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Who Owns the Rents? Recent Cases Highlight Uncertainty as to Effect of Mortgage Rent Assignments in New York Bankruptcies

Amid the recent proliferation of commercial mortgage defaults in New York, the question of whether property of a debtor’s bankruptcy estate includes the rental income of real property subject to a mortgage’s purportedly “absolute” assignment of rents has taken on great importance for both debtors and real property lenders. This article examines the divergent treatment of purportedly assigned rents in recent bankruptcy court decisions in New York and highlights issues that lenders should consider when underwriting mortgage loans.
This article was first published in the August 27, 2012 issue of Thomson Reuters News & Insight. Permission for article reprint has been granted. Copyright © 2012 Thomson Reuters.

William M. Hawkins is a partner in the Bankruptcy, Restructuring and Creditors’ Rights Practice in the New York office of Loeb & Loeb LLP. He has more than a decade of experience in counseling secured and unsecured creditors, trustees, committees, lessors, equity holders and other constituencies in credit restructurings, corporate reorganizations, bankruptcies and liquidation proceedings. Daniel B. Besikof is an associate in Loeb & Loeb’s Bankruptcy, Restructuring and Creditors’ Rights Practice. Mr. Besikof represents a wide variety of stakeholders in Chapter 11 bankruptcy proceedings, corporate restructurings and liquidations, including lenders, administrative and collateral agents, indenture trustees, lessors, trade creditors, committees, investors and trustees.