Explanation of Deed of Trust with Assignment of Rents
What is Deed of Trust
Deed of trust is a financial business agreement that a property buyer enters in with a financial lender or a company. This agreement allows the property buyer to borrow money from the financial lender but the ownership of the property is not allotted to either the buyer or the lender. There is a middleman or agency, usually a trust, who is party to the agreement as well. This trustee would be holding onto the ownership papers till such time the money borrowed by the property buyer has been repaid. If the property buyer fails to repay the money to the lender, then the trustee may allot the ownership of the property to the lender.
In this deed of trust, there is a clause that deals with assignment of rents. Since you are buying the property, you become the property owner even if you do not have the ownership papers which are stacked with the trustee. Being the owner of the property, you can rent out the property to one or more tenants and you would have the right to collect the rents. However, if you are failing to make repayments towards the loan you have been given by the lender then the lender has the right to collect the rents and adjust it with repayments.
In simpler words, you wouldn’t be getting or collecting the rent. The lender would collect the rent and secure its loan amount and the interests. If you continue to fail repayments then this assignment of rents grants the lender the right to initiate foreclose through the trustee in due time.
Assignment of Rents
No deed of trust is authored these days without the assignment of rents. The latter has become an integral part of the financial arrangement which is simpler than mortgage and has several benefits. Despite the widespread use of deed of trust with assignment of rents, there may be odd cases where a deed of trust may not have such a clause.
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