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.