ASSIGNMENT OF LEASES AND RENT

Must a Collateral Assignment of Leases and Rents recorded along with a mortgage be separately discharged where the mortgage itself has been discharged?  No, according to Eno and Hovey, Massachusetts Practice - Real Estate Law with Forms, West Publishing Co., (Third Edition, 1995), §9.17.  The assignment is merely additional security for a mortgage and is automatically discharged upon the discharge of the mortgage.

The rationale for a Collateral Assignment of Leases and Rents with regard to the rights and ability of a mortgagee to collect rents in the event of a default under the mortgage is discussed in the case of HRPT Advisors, Inc. v. Macdonald, Levine, Jenkins & Co., PC., 43 Mass.AppCt. 613, 686 N.E.2d 203 (1997).

In Massachusetts the rule is that entry by a mortgagee in possession and assertion of title  under a mortgage granted prior to a lease, ousts the tenant and terminates the lease.  There is no privity of contract between the tenant and the mortgagee.  The mortgagee has superior possessory rights with respect to those of the tenant following the landlord's default.

The mortgagee may either terminate the leases and lost its right to rents or demand that the tenant remit rents to mortgagee pursuant to this assignment.