Michigan’s New Universal Assignment of Rents Act

Pay Rent marked on calendar

Commercial property owners wishing to obtain financing will likely be required by their lender to sign a document generically referred to as an "assignment of rents and leases" as additional security for repayment of the loan. In the event of a loan default, such an assignment will allow the lender to collect rent due from any tenants that may be on property owned by the borrower, to be applied to the debt. In an effort to make existing law more consistent, Michigan has enacted the Michigan Uniform Assignment of Rents Act (the “Act”), which became effective on September 22, 2022. Key provisions of the Act include the following:

  • The Act defines “Assignment of rents” as a transfer of an interest in rents in connection with an obligation secured by real property in this state and from which rents arise, includes an expansive definition of that which constitutes “rent,” and specifies that a security instrument for purposes of the Act can be any document that creates a security interest in real property, regardless of what it is called, including a land contract.
  • The Act provides that a rent assignment creates a presently effective security interest (a lien) in all accrued and unaccrued rents arising from the real property described in the assignment.
  • The Act specifies how the order of priority among competing security interests is to be determined and sets forth the procedure for the enforcement of the assignment.
  • The Act specifies that it applies to all future rent assignments and all rent assignments executed before the September 22, 2022, effective date.

Questions? Please contact one of our attorneys at 248.477.6300.

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