The Act is codified as Sections 56-15-1 thru 56-15-19 NMSA.
By Victor E. Carlin
The New Mexico Assignment Of Rents Act is good news for all concerned. All lenders and attorneys that are involved with commercial mortgages and/or commercial assignments of rent should become familiar with the Act. Some of the highlights are as follows:
1. As a general rule, a document that creates a security interest in real property, such as a mortgage, will henceforth create an assignment of rents arising from the real property, whether or not the document specifically provides for a security interest in personal property, such as rents. However, that does not mean that lenders should stop using mortgages that contain internal assignments of rents, and that does not mean that lenders should stop using separate documents specifically consisting of an assignment of rents.
2. Upon recording a mortgage and/or an assignment of rents in the real property records a lender’s security interest in rents is fully perfected.
3. Upon default by the borrower the lender's assignment of rents may be enforced by giving notice to the tenants, as has always been the case. However, the Act now requires that notice also be given to other lien holders of record, as well as to the owner of the property (the assignor). Also, the Act includes a "safe harbor" form of notice to tenants.
4. Enforcement of an assignment of rents does not make a lender a mortgagee in possession of the real property, and it does not limit any other rights available to the lender.
5. When the Act goes into effect on January 1, 2012 it will be applicable to all existing mortgages and assignments of rents, as well as to all future mortgages and assignments of rents. However, if a mortgage existing prior to January 1, 2012 does not specifically contain an assignment of rents, the Act will not create one. On the other hand, as indicated above, with regard to mortgages executed on or after January 1, 2012, the Act will create an assignment of rents arising from the real property, whether or not the mortgage specifically so provides.
The foregoing is intended to highlight a few of the important provisions of the Act. It is recommended that all commercial lenders and their attorneys read the Act in its entirety.
