2006 Louisiana Laws - RS 9:4401 — Conditional or collateral assignment of leases or rents

PART IV.  PLEDGE OR ASSIGNMENT OF LEASES AND RENTS

§4401.  Conditional or collateral assignment of leases or rents

A.  Any obligation may be secured by an assignment by a lessor or sublessor of leases or rents, or both leases and rents, pertaining to immovable property.  Such assignment may be expressed as a conditional or collateral assignment, and may be effected in an act of mortgage, by a separate written instrument of assignment, or by a separate written instrument of pledge, and may be referred to, denominated, or described as a pledge or an assignment, or both.  The instrument shall state the amount of the obligation secured thereby or the maximum amount of the obligation that may be outstanding at any time from time to time that such assignment secures.  If such conditional or collateral assignment is made, it shall become absolute upon the assignor's default in respect to the obligation thereby secured or in accordance with the terms of the instrument creating such assignment, and shall become operative as to the debtor upon written notice to the debtor from or on behalf of the assignee or the assignor that such assignment has so become absolute.

(1)  An assignment relating to a lease or rent of an immovable is given the  effect of recordation when an original or a certified copy of the instrument creating the assignment is filed in the conveyance records of the parish in which the immovable is situated; however, an assignment contained in an act of mortgage filed in the mortgage records of such parish on or after September 1, 1995, shall be given the effect of recordation when, to the extent, and for so long as the act of mortgage is given such effect, without the need for separate recordation in the conveyance records.  An assignment given the effect of recordation has such effect with regard to all obligations, present and future, secured thereby notwithstanding the date of the incurrence of such obligations or the nature of such obligations.

(2)  Such assignment may include all or any portion of the assignor's presently existing and anticipated future leases and rents pertaining to the described immovable property.  As future leases or rents of an immovable come into existence the assignee's rights as to such leases and rents shall have effect as to third persons from the date of the filing of the instrument.  It shall not be necessary to specifically describe the presently existing or future arising leases or rents; to affect the assignor, the assignee, the debtor, or other third parties the instrument shall suffice if it contains a general description of the leases and rents together with a description of the immovable affected by the lease.  The immovable property description shall be the kind of description which, if contained in a mortgage of the immovable, would cause such mortgage to be effective as to third persons if the mortgage were properly filed for record under the laws of this state.

(3)  Once an assignment relating to leases or rents of an immovable is so filed, the assignee shall have a superior claim to the leases and rents assigned and their proceeds as against all other creditors whose claims or security interests arise or are perfected after the filing of the assignment, notwithstanding the fact that the debtor is not notified of or does not consent to the assignment or that the assignee is not in possession of the immovable property.

(4)  Except for purposes of Subsection G, the term "lease" as used in this Section includes a sublease.

B.  This Section is intended to recognize one method of securing obligations, and shall not have the effect of repealing any other provision of law in respect to pledge, pawn, and assignment of incorporeal rights.

C.  This Section is remedial and shall be retroactive.  All assignments of leases or rents heretofore made in compliance with the provisions of this Section are hereby validated.

D.  A landowner or mineral servitude owner may make a conditional or collateral assignment pursuant to this Section of rents, royalties, delay rentals, shut-in payments, and other payments which are rent or rentals under Title 31 of the Louisiana Revised Statutes attributable to the landowner's sale, lease, or other disposition of his right to explore and develop his land for production of minerals or to the mineral servitude owner's sale, lease, or other disposition of his mineral right.  This Section shall not otherwise apply to rents, royalties, overriding royalties, bonuses, and other payments and other rights under mineral leases and other contracts relating to minerals.

E.  This Section shall apply to assignments of leases of movable property subject to the Louisiana Lease of Movables Act entered into prior to the time Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et seq.) becomes effective, including without limitation those assignments of leases that affect rights arising after the effective date of Chapter 9 and those continuing assignments that may secure future obligations, lines of credit, and other ongoing credit facilities.  This Section shall further apply to assignments of leases of immovable property located in this state without regard to the time Chapter 9 becomes effective.

F.(1)  Except as otherwise agreed to by the parties, the assignee's interest in the leases or rents assigned continues in any identifiable proceeds including collections received by the assignor.

(2)  In the event of insolvency proceedings instituted by or against an assignor, the assignee has a perfected security interest in proceeds of the leases or rents or both leases and rents assigned, as follows:

(a)  In identifiable noncash proceeds and in separate deposit accounts containing only proceeds.

(b)  In identifiable cash proceeds in the form of money which is neither commingled with other money nor deposited in a deposit account prior to the insolvency proceedings.

(c)  In identifiable cash proceeds in the form of checks and the like which are not deposited in a deposit account prior to the insolvency proceedings.

(d)  In all cash and deposit accounts of the assignor in which proceeds have been commingled with other funds, but the perfected security interest under this Section is subject to any right of set-off.  It is further limited to an amount not greater than the amount of any cash proceeds received by the assignor within ten days before the institution of the insolvency proceedings, less the sum of:

(i)  the payments to the assignee on account of cash proceeds received by the assignor during such period; and

(ii)  the cash proceeds received by the assignor during such period to which the assignee is entitled under Paragraphs (a) through (c) of Subsection F(2).

G.(1)  The rights of an assignee against the debtor shall be subject to any dealing by the debtor with the assignor, any other assignee, or other successor in interest of the assignor until the debtor receives written notice from or on behalf of the assignee or the assignor that the assignment of the particular lease or rent of which he is debtor has become absolute.  A notification which does not reasonably identify the rights assigned is ineffective.  If requested by the debtor, the assignee must seasonably furnish reasonable proof that the assignment has been made and unless he does so the debtor may pay the assignor.

(2)  Except as provided in this Subsection (G), a debtor who has received written notice that the assignment has become absolute will not be discharged from his debt if he pays anyone other than the assignee.  In any case in which a debtor is not notified of the assignment made in compliance with the provisions of this Section and, in good faith, makes payment of rent in whole or in part to the assignor or the assignor's successor, or to a subsequent assignee of the rent who shall have notified the debtor of that assignment, then to the extent of payment, the debtor shall be exonerated of liability to make payment to the first assignee; however, the person to whom payment was made shall be accountable and liable to the assignee for the sums received.  The debtor may, at its option, commence concursus proceedings instead of making payment to the assignor or the assignee.

(3)  Notwithstanding the debtor's receipt of written notice of the assignment, a modification of or substitution for the lease made in good faith and in accordance with reasonable commercial standards is effective against an assignee, unless the debtor has otherwise agreed with the assignee.  In either event the assignee acquires rights under the modified or substituted lease corresponding to the assignee's rights under the original lease.  No termination or modification of or substitution for a lease shall be effective against an assignee as to the right to the payment of rent or a part thereof under an assigned lease which has been fully earned by performance.  The assignment may provide that modification of or substitution for the lease is a default by the assignor.

(4)  A term in any lease between a debtor and an assignor is ineffective if it prohibits assignment of rent or prohibits creation of a security right in rent due or to become due or requires the debtor's consent to such assignment of rent or security interest in rent.

(5)  The mere existence of a conditional or collateral assignment does not impose contract or tort liability upon the assignee for the assignor's acts or omissions relating to such leases.

H.(1)  The  effect of recordation of all assignments recorded on or after September 1, 1990, ceases ten years after the date of the instrument creating the assignment, except, that if an instrument creating an assignment describes the maturity of an obligation secured thereby and if any part of the described obligation matures nine years or more after the date of the instrument, the effect of recordation ceases six years after the described maturity date.  A recorded instrument creating an assignment may be reinscribed by filing a signed, written notice of reinscription.  The notice shall state the name of the assignor as it appears in the recorded instrument and recordation number or other appropriate recordation information of the instrument or of a prior notice of reinscription and shall declare that the instrument is reinscribed.  A notice of reinscription that is filed before the effect of recordation ceases continues that effect for ten years from the date the notice is filed.  A notice of reinscription that is filed after the effect of recordation ceases produces the effects of recordation, but only from the date the notice is filed.  The method of reinscription provided in this Section is exclusive, and neither an amendment of an instrument creating an assignment nor an acknowledgment of the existence of an assignment by the assignor constitutes a reinscription of the instrument.  Notwithstanding the foregoing, the effect of recordation of an assignment contained in an act of mortgage filed on or after September 1, 1995, continues for so long as the act of mortgage is given  the effect of recordation.  In such cases, reinscription of the act of mortgage constitutes reinscription of the assignment contained therein.

(2)  Notwithstanding the foregoing provisions, the effect of registry of all assignments recorded on or before August 31, 1990, shall be determined by the other laws of registry applicable thereto.

(3)  The recordation of an assignment may be cancelled by the consent of the assignee evidenced by any written release, under private signature or otherwise.   Cancellation or erasure of an act of mortgage containing an assignment constitutes cancellation of the assignment contained therein, whether the act of mortgage was recorded in the mortgage records or conveyance records, or both.

I.  The provisions of R.S. 9:4401(A), as amended and reenacted, and the provisions of R.S. 9:4401(G) and (H) as enacted by Acts of the 1990 Regular Session are remedial and shall, wherever possible, be given retroactive effect.  All assignments of present and future leases or rents heretofore made in compliance herewith are hereby validated.

Added by Acts 1980, No. 321, §1; Acts 1985, No. 592, §5, eff. July 13, 1985; Acts 1987, No. 130, §1, eff. June 18, 1987; Acts 1989, No. 137, §4, eff. Sept. 1, 1989; Acts 1990, No. 1079, §3, eff. Sept. 1, 1990; Acts 1995, No. 1087, §3.

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