Where a commercial loan is in default, it is common practice to exercise the
Assignment of Rents Clause by obtaining the appointment of a receiver.
"If you secured your loan with a typical mortgage and
assignment of rents, you have a valid security interest in the real estate under either line of cases.
Despite the lender's lien on these rents through its
assignment of rents, the borrower was authorized through the plan to use these monies to pay its administrative costs incurred during the bankruptcy, (i.e., attorney's fees); its unsecured creditors; and $100,000 of the debtor's attorney's fees in its pursuit of certain lender liability litigation against another pre-petition lender.
In many cases, he said, lenders learn too late that their counsel recorded only the mortgage and
assignment of rents but failed to file the U.C.C.
