Definition
In real estate, to “assign” is to transfer one’s rights or interests in a property or contract to another party. This is a common practice for leases, mortgages, and deeds of trust, among other contractual obligations.
Key Points:
- Transferability: Assigning the contract allows another person to step into the original party’s shoes.
- Continuing Obligations: The original party might still be liable for the contract unless a novation occurs, which requires consent from all parties to substitute someone else.
- Legal Implications: Assignments often require written consent from certain parties based on the terms of the initial agreement.
Examples
Example 1: Lease Assignment
An apartment tenant, Julia, wishes to move to another city before her lease term ends. She finds another tenant, Tom, willing to take over the lease. Julia assigns the lease to Tom. However, if Tom fails to pay rent, Julia may still be liable to the landlord unless a novation is put in place.
Example 2: Assignment of Mortgage
Adam has a mortgage on a commercial property but decides to sell this property to a new investor. The investor takes on the mortgage responsibilities through an assignment, but the lender might still hold Adam accountable for the mortgage terms unless a formal novation happens.
Frequently Asked Questions
What happens when you assign a lease?
When you assign a lease, you transfer your leasehold interest to another party while potentially retaining liability for the lease terms.
Can you assign a mortgage?
Yes, mortgages can be assigned, transferring the obligations and benefits of the mortgage from one party to another. Consent from the lender is often required.
What is Novation?
Novation is replacing one party in a contract with another, with the agreement of all affected parties, thereby relieving the original party of any further obligation.
Are there fees involved in assignments?
Yes, there can be administrative fees, legal fees, or application fees required to process an assignment.
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Lease: A binding contract where the lessee agrees to pay the lessor for the use of an asset.
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Mortgage: A legal agreement in which property is used as security for the repayment of a loan.
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Deed of Trust: A document that in some states takes the place of a mortgage in securing a loan.
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Novation: The substitution of a new contact or new party in place of an original agreement or existing party, typically relieving the original party of all obligations.
Online Resources
- Investopedia - Assign Contract: Investopedia
- The Balance - What is an Assignment?: The Balance
- Nolo - Assignment and assumption agreements: Nolo
References
- Federal Housing Finance Agency, Guidelines on Mortgage Assignment
- Legal Dictionary, NOVATION definition
Suggested Books for Further Study
- “Real Estate Law” by Marianne Jennings
- “Fundamentals of Real Estate” by David C. Ling and Wayne R. Archer
- “Practical Real Estate Law” by Daniel F. Hinkel
Real Estate Basics: Assign Fundamentals Quiz
### Which document might need to be assigned if you sell a leased property?
- [x] Lease
- [ ] Title insurance
- [ ] Home warranty
- [ ] Inspection report
> **Explanation:** A lease might need to be assigned because the new owner would need to step into the existing lease agreement.
### What legal mechanism generally involves substituting a new party for an old party in a contract, releasing the original party from ongoing obligations?
- [ ] Assignment
- [x] Novation
- [ ] Leasing
- [ ] Modification
> **Explanation:** Novation substitutes a new party for an old party in a contract, releasing the original party from further obligations.
### If transferring contract rights to another, does the original party completely relieve itself of responsibilities automatically?
- [x] No, the original party remains responsible unless a novation occurs.
- [ ] Yes, always.
- [ ] Only for residential leases.
- [ ] Similar to subleasing.
> **Explanation:** The original party is not relieved of its responsibilities unless a novation has been agreed upon.
### Under which contract can a tenant freely assign their leased interest without landlord consent?
- [ ] Any lease
- [ ] Most residential leases
- [x] Only if the lease specifically allows it
- [ ] Commercial leases always allow this
> **Explanation:** Assignments typically require landlord consent unless the lease expressly provides otherwise.
### What is it called when the original party transfers their obligation but remains liable if the new party defaults?
- [X] Surety
- [ ] Beneficiary
- [ ] Assignor
- [ ] Sublessor
> **Explanation:** In assignments where the original party remains liable, they function similarly to a surety.
### Can an owner of a property reassign a deed of trust to another party?
- [x] Yes, typically with conditions
- [ ] No, it is non-transferable
- [ ] Only within family members
- [ ] It can never be reassigned.
> **Explanation:** Deeds of trust can be reassigned, often with the agreement from the beneficiary and subject to state laws.
### An agreement needed for an assignor to be free from liabilities is known as?
- [ ] Assignment Agreement
- [x] Novation Agreement
- [ ] Warranty Deed
- [ ] Lease Transfer
> **Explanation:** A Novation Agreement is required to free the assignor from any remaining liabilities fully.
### When transferred, what document often requires the lender's consent to validate the assignment effectively?
- [ ] Home Warranty
- [ ] Property Inspection Report
- [x] Mortgage
- [ ] Local Utility Agreements
> **Explanation:** Assigning a mortgage often requires the lender's consent to validate the transfer.
### In which scenario would "novation" not be needed?
- [ ] Changing parties in the lease
- [x] When the assignment alone is agreed upon by all
- [ ] Changing mortgagees
- [ ] Conveying property deeds
> **Explanation:** In assignments where all parties agree without requiring complete transfer of responsibility, novation is not needed.
### True or False: Assigning a lease always transfers all responsibilities to the new tenant automatically?
- [ ] True
- [x] False
> **Explanation:** False. While interests are transferred, the original leaseholder may still hold responsibilities unless explicitly released.
