Florida Mortgage Law: Assignment of Rents

In Florida, there are several types of security that a mortgagee can negotiate and obtain with respect to a mortgage loan secured by real property.  One such security can include the rentals that are generated from the real property itself.  A mortgage or separate instrument can provide for an assignment of rents of real property or any interest therein as security for repayment of the indebtedness. In the event that the mortgagor makes such an assignment, then the mortgagee holds a lien on the rents, and the lien created by the assignment is be perfected and effective against third parties upon recordation of the mortgage or separate instrument in the public records of the county in which the real property is located.  An assignment of rents provision becomes absolute upon the mortgagor’s default and operative upon mortgagee’s written demand.

Florida Statute section 697.07 provides a simplified procedure to enforce an assignment of rents clause.  A recent example of where an assignment of rents clause was enforced over several objections of the mortgagor/borrower is set forth in Stearns Bank, N.A. v. Shiraz Investments, LLC, 2012 WL 4058246 (M.D. Fla., Sept. 14, 2012). In this particular case, the borrowers had entered into four separate loan agreements concerning four separate properties, all of which were generating monthly rents. Amongst the various arguments presented by the defendants to avoid enforcement of the assignment of rents clause were as follow: (a) that plaintiff breached the loan agreement first; (b) that plaintiff waived its right to collect rents; (c) that enforcing the assignment of rents clause would lead to defendants’ financial ruin.  All of these arguments were rejected by the court; in particular, as to the defendants’ argument about financial hardship, the court noted that it was “not inclined to rewrite agreements simply because the circumstances and the market have changed, making a once profitable situation a bad investment for one of the parties”. 

At Schecter Law, we use our extensive experience to assist our clients in obtaining the best possible terms for their secured mortgage loan transactions.  Our experience extends to assisting lenders in negotiating and preparing security documents and loan agreements that protect their interests.