What is an assignment of rents?

An assignment of rents is a legal agreement in which the owner of a property transfers the right to collect and receive rental income from the property to another party, typically a lender or investor. This is often done as a form of security for a loan or investment, providing the lender with a source of repayment in the event of default.

The assignment of rents clause is usually included in the mortgage or deed of trust document for a property, outlining the terms and conditions of the agreement. The property owner agrees to turn over the rental income from the property to the lender or investor until the loan is repaid or the investment is recouped.

By assigning the rents, the lender or investor gains more control over the property and ensures a steady income stream to protect their investment. However, the property owner may still retain the right to manage the property and make decisions regarding tenants and maintenance.

It is important for both parties to clearly understand the terms of the assignment of rents agreement and to comply with all applicable laws and regulations governing rental income. Failure to do so could result in legal consequences for both parties.