Lease Agreement Cession

If the rental decision comes into force with the previous issuance of a letter of credence or the opening of formal legal proceedings, the borrower is given the necessary power of appeal. However, it is commonplace that from the moment he brings an action, the borrower requires persons authorized to bring an action, not before, and that he must retain this power of appeal until the final judgment is rendered. Therefore, the power of appeal is a bonus during the application phase. If the borrower issues a letter of credence or initiates formal legal proceedings without there being any such retaliation on the rental right, he can invoke the fact that he acted in any agency or agent. In order to control the date of the assignment of the rental right and thus control when the lender loses its collateral, the lender could set a rental threshold below which there is an automatic recusal of the rental right and beyond which the lender would have to obtain the prior agreement of the lender. The assignment of the rental right should be subject to the assignment by the borrower of its rights to the revenue that may result from such a dispute against the tenants for the benefit of the creditor. It is able to do so when the transgression has an existing right, which is usually included in a lease agreement and does not yet need to be enforced. South African courts have recognized for more than a century that future rights can be assigned and transferred to anticipando. This is a reconciliation of the facts in Picardi Hotels Ltd v Thekwini Properties (Pty) Ltd 2009 (1) SA 493 (SCA) (Picardi case).

A clause in a loan document contained a standard assignment of rental income collateral. The applicant relied as a particular plea in law on the applicant`s lack of power of appeal to bring legal proceedings to charge rents. The Supreme Court of Appeal (SCA) ruled as follows. It is established (in South Africa) that an assignment of a security right deprives the assignor of the right to collect the assigned debt and that the assignor retains only a mere dominium or right of recurrence. In the case of a simple, ordinary and grammatical interpretation of the obligation clause, all the constituent elements of an assignment were present in such a way that the performance of the obligation resulted in an effective and unconditional transfer of rights (from the hypothecary debtor to the lender). The use of the present in the loan document was a strong indication of the intention for an immediate transfer of rights. As a result, the respondent did not have the authority to sue the complainant over the unpaid rents. The defendant should have removed from the bank a recession (of the rights transferred) to give it back the right to sue the unpaid rents (recusal of the rental right). The legal risk for the lender (whether before or in the event of late payment or insolvency of the borrower) of an assignment of the rental right is that it will thus be stripped of its guarantee rights. The lender should not prematurely assign the assigned rights (apply the recusal of the rental right). . .


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