deed of assignment civil code

Deed of Assignment | Assignor | Assignee

Assign your property to another with a "deed of assignment".

Transfer your property to another person

Last updated on 16 November 2023

1. What is a Deed of Assignment? 

A Deed of Assignment is a contract where the owner (the “assignor”) transfers ownership over property to another person (the “assignee”) by way of assignment. The assignee steps into the shoes of the assignor and assumes all the rights and obligations to the property.

2. When do you need a Deed of Assignment?

A Deed of Assignment is used when the owner wants to transfer ownership (and the rights and obligations) over property to another person.

3. What information do you need to create the Deed of Assignment?

To create your Deed of Assignment you’ll need the following minimum information:

• The type of assignor (e.g. individual or business) as well as name and details (e.g. nationality and address).
• The type of assignee (e.g. individual or business) as well as name and details (e.g. nationality and address).
• Brief description of the property to be assigned.

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Deed of Assignment: Everything You Need to Know

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. 3 min read updated on January 01, 2024

Updated October 8,2020:

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. It states that a specific piece of property will belong to the assignee and no longer belong to the assignor starting from a specified date. In order to be valid, a deed of assignment must contain certain types of information and meet a number of requirements.

What Is an Assignment?

An assignment is similar to an outright transfer, but it is slightly different. It takes place when one of two parties who have entered into a contract decides to transfer all of his or her rights and obligations to a third party and completely remove himself or herself from the contract.

Also called the assignee, the third party effectively replaces the former contracting party and consequently assumes all of his or her rights and obligations. Unless it is stated in the original contract, both parties to the initial contract are typically required to express approval of an assignment before it can occur. When you sell a piece of property, you are making an assignment of it to the buyer through the paperwork you sign at closing.

What Is a Deed of Assignment?

A deed of assignment refers to a legal document that facilitates the legal transfer of ownership of real estate property. It is an important document that must be securely stored at all times, especially in the case of real estate.

In general, this document can be described as a document that is drafted and signed to promise or guarantee the transfer of ownership of a real estate property on a specified date. In other words, it serves as the evidence of the transfer of ownership of the property, with the stipulation that there is a certain timeframe in which actual ownership will begin.

The deed of assignment is the main document between the seller and buyer that proves ownership in favor of the seller. The party who is transferring his or her rights to the property is known as the “assignor,” while the party who is receiving the rights is called the “assignee.”

A deed of assignment is required in many different situations, the most common of which is the transfer of ownership of a property. For example, a developer of a new house has to sign a deed of assignment with a buyer, stating that the house will belong to him or her on a certain date. Nevertheless, the buyer may want to sell the house to someone else in the future, which will also require the signing of a deed of assignment.

This document is necessary because it serves as a temporary title deed in the event that the actual title deed for the house has not been issued. For every piece of property that will be sold before the issuance of a title deed, a deed of assignment will be required.

Requirements for a Deed of Assignment

In order to be legally enforceable, an absolute sale deed must provide a clear description of the property being transferred, such as its address or other information that distinguishes it from other properties. In addition, it must clearly identify the buyer and seller and state the date when the transfer will become legally effective, the purchase price, and other relevant information.

In today's real estate transactions, contracting parties usually use an ancillary real estate sale contract in an attempt to cram all the required information into a deed. Nonetheless, the information found in the contract must be referenced by the deed.

Information to Include in a Deed of Assignment

• Names of parties to the agreement
• Addresses of the parties and how they are binding on the parties' successors, friends, and other people who represent them in any capacity
• History of the property being transferred, from the time it was first acquired to the time it is about to be sold
• Agreed price of the property
• Size and description of the property
• Promises or covenants the parties will undertake to execute the deed
• Signatures of the parties
• Section for the Governors Consent or Commissioner of Oaths to sign and verify the agreement

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Content Approved by UpCounsel

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Deed of Assignment (for Intellectual Property)

In the realm of intellectual property, a Deed of Assignment is a formal legal document used to transfer all rights, title, and interest in intellectual property from the assignor (original owner) to the assignee (new owner). This is crucial for the correct transfer of patents, copyrights, trademarks, and other IP rights. The deed typically requires specific legal formalities, sometimes notarization, to ensure it is legally enforceable.

To be legally effective a deed of assignment must contain:

• Title of the Document : It should clearly be labeled as a "Deed of Assignment" to identify the nature of the document.
• Date : The date on which the deed is executed should be clearly mentioned.
• Parties Involved : Full names and addresses of both the assignor (the party transferring the rights) and the assignee (the party receiving the rights). This identifies the parties to the agreement.
• Recitals : This section provides the background of the transaction. It typically includes details about the ownership of the assignor and the intention behind the assignment.
• Definition and Interpretation : Any terms used within the deed that have specific meanings should be clearly defined in this section.
• Description of the Property or Rights : A detailed description of the property or rights being assigned. For intellectual property, this would include details like patent numbers, trademark registrations , or descriptions of the copyrighted material.
• Terms of Assignment : This should include the extent of the rights being transferred, any conditions or limitations on the assignment, and any obligations the assignor or assignee must fulfill as part of the agreement.
• Warranties and Representations : The assignor typically makes certain warranties regarding their ownership of the property and the absence of encumbrances or third-party claims against it.
• Governing Law : The deed should specify which jurisdiction's laws govern the interpretation and enforcement of the agreement.
• Execution and Witnesses : The deed must be signed by both parties, and depending on jurisdictional requirements, it may also need to be witnessed and possibly notarized.
• Schedules or Annexures : If there are detailed lists or descriptions (like a list of patent numbers or property descriptions), these are often attached as schedules to the main body of the deed.

Letter of Assignment (for Trademarks and Patents)

This is a less formal document compared to the Deed of Assignment and is often used to record the assignment of rights or licensing of intellectual property on a temporary or limited basis. While it can outline the terms of the assignment, it may not be sufficient for the full transfer of legal title of IP rights. It's more commonly used in situations like assigning the rights to use a copyrighted work or a trademark license.

For example, company X allows company Y to use their trademark for specific products in a specific country for a specific period.  

At the same time, company X can use a Letter of Assignment to transfer a trademark to someone. In this case, it will be similar to the Deed of Assignment. 

Intellectual Property Sales Agreement

An IP Sales Agreement is a detailed contract that stipulates the terms and conditions of the sale of intellectual property. It covers aspects such as the specific rights being sold, payment terms, warranties regarding the ownership and validity of the IP, and any limitations or conditions on the use of the IP. This document is essential in transactions involving the sale of IP assets.

However, clients usually prefer to keep this document confidential and prepare special deeds of assignment or letter of assignment for different countries.

IP Transfer Declaration

In the context of intellectual property, a Declaration is often used to assert ownership or the originality of an IP asset. For example, inventors may use declarations in patent applications to declare their invention is original, or authors may use it to assert copyright ownership. It's a formal statement, sometimes required by IP offices or courts.

When assigning a trademark, the Declaration can be a valid document to function as a proof of the transfer. For example, a director of company X declares that the company had sold its Intellectual Property to company Y. 

Merger Document

When companies or entities with significant IP assets merge, an IP Merger Document is used. This document outlines how the intellectual property owned by the merging entities will be combined or managed. It includes details about the transfer, integration, or handling of patents, copyrights, trademarks, and any other intellectual property affected by the merger.

In all these cases, the precise drafting of documents is critical to ensure that IP rights are adequately protected and transferred. Legal advice is often necessary to navigate the complexities of intellectual property laws.

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JOSE PORTUGAL PEREZ Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO Chief Justice

1 Rollo , pp. 3-37.

2 Id. at 40-54. Penned by Associate Justice Nina G. Antonio-Valenzuela with Associate Justices Isaias P. Dicdican and Myra V. Garcia-Fernandez concurring.

3 Id. at 55-56.

4 Id. at 219-228. Penned by Judge Edwin D. Sorongon.

5 Id. at 5.

6 Id. at 118-154.

7 Id. at 122.

8 See id. at 63 and 133.

9 See id. at 133. Sections 6.9 and 6.10 of the Trade Contract provide:

6.9 Without prejudice to his other rights and remedies, the Client [FBDC] or Construction Manager on behalf of the Client shall be entitled to employ and pay other persons to remedy any negligence, act, omission or default of the Trade Contractor [MS Maxco] where notice has been given under Clause 5.13 and the Trade Contractor has failed to remedy or take steps diligently to remedy the same.

All damages, loss, and/or expense suffered or incurred by the Client in doing so shall be borne by the Trade Contractor and may be deducted from the Contract Sum and approximate adjustments made to the interim certificates.

6.10 Nothing contained elsewhere in this Contract shall in any way limit or exclude any of the rights of the Client to deduct or set-off (whether under this Contract or otherwise) any sums to which he is or may become entitled whether as damages or otherwise from or against the Contract Sum or from or against any monies otherwise due to the Trade Contractor under this Contract. The Construction Manager shall give the Trade Contractor ten working days notice of any such deduction or set-off and such [w]ithholding [n]otice shall specify the reasons for the deduction or set-off and shall state the amount of it or them.

10 See id. at 8 and 222.

11 See id. at 47.

13 See Section 19.1 of the Trade Contract; id. at 144.

14 Id. at 62.

15 Id. at 60-61.

16 See id. at 9 and 221.

17 Id. at 60.

18 Id. at 63.

19 Records show that MS Maxco was also impleaded in other cases, to wit: CIAC Case No. 11-2002 entitled " Asia-Con Builders Inc. v. L&M Maxco Company, Inc. and Lee Meng Yong " pending before the Construction Industry Arbitration Commission; and Civil Case No. 05-164 entitled " Concrete Masters, Inc. v. L&M Maxco Company, Inc. " pending before the Regional Trial Court of Makati City. See id. at 43-44.

20 See letters dated October 14, 2005 (id. at 64); dated October 26, 2005 (id. at 65); and January 17, 2006 (id. at 67).

21 Id. at 68.

22 See Complaint For Sum of Money filed on February 13, 2006; id. at 57-59.

23 Id. at 59.

24 See Answer Ex Abundanti Ad Cautelam dated July 14, 2006; id. at 167-218.

25 See id. at 176-180.

26 See id. at 183.

27 See id. at 186.

28 See id. at 188-189.

29 See id. at 192 and 195.

30 See id. at 210.

31 Id. at 219-228.

32 Id. at 228.

33 Art. 1624. An assignment of credits and other incorporeal rights shall be perfected in accordance with the provisions of Article 1475.

34 Id. at 225.

35 Id. at 225-226.

36 Id. at 226.

38 Id. at 226-227.

39 Id. at 226.

40 Id. at 228.

42 See Notice of Appeal Ex Abundanti Ad Cautelam dated March 17, 2009; id. at 229-230.

43 Id. at 40-54.

44 Id. at 53.

45 Id. at 52.

46 See id. at 51-53.

47 See id. at 53.

48 Dated June 10, 2013. Id. at 299-318.

49 Id. at 55-56.

50 See Article 1159 of the Civil Code.

51 Mendiola v. Commerz Trading Int’l., Inc. , G.R. No. 200895, July 31, 2013, 703 SCRA 137, 142-143.

52 See BA Finance Corporation v. CA , 278 Phil. 176, 182 (1991).

53 See Mercantile Insurance Co., Inc. v. Felipe Ysmael, Jr. & Co., Inc. , 251 Phil. 66 (1989); BPI Credit Corporation v. CA , G.R. No. 96755, December 4, 1991, 204 SCRA 601.

54 Gonzales vs. Land Bank of the Philippines , 262 Phil. 568, 574 (1990).

55 Koa v. CA , G.R. No. 84847, March 5, 1993, 219 SCRA 541, 546, citing Fidelita Mut. L. Ins. Co. v. Clark , 203 U.S. 64, 51 L. ed., 91 27 s. Ct. 19; Judson v. Corcoran , 17 How (US) 612, 156 L. ed. 231.

56 Rollo , p. 144.

57 See Lo v. KJS Eco-Formwork System Phil., Inc ., 459 Phil. 532, 539 (2003), citing Article 417 of the Civil Code which provides:

Art. 417. The following are also considered as personal property:

(1) Obligations and actions which have for their object movables or demandable sums; and

58 Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition:

(1) The expenses of the contract, and any other legitimate payments made by reason of the sale[.]

Contract law in the Netherlands

Contents of a contract, performance, breach, remedies, types of contract under dutch law, employment law in the netherlands, employment termination, dismissal of an employee, employment law - miscellaneous.

• About the Dutch Law Institute

Assignment of a claim under Dutch law - transfer of debts

• Contract law
• Assignment of a claim

What is assignment of a claim - under the laws of the Netherlands?

Assignment is where one person, the assignor, transfers a chose in action to another, the assignee. A chose in action is a property right which can only be enforced by legal action not by taking possession, for example a debt, a right to compensation; a claim.

If person C owes a debt to person A, person A may assign the chose in action (the legal right to receive the money) to person B. Person C will then be required to pay the debt to person B rather than person A. Once the debt has been validly assigned, B will be able to enforce payment of the debt and only payment to B will extinguish the debt.

How can a debt be assigned under Dutch law?

Under Dutch law, the general rule is that a chose in action (such as a claim) unless assignment is precluded by law or the nature of the right (art 3:83(1) of the Dutch Civil Code).

Contracting parties are free to exclude assignment in their agreement (art 3:83(2) of the Dutch Civil Code). For example, a contracting party to a distribution agreement may wish to prevent the distributor from assigning the right to distribute to a third party:

Neither Party may assign or transfer to a third party any right under this Agreement without the prior written consent of the other Party. This restriction is to be effective according to article 3:83(2) of the Dutch Civil Code.

How do you transfer title to a claim?

Assignment also requires “delivery” (levering) of the chose in action. There are two possible ways to “deliver” a contractual claim.

Article 3:94(1) the Dutch Civil Code provides that a chose in action is delivered by means of a deed and subsequent notice to the debtor (or person against whom the right can be exercised). Either the assignor or the assignee can give notice. In this situation, the assignment is not complete until the debtor has notice.

A chose in action can also be assigned through a Notarial Deed or deed that is registered with the Tax and Customs Administration (art 3:94(2) the Dutch Civil Code). In these cases, there is no need to give notice to the debtor (or person against whom the right can be exercised) for the assignment to be complete. However, the chose cannot be enforced against this person until they have notice from the assignor or assignee. One rationale for this provision is that if the assignor is declared bankrupt before the notice is given, but after the execution or registration of the deed, the assignment will already be complete and the chose in action in question will not be part of the bankrupt estate.

Should you assign ancillary rights under Dutch law?

After assignment, the assignee acquires all rights that are ancillary to the claim (article 6:142 of the Dutch Civil Code).

Ancillary rights could include:

• rights of pledge
• mortgage, or
• the right to enforce judgments relating to the claim.

Ancillary rights may also include a right to contractual interest or to penalty sums under the contract.

Importantly, the assignment of claim does not affect the debtor’s defences (art 6:145 the Dutch Civil Code). For example, if the original contract between the assignor and the debtor contained a force majeure clause and an event occurs which can be classified as force majeure, the clause may be able to exempt the debtor as against the assignee.

How do you transfer a contract under Dutch law?

Article 6:159 of the Dutch Civil Code provides that a party to an agreement can, with consent of the other contracting party, transfer its contractual position to a third party through a deed concluded with that third party. All the rights and obligations are hereby transferred to the third party except as otherwise provided in relation to accessory rights or rights that have already become exigible. This means that, in principle, the new contracting party will have exactly the same rights and obligations as the original contracting party. For example, they will have the same performance obligations and the same rights to termination and damages for breach of contract by the other party.

In most other legal systems assignment only concerns the transfer of rights and not obligations. An assignment can therefore not transfer the entirety of a contractual position including both rights and obligations. In some common-law jurisdictions, a transfer of obligations is possible only by “novation”. This involves the termination of the original contract between A and B and the creation of a new contract between A and C. In a novation, the rights and obligations under the new contract are not necessarily identical to those in the original contract.

Which contracts can be transferred under Dutch law?

In principle all contracts can be transferred by the procedure detailed in article 6:159 of the Dutch Civil Code. However, as is the case with assignment, it is possible to contractually stipulate that transfers will not be permitted.

The contracts which can't be transferred under Dutch law are:

• contracts that contain rights and obligations that have already been performed and that are essential for the parties
• agreements containing rights and obligations that are so connected to the parties that by their nature cannot be transferred
• agreements that specifically exclude the right to transfer
• agreements that contain rights and obligations that are insufficiently certain.

What are the formalities to transfer a contract under Dutch law

As mentioned, in order to transfer a contract under Dutch law, there needs to be a deed signed between the original contracting party and the party who “takes over” the contract. There is no requirement of form for the consent of the other contracting party, that is, the party who remains party to the contract. The consent may be given orally, in writing or may even be implied in certain circumstances.

About the author

Jan Willem de Groot has been a lawyer in the Netherlands for 35 years. He is now an author and speaker on Dutch civil law. As a Dutch lawyer, his main areas of expertise are contract law and litigation in the Netherlands.

Lawyers in the Netherlands

Dutch contract law, dutch employment law, litigation in holland.

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What is the difference between a grant deed and a gift deed? (Civ. Code § 1113)

While grant deeds and gift deeds are incredibly similar, their differences can inevitably lead to legal disputes. The added family dynamics that typically accompany gift deeds can make things even murkier. In these situations, having an experienced real estate attorney at your side can make all the difference. The Underwood Law Firm encounters both types of deeds with frequency and has the familiarity and skill to help title holders understand their rights.

What is a deed?

A deed is a written instrument (a document) that conveys or transfers the title to real property; it is an executed conveyance and operates as a present transfer of real property. ( Estate of Stevens (2002) 28 Cal.4th 665, 672.) Deeds are also considered written contracts and are therefore subject to the rules applicable to and governing contracts. (Civ. Code § 1040; Johnston v. City of Los Angeles (1917) 176 Cal. 479, 485.)

Once executed, a deed becomes the grant itself. Because of this, a valid deed is subject to numerous requirements.

In order for the deed to function as a legally-binding transfer of real property, it must first be in writing. It must also name both the person conveying and receiving the title. It must be signed by the grantor under the Statute of Frauds, delivered to the individual receiving the deed, and finally, accepted by the grantee. (see generally Civ. Code § 1091.) If any of these “essential elements are missing, the deed is ineffective to transfer title.” ( In re Marriage of Wozniak (2020) 273 Cal.App.5th 120, 134.)

What is a grant deed?

A grant deed is the most common method Californians use to transfer title to real property. (Miller & Starr 3 Cal. Real Estate § 8:5.) Authorized under Civil Code section 1092, the grant deed is called such because the person giving up the land is literally “granting” their property rights to another person.

With other types of deeds, this isn’t always the case. For example, quitclaim deeds are usually characterized by the words “release and remise.” There, the person transferring the title is not “granting” their property rights to someone else but instead “releasing” their interest in the property to another person.

This difference in language may seem trivial or inconsequential, yet the law stresses the importance of language. Thus, “the essential of such a [grant] deed has long been held to be the word ‘grant.’” ( Klamath Land & Cattle Co. v. Roemer (1970) 12 Cal.App.3d 613, 618.)

What does a grant deed convey?

When a grant deed is used as the method of conveyance, it “conveys a fee simple title to the grantee for all purposes.” ( Shuster v. BAC Home Loans Servicing, LP (2012) 211 Cal.App.4th 505, 511.)

A fee simple estate is a legal way of saying that one holds all the property rights possible associated with a certain piece of land. “Ownership of title in fee simple absolute includes the rights, subject to governmental restrictions, of full use and disposition of the property.” ( Carlson v. Assessment Appeals Bd. I (1985) 167 Cal.App.3d 1004, 1013.) The title may endure forever, without limitation, and will pass to the grantee and their heirs.

The fee simple title is also alienable, devisable, and descendible. This means it can be sold at any time, transferred upon the owner’s death via will, or passed through the laws of intestate succession if no will is present.

In California, most title is held in fee simple, as it allows property owners to enjoy the maximum amount of property rights. But just because a grant deed is used does not mean the title is automatically conveyed in fee simple. Like all other types of contracts, intent matters. And any person transferring title, even through a grant deed, can intend to transfer a “lesser” estate. ( Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345, 378.)

What is a gift deed?

Generally, gift deeds (or deeds of gift) are just another form of grant deed. They usually convey the title in fee simple, and they typically include the word “grant” in their operative language. They are, however, unique in that they are “gifts.” They are transfers of title to property without anything given in return. For the most part, they are tools used between family members as a means of conveying property.

From afar, this seems problematic. As stated earlier in the post, deeds are considered written contracts, meaning the contours of contract law apply to them. The fundamentals of contracts are the same in virtually every state. To be valid, there must be an offer, an acceptance, and most importantly, consideration .

There is a wealth of law on consideration, but in essence, it is a benefit conferred or detriment suffered as a result of a promise. (Civ. Code § 1605.) For example, if A contracts with B to pay B $10,000 for a house, then the $10,000 is the real estate contract’s consideration. The money exchanged makes the contract valid.

Usually, promises to make gifts are unenforceable by the law. This is because they do not involve consideration. A gift is given in exchange for nothing. There is no “bargained for exchange.” (see Passante v. McWilliam (1997) 53 Cal.App.4th 1240, 1247.)

But gift deeds are one of the exceptions to this general rule. Because of the importance of real estate title, and the commonplace desire of families to transfer title between their members, the law allows for gift deeds to proceed even if they transfer property for nothing in exchange. “It is settled that a deed without fraud in its inception conveys title and is not void for any failure of consideration…” ( Wooster v. Department of Fish & Game (2012) 211 Cal.App.4th 1020, 1030.)

Does my deed carry an implied covenant?

When title is conveyed through a grant deed, it comes with implied covenants. This means there are promises inherent to and within the deed itself unless otherwise denoted.

Under the California Civil Code section 1113, two covenants apply to any conveyance through a grant: (1) that prior to executing the present conveyance, the grantor did not themself convey the same estate, or any right, title, or interest, to anyone else other than the grantee, and (2) that such estate is, at the time of the present conveyance, free from all encumbrances suffered by the grantor.

Gift deeds, on the other hand, may not carry these covenants. While the authority for this position is quite old, it has yet to be explicitly disproved. Thus, under California law, love and affection are sufficient considerations to support a conveyance of property as a gift, but they are not sufficient considerations to hold the property as containing the implied covenants. ( In re Estate of Porter (1903) 138 Cal. 618, 624.)

How can the Attorneys at Underwood Law Assist You?

Understanding how you hold title to your property is incredibly important. Based on the deed, you may have additional rights and obligations associated with your property. Additionally, the deed is the foremost document for many lawsuits involving property, be it a partition, adverse possession, foreclosure, breach of warranty, etc.  

As each case is unique, property owners would be well-served to seek experienced counsel familiar with estates and property interests of all types. At Underwood Law, our knowledgeable attorneys are here to help. If you are concerned about your deed being canceled, seeking to understand your property rights, or if you just have questions, please do not hesitate to contact our office.

Go here to get more details.

January 1989 - Philippine Supreme Court Decisions/Resolutions

Philippine Supreme Court Jurisprudence

* Penned by then Judge of the Court of First Instance of Manila, Ameurfina Melencio-Herrera, now Associate Justice of the Court.

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• G.R. No. 78315 January 2, 1989 - COMMERCIAL CREDIT CORP. v. COURT OF APPEALS
• G.R. No. 72806 January 9, 1989 - EPIFANIO CRUZ v. INTERMEDIATE APPELLANT COURT
• G.R. No. L-74806 January 9, 1989 - SM AGRI AND GENERAL MACHINERIES v. NATIONAL LABOR RELATIONS COMMISSION
• G.R. No. 76761 January 9, 1989 - ASST. EXECUTIVE SEC. FOR LEGAL AFFAIRS v. COURT OF APPEALS
• G.R. No. 77959 January 9, 1989 - RADIO COMMUNICATIONS OF THE PHILS. v. SEC. OF LABOR AND EMPLOYMENT
• G.R. Nos. 79123-25 January 9, 1989 - PEOPLE OF THE PHIL. v. EMELIANO TRINIDAD
• G.R. No. 78169 January 12, 1989 - BIBIANO REYNOSO IV v. COMMERCIAL CREDIT CORP.
• G.R. No. 43862 January 13, 1989 - MERCANTILE INSURANCE CO. v. FELIPE YSMAEL, JR. & CO.
• G.R. No. 47425 January 13, 1989 - PEOPLE OF THE PHIL. v. METODIO S. BASIGA
• G.R. No. 51554 January 13, 1989 - TROPICAL HOMES, INC. v. WILLELMO C. FORTUN
• G.R. No. 53955 January 13, 1989 - MANILA BANKING CORP. v. ANASTACIO TEODORO JR.
• G.R. No. 54330 January 13, 1989 - JULIO E. T. SALES v. SECURITIES AND EXCHANGE COMMISSION
• G.R. No. 66712 January 13, 1989 - CALIXTO ANGEL v. PONCIANO C. INOPIQUEZ
• G.R. No. 66865 January 13, 1989 - MAGTANGGOL QUE v. INTERMEDIATE APPELLATE COURT
• G.R. No. 74047 January 13, 1989 - PEOPLE OF THE PHIL. v. GRACIANO E. GENEVEZA
• G.R. No. 75016 January 13, 1989 - PERLA C. BAUTISTA v. BOARD OF ENERGY
• G.R. No. 76592 January 13, 1989 - ERDULFO C. BOISER v. NATIONAL TELECOMMUNICATIONS COMMISSION
• G.R. No. 77298 January 13, 1989 - ANGELES CENTINO v. COURT OF APPEALS
• G.R. No. 79518 January 13, 1989 - REBECCA C. YOUNG v. COURT OF APPEALS
• G.R. No. 36187 January 17, 1989 - REYNOLDS PHILIPPINE CORP. v. COURT OF APPEALS
• G.R. No. 73835 January 17, 1989 - CHINA AIRLINES, LTD. v. INTERMEDIATE APPELLATE COURT
• G.R. No. 33425 January 20, 1989 - PROCTER AND GAMBLE PHIL. MFG. CORP. v. COMMISSIONER OF INTERNAL REVENUE
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• G.R. Nos. 61167-68 January 20, 1989 - FIDEL A. DE GUZMAN v. THE INTESTATE ESTATE OF FRANCISCO BENITEZ
• G.R. No. 66350 January 20, 1989 - ALBERTO DE GUZMAN v. INTERMEDIATE APPELLATE COURT
• G.R. No. 67115 January 20, 1989 - FILOIL MARKETING CORPORATION v. INTERMEDIATE APPELLATE COURT
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• G.R. No. 74679 January 20, 1989 - ROSITA DE ASIS v. INTERMEDIATE APPELLATE COURT
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• G.R. No. 72306 January 24, 1989 - DAVID P. FORNILDA v. BRANCH 164, REGIONAL TRIAL COURT, PASIG
• G.R. No. 78648 January 24, 1989 - RAFAEL N. NUNAL v. COMMISSION ON AUDIT, ET AL.
• G.R. No. 83882 January 24, 1989 - IN RE PETITION FOR HABEAS CORPUS OF WILLIE YU v. MIRIAM DEFENSOR-SANTIAGO
• A.C. No. 3277 January 24, 1989 - DAVID P. FORNILDA v. BRANCH 164, REGIONAL TRIAL COURT, PASIG
• G.R. No. 33955 January 26, 1989 - FORTUNATO DA. BONDOC v. COURT OF INDUSTRIAL RELATIONS
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• G.R. No. 40778 January 26, 1989 - PEOPLE OF THE PHIL. v. ARCILLO MANLOLO
• G.R. Nos. 44715-16 January 26, 1989 - ERLINDA BARRERAS v. GREGORIO N. GARCIA
• G.R. No. 49410 January 26, 1989 - DEVELOPMENT BANK OF THE PHIL. v. COURT OF APPEALS
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• G.R. No. 80680 January 26, 1989 - DANILO B. TABAS v. CALIFORNIA MANUFACTURING COMPANY
• G.R. No. 81816 January 26, 1989 - NATIVIDAD Q. SALOMON v. NATIONAL ELECTRIFICATION ADMINISTRATION
• A.M. No. R-225-RTJ January 26, 1989 - HIMINIANO D. SILVA v. GERMAN G. LEE, JR.
• G.R. No. 29541 January 27, 1989 - CARLOS GABILA v. PABLO PEREZ
• G.R. No. 47027 January 27, 1989 - BEATRIZ DE ZUZUARREGUI VDA. DE REYES v. COURT OF APPEALS
• G.R. No. 50041 January 27, 1989 - PEOPLE OF THE PHIL. v. ILDEFONSO L. ABONADA
• G.R. No. 56457 January 27, 1989 - PEOPLE OF THE PHIL. v. DIOSDADO PEDROSA
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• G.R. No. 46807 January 31, 1989 - MAURO OMANA v. PEOPLE OF THE PHIL.
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• G.R. No. 56705 January 31, 1989 - COMMISSIONER OF CUSTOMS v. PROCTER AND GAMBLE PHIL. MFG CORP.
• G.R. No. 58797 January 31, 1989 - ANTONIO QUIRINO v. NATHANAEL M. GROSPE
• G.R. Nos. 65345-47 January 31, 1989 - PEOPLE OF THE PHIL. v. HERMENEGILDO RAMIREZ
• G.R. Nos. 66178-79 January 31, 1989 - PEOPLE OF THE PHIL. v. JOHN PELOTIN
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• G.R. No. 70926 January 31, 1989 - DAN FUE LEUNG v. INTERMEDIATE APPELLATE COURT
• G.R. No. 72828 January 31, 1989 - ESTELITA S. MONZON v. INTERMEDIATE APPELLATE COURT
• G.R. No. 73886 January 31, 1989 - JOHN C. QUIRANTE v. INTERMEDIATE APPELLATE COURT
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• G.R. No. 75853 January 31, 1989 - PEOPLE OF THE PHIL. v. ANDRES BUGTONG
• G.R. No. 76988 January 31, 1989 - GENERAL RUBBER AND FOOTWEAR CORP. v. FRANKLIN DRILON
• G.R. No. 77116 January 31, 1989 - PEOPLE OF THE PHIL. v. FERDINAND CAMALOG
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• G.R. No. 84423 January 31, 1989 - JOSE B. NAVARRO v. COURT OF APPEALS
• A.M. No. P-88-181 January 31, 1989 - ROBERTO S. CHIONGSON v. MATEO MAGBANUA

Assignment of Rents – What, Why, and How?

Article by:

Madelaine prescott, esq., share this post:.

• November 29, 2023

These days, almost all commercial loans include an Assignment of Rents as part of the Deed of Trust or Mortgage. But what is an Assignment of Rents, why is this such an important tool, and how are they enforced?

An Assignment of Rents (“AOR”) is used to grant the lender on a transaction a security interest in existing and future leases, rents, issues, or profits generated by the secured property, including cash proceeds, in the event a borrower defaults on their loan. The lender can use the AOR to step in and directly collect rental payments made by the tenant. For an AOR to be effective, the lender’s interest must be perfected, which has a few fairly simple requirements. The AOR must be in writing, executed by the borrower, and recorded with the county where the property is located. Including an AOR in the recorded Deed of Trust or Mortgage is the easiest and most common way to ensure the AOR meets these requirements should it ever need to be utilized.

When a borrower defaults, lenders can take advantage of AORs as an alternative to foreclosure to recoup their investment. With a shorter timeline and significantly lower costs, it is certainly an attractive option for lenders looking to get defaulted borrowers back on track with payments, without the potential of having to take back a property and attempting to either manage it or sell it in hopes of getting your money back out of the property. AORs can be a quick and easy way for the lender to get profits generated by the property with the goal of bringing the borrower out of default. But lenders should carefully monitor how much is owed versus how much has been collected. If the AOR generates enough funds so that the borrower is no longer in default, the lender must stop collecting rents generated by the property.

Enforcement of an AOR can also incentivize borrowers to work with the lender to formulate a plan, as many borrowers rely on rental income to cover expenses related to the property or their businesses. Borrowers are generally more willing to come to the table and negotiate a mutual, amicable resolution with the lender in order to protect their own investment. A word of warning to lenders though: since rental income is frequently used to pay expenses on the property, such as the property manager, maintenance, taxes, and other expenses, the lender needs to ensure they do not unintentionally hurt the value of the property by letting these important expenses fall behind. This may hurt the lender’s investment as well, as the property value could suffer, liens could be placed on the property, or the property may fall into disrepair if not properly maintained. It is also important for lenders to be aware of the statutes surrounding the payment of these expenses when an AOR is being used, as some state’s statutes require the lender to pay certain property expenses out of the collected rents if requested by the borrower.

In addition to being shorter and cheaper than foreclosure, AORs can be much easier to enforce. In California, the enforcement of an AOR is governed by California Civil Code §2938. This statute specifies enforcement methods lenders can use and restrictions on use of these funds by the lender, among other things. Under CA Civil Code §2938(c), there are 4 ways to enforce an AOR:

• The appointment of a receiver;
• Obtaining possession of the rents, issues, profits;
• Delivery to tenant of a written demand for turnover of rents, issues, and profits in the correct form; or
• Delivery to assignor of a written demand for the rents, issues, or profits.

One or more of these methods can be used to enforce an AOR. First, a receiver can be appointed by the court, and granted specific powers related to the AOR such as managing the property and collecting rents. They can have additional powers though; it just depends on what the court orders. This is not the simplest or easiest option as it requires court involvement, but this is used to enforce an AOR, especially when borrowers or tenants are uncooperative. Next is obtaining possession of the rents, issues, profits, which is exactly as it seems; lenders can simply obtain actual possession of these and apply the funds to the loan under their AOR.

The third and fourth options each require delivery of a written demand to certain parties, directing them to pay rent to the lender instead of to the landlord. Once the demand is made, the tenant pays their rent directly to the lender, who then applies the funds to the defaulted loan. These are both great pre-litigation options, with advantages over the first two enforcement methods since actual possession can be difficult to obtain and courts move slowly with high costs to litigate. The written demands require a specific form to follow called the “Demand To Pay Rent to Party Other Than Landlord”, as found at CA Civil Code §2938(k). There are other notice requirements to be followed here, so it is essential to consult with an experienced attorney if you are considering either of these options. California Civil Code §2938 specifically provides that none of the four enforcement methods violate California’s One Action Rule nor the Anti-Deficiency Rule, so lenders can confidently enforce their AORs using the above methods with peace of mind that they are not violating other California laws.

Whether you are looking to originate a new loan, or you are facing a default by your borrower, understanding what an Assignment of Rents is and how it operates can be extremely beneficial. Enforcing an AOR can be an easier option than foreclosure and can help promote a good relationship with your borrower when handled correctly. If you have any questions about AORs, or need further details on how to enforce them, Geraci is here to help.

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