You may be a lender for the commercial properties and lend the money to commercial property dealer, who has rented the property to tenants. How could you as a lender secure your lending? As an additional security to your lending, you can make borrower sign a General Assignment of Rents, allowing you to collect and receive the commercial property rents from the tenants.
In actual Lease Agreement, the only requirement for the landlord is to deliver the property to the tenant and him paying the rent to the landlord. But after signing the Assignment of Rent as a collateral security for the borrowings, the landlord rents or leases the property to the tenant but the tenant pays the rent to the lender, instead of the landlord.
The General Assignment of Rents can be defined as an Agreement, where the landlord or borrower (assignor) assigns the rent from the tenants of his leased property, to the lender (assignee) as a security for a mortgage loan or other monies, being advanced by the lender. Through such Contract, the tenant directly pays the rent to the landlord. In case of any default by the borrower, the lender can take certain step just short of foreclosure. By virtue of Assignment Contract, the lender gets the right to contact all tenants and advice them to pay rent directly to him.
The General Assignment of Rents contains following main provisions, along with numerous other clauses:
GENERAL ASSIGNMENT OF RENTS
THIS AGREEMENT made as of the _____ day ____mm, _____20xx
BETWEEN:
● _______________________(Owner of the land) hereinafter called the “Assignor”
OF THE FIRST PART
-and-
(lender)__________________
hereinafter called the “Chargee”
OF THE SECOND PART WITNESSES THAT WHEREAS: ]
the Assignor is the owner of the Lands subject to the Charge and has agreed to enter into this agreement with the Chargee as collateral security for the due payment of the Charge;
Now therefore it is hereby covenanted, agreed and declared as follows.
1. In this agreement, unless there is something in the subject matter or context inconsistent therewith,
(a) "Charge" means a charge of the Lands from the Assignor to the Chargee securing the principal sum of ● and interest thereon registered as Instrument Number ●;
(b) "Lands" means the lands and premises described in box 6 of the Document General to which this agreement is attached, or if this document has been electronically registered, the lands and premises described in the “Properties” section of the document to which this Schedule is attached;
[Note to Solicitor: This definition will have to be amended to provide the correct legal description of the Lands as per specific province, where the land is located.]
(c) "Leases" includes
(i) every existing and future lease and agreement to lease in respect of the whole or any portion of the Lands;
(ii) every existing and future tenancy, agreement as to use or occupation and licence in respect of the whole or any portion of the Lands, whether or not pursuant to any written lease, agreement or licence;
(iii) every existing and future guarantee of all or any of the obligations of any existing or future tenant, user, occupier or licensee of the whole or any portion of the Lands; and
(iv) every existing and future assignment of, and agreement to assume, the obligations of tenants of the whole or any portion of the Lands;
(d) "Rents" means all revenues, receipts, income, credits, deposits, rents, additional rents, tenant recoveries and other receivables of any nature and kind whatsoever arising from, payable under or related to the Leases, whether past due, now due or hereafter to become due and the benefit of all covenants of tenants, users, occupiers, licensees and guarantors under or in respect of the Leases.
2. The Assignor hereby assigns to the Chargee, its successors and assigns (as security for the principal, interest, and other amounts secured by the Charge and until the monies due under and by virtue of the Charge have been fully paid and satisfied), (i) the Leases and all benefits and advantages to be derived therefrom with full power and authority to use the name of the Assignor or the owner from time to time of the Lands or the name of the Chargee, as the Chargee may elect in its sole discretion, for enforcing the covenants and agreements on the parts of the tenants contained therein, and (ii) the Rents, with full power and authority to demand, collect, sue for, recover, receive and give receipts for the Rents and to enforce payment thereof in the name of the Assignor or the owner from time to time of the Lands or in the name of the Chargee, as the Chargee may elect in its sole discretion.
3. The Assignor hereby represents, warrants, covenants and agrees that:
(a) complete and true copies of all of the presently existing non-residential Leases have been delivered to the Chargee;
(b) the Assignor will not without the prior written consent of the Chargee perform, or omit to perform, any act having the effect of terminating, cancelling or accepting surrender of any of the non-residential Leases or of waiving, releasing, reducing or abating any rights or remedies of the Assignor or any obligations of any other party thereunder or in connection therewith;
(c) none of the non-residential Leases or the Assignor’s rights thereunder, including the right to receive the Rents, will be altered, varied or amended;
(d) none of the Rents has been or will be paid more than one month in advance (except, if so provided in the lease or agreement, for payment of rent for the last month of the term) nor have they been discounted, released, waived, compromised or otherwise discharged;
(e) there has been no default of a material nature which has not been remedied under any of the Leases by any of the parties thereto;
(f) there is no outstanding dispute under any of the Leases by any party thereto; and
(g) the Assignor will observe and perform all of the Assignor’s obligations under
each of the Leases.
4. Subject to the provisions of paragraph 3(d) above, the Assignor shall be permitted to collect and receive the Rents as and when they shall become due and payable according to the terms of each of the Leases unless and until the Chargee shall give notice to the tenant, user, occupier, licensee or guarantor there under requiring payment to the Chargee.
5. Nothing contained herein or in any statute shall have the effect of making the Chargee, its successors or assigns, responsible for the collection of Rents or any of them or for the
performance of the covenants, obligations or conditions under or in respect of the Leases or any of them to be observed or performed by the Assignor, and the Chargee shall not, by virtue of this agreement or its receipt of the Rents or any of them, become or be deemed a chargee in possession of the Lands or the charged premises and the Chargee shall not be under any obligation to take any action or exercise any remedy in the collection or recovery of the Rents
or any of them or to see to or enforce the performance of the obligations and liabilities of any person under or in respect of the Leases or any of them; and the Chargee shall be liable to account only for such monies as shall actually come into its hands, less all costs and expenses and other proper deductions.
6. The Assignor hereby agrees to execute such further assurances as may be reasonably required by the Chargee from time to time to perfect this agreement and assignment. The Assignor will from time to time at the reasonable request of the Chargee furnish to the Chargee a copy of the current rent roll of the building on the Lands showing the basic terms of all Leases and, if requested by the Chargee, give the Chargee a specific assignment of the Rents thereunder in form satisfactory to the Chargee.
7. The Assignor further agrees that the Assignor will not lease or agree to lease any part of the Lands except at a rent, on terms and conditions, and to tenants, which are not less favourable or desirable than those which a prudent landlord would expect in respect of the premises to be leased.
8. The Assignor hereby agrees to indemnify at all times and from time to time and save the Chargee harmless from any and all demands, claims, damages, actions, proceedings, lawsuits, costs, expenses, or payments incurred which the Chargee may sustain or incur by reason of the Assignor’s failure to charge legal rents or by reason of successful rebate claims by any tenant under any lease in the building on the Lands or by any former tenant of the building and agrees that all rents charged with respect to the Lands or any part thereof will be lawful rents pursuant to any applicable legislation from time to time respecting residential housing and further agrees that he will file all items required to be filed by such legislation in a timely, accurate and complete way.
9. It is understood and agreed that this agreement and assignment is being taken as collateral security only for the due payment of any sum due under the Charge; and that none of the rights or remedies of the Chargee under the Charge shall be delayed or in any way prejudiced by these presents; and that following registration of a discharge of the Charge this agreement and assignment shall be of no further force or effect, and such discharge shall act as a release and reassignment of the assignments herein.
10. In this agreement words denoting the singular include the plural where appropriate and vice-versa and words denoting any gender include all genders.
11. This agreement and everything herein contained shall extend to, bind and enure to the benefit of the respective heirs, executors, administrators, successors and assigns of each of the parties hereto.
IN WITNESS WHEREOF the Assignor has executed this Agreement.
Name:____________________
Position: __________________
Name:____________________
Position:__________________
We have authority to bind the Corporation