Assignment Of Rents Agreement Template for England and Wales

An assignment of rents agreement transfers the right to receive rental income from a property to a third party, typically a lender as additional security for a loan. Once the assignment is perfected and notice given to the tenant, the tenant pays rent directly to the assignee rather than the landlord. It is commonly used in commercial property finance as supplementary security alongside a legal mortgage.

An absolute assignment of rents takes effect immediately on completion of the written assignment and delivery of notice to the tenant. A conditional assignment (often used in lending) typically provides that the assignment only becomes active on default by the borrower, with the landlord retaining the right to collect rents until then. The assignment deed should clearly state which structure applies.

Yes. Under s.136 LPA 1925, written notice to the tenant is required to convert an equitable assignment into a legal assignment. Without notice, the tenant can validly continue paying rent to the original landlord. Once notice is received, the tenant must redirect payments to the assignee. The tenant is not liable for rents paid to the original landlord in good faith before notice was received.

An assignment transfers the legal right to the rent itself to the assignee; the assignee becomes the party entitled to collect the income. A charge creates security over the rental income without transferring ownership of the right; the chargor retains ownership subject to the security interest. In practice, lenders often take both, but a legal assignment gives the lender a stronger and more direct enforcement remedy.

An assignment of rents is not directly registrable as a separate entry, but where it is granted as security alongside a legal charge over the property, it forms part of the registered charge. Lenders typically include an assignment of rents clause within the mortgage deed itself, which is then registered at HM Land Registry as part of the charge, binding any subsequent buyer or mortgagee with notice.

Under the Income Tax (Trading and Other Income) Act 2005, rental income that has been absolutely assigned is assessed on the assignee as the person entitled to receive it. Where the assignment is conditional or for security only, HMRC may still treat the landlord as the person assessable on the income during the period they retain management control. Professional tax advice is needed to determine the correct treatment.

Where the assignment of rents is granted as security for a mortgage that is registered at HM Land Registry, a buyer of the property takes subject to that registered charge and the assignment of rents within it. On a sale with full discharge of the mortgage, the lender releases the assignment of rents as part of the discharge. A buyer purchasing with the mortgage subsisting inherits the same obligations as the original borrower.

The assignment of the right to receive rents does not require the tenants' consent, but notice must be given to each tenant for the assignment to be legally effective against them. Business tenants under the Landlord and Tenant Act 1954 retain their statutory security of tenure regardless of the assignment and cannot be required to pay to an assignee any more than the contractual rent due under their lease.