Abstract
This Article explains the provisions of the UARA and encourages its prompt adoption in states that presently lack comprehensive statutes governing security interests in rents. Part I provides a general background about state mortgage law and the nature of the mortgagee's right to rents arising from the mortgaged premises, as well as the general impact of the federal Bankruptcy Code upon a mortgagee's security interest in rents. In Part II, the Article highlights four problem areas that have produced substantial litigation and uncertainty about the enforceability of security interests in rents in the bankruptcy context. These are (a) the proper scope of the term "rents"; (b) when a security interest in rents has been properly "perfected"; (c) whether a mortgagor can make an "absolute" assignment of rents (as opposed to an assignment for purposes of security); and (d) whether a security interest in rents creates an interest that is distinct from the mortgaged real property from which the rents arise. Part II chronicles the litigation produced by these issues and summarizes the solutions that the UARA provides for each of these issues. In Part III, the Article highlights a variety of other issues relating to the collection of rents, including: (a) the standards governing the appointment of a receiver; (b) the mortgagor's liability for "milking" rents (i.e., collecting rents after default without directing them to the payment of the mortgage debt); (c) collection of rents by the mortgagee via direct notification to tenants; (d) the extent to which a mortgagee that collects rents must apply those rents to the payment of taxes and other property-related expenses; (e) priority among competing assignments of rents; (f) priority between an assignee of rents and a person holding an interest in the proceeds of rents arising under UCC Article 9; and (g) the effect of the mortgagee's collection of rents upon the mortgagee's ability to enforce the mortgage debt. The Article discusses prevailing authority with respect to each issue, particularly highlighting the manner in which the UARA would resolve these issues. The Article concludes with an Appendix that sets forth a bullet-point summary of the primary provisions of the UARA.
Recommended Citation
R. Wilson Freyermuth,
Modernizing Security in Rents: The New Uniform Assignment of Rents Act,
71 Mo. L. Rev.
(2006)
Available at: https://scholarship.law.missouri.edu/mlr/vol71/iss1/6