How Assignment of Rents Works in Florida

When an Asset Manager, Loan Portfolio Manager, Private Lender, or Investor lends money to someone else who is hoping to profit from a real estate property, they should find secure ways to help protect their investment. When you are putting your own livelihood on the line to fund a borrower, you want to make sure that your investment is protected. These last two years have taught us that all too well.

In Florida, one such protective measure is known as an Assignment of Rents. An Assignment of Rents allows the lender to collect the rent payments from the borrower’s tenants if the borrower has failed to pay their loan payments to the lender. This allows the lender another source of temporary income if the borrower defaults on their loan.

Typically, a lender gives a borrower a loan to help purchase a real estate property. The tenants of the real estate property, whether residential or commercial, pay rent to the borrower. In turn, the borrower makes regular loan payments to the lender to return their investment. When the borrower is failing to pay the lender themselves, an Assignment of Rents can result in a Court Order directing the borrower to turn over rents to the lender, or  skip the middle man altogether, and allow the lender to collect the rent payments directly from the tenants of the real estate property.

An Assignment of Rents is allowed in Florida under Florida Statute 697.07, but it does not happen automatically. The lender must include a provision for an Assignment of Rents in the mortgage or a separate Agreement. An Assignment of Rents cannot be assumed by itself without written acknowledgment.

There are two methods for enforcing an Assignment of Rents. The first is known as making a written demand to turn over all rents in possession of the borrower. This method involves sending a written notice to the borrower demanding rent payment be turned over to them. If the borrower does not then pay the lender, the lender generally proceeds to foreclose on the property. Again, to be successful, there has to be a borrower’s default and the written Notice sent to the borrower.

The second method of enforcement is within the context of a foreclosure action, where the lender files a Motion for Sequestration of Rents into the Court Registry. The lender asks the Court to sequester the rent payments from the borrower and pay them to the lender. The lender does not have to send a written notice or show proof of the default (Although, invariably, it is good practice to provide notice). The Statute requires the Court to expedite this action to give the lender a source of income throughout the lengthy foreclosure process.

An Assignment of Rents provides a lender with an added legal tool to protect real estate investments in Florida. While not the main thrust in a foreclosure action, you can utilize the leverage the sequestering the rents provide at the same time as other remedies to better assure the return on your investment remains intact once all legal proceedings have been concluded. If you are an Asset Manager, Loan Portfolio Manager, Private Lender, or Investor looking to see legal action in concert with protecting the return on your Florida real estate property, contact the Reyes Law Group today! We not only defend your investment, but preserve your rights and value your trust… every single day!

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Reyes Law Group

Reyes Law Group represents clients in a multi-disciplinary legal practice involving real estate transactions and litigation with a “footprint” that covers the State of Florida. Over the firm’s first 10 years, Reyes Law Group has closed over $100M in commercial closings, representing buyers and sellers in contract negotiations, due diligence, and the related title review and policy issuance related to closings. In litigation, the firm has commercial litigation experience focused on prosecuting or defending claims such as breach of contracts, partition actions, trade secret violations, and breach of non-competes. However, our firm’s MAIN FOCUS is assisting asset and loan portfolio managers, investors and private lenders with a “ 4-PILLAR APPROACH” to the legal challenges they face with non-performing assets: 1) LOAN WORKOUTS; 2) COMMERCIAL FORECLOSURES (across the State of Florida); 3) COMMERCIAL EVICTIONS; and 4) REO COMMERCIAL CLOSINGS.30+ years’ legal experience means - WE CAN HELP!
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