Document Type
Research Memorandum
Publication Date
2026
Abstract
(Excerpt)
Assignments of rents are a common feature of commercial real estate financing in New York. In connection with a mortgage or other secured loan, a borrower that owns income-producing property typically grants the lender an assignment of rents as additional security, entitling the lender to rental income generated by leases at the property upon the borrower’s default. These assignments are intended to protect the lender’s interest by providing an alternative source of repayment and by limiting the borrower’s ability to divert rental income during periods of financial distress.
Disputes concerning assignments of rents often arise when a borrower defaults on its loan obligations and subsequently files for bankruptcy. At that point, a central question becomes whether the lender is entitled to collect and apply post-petition rental income, or whether such rents are instead property of the bankruptcy estate subject to the debtor’s control and the Bankruptcy Code’s cash-collateral restrictions. The resolution of this issue has immediate and practical consequences for both lenders and debtors, as rental income is often the primary source of cash flow for income-producing real property.