, not that it is required. SImply tell them you don't have a PP.

As to an assignment of rents, this is generally in the deed of trust or security agreement, it's nothing new. If such an assignment is not in an existing DOT and they are asking for it on a loan that is in existance, the answer is no, you do not have to give it to them, but read your security agreement carefully before you say no.

Such an assignment only goes into effect in the event of default in payment. If you default those rents are then due the lender and if you collect them then you may be responsible for for the rents and may have various charges that could be leveled against you if you take the funds after they assume the right to collect them. In the past, such collections were ususally limited to larger commercial leases, I can't really say that I have seen a residential lease assigned, mainly because the foreclosure process is quickly accomplished in my area and there is little need to.

Now, that existing tenants can remain for up to 90 days beyond foreclosure, there would be a need for the assignment of rents, however this is provided for through the process, ownership and rights to rent proceeds.

Bottom line, if it's a new loan request, then yes the lender can require the assignment, if it's an existing loan, I'd suggest that you consider the relationship with that lender, will you use them again? Weigh the effects of such an assignment, if you're never in default, there is no right for them to collect any rents. Good luck, Bill