What Does “Cession of Rentals and Revenues” Mean?

Question from John, What Does “Cession of Rentals and Revenues” Mean?

Answer from AI:

The “Cession of Rentals and Revenues” section in a home loan agreement is a legal provision that borrowers might encounter when they have a mortgage on a property that they intend to rent out. This clause has significant implications for the borrower’s rights and the lender’s security interest in the property. Here’s a breakdown of what this section generally means:

• Cession: This is a legal term that refers to the act of giving up one’s rights or interests in a property to another party. In this context, the borrower (the Client) is agreeing to transfer certain rights to the lender (Nedbank).
• Rights, Title, and Interest in Rentals: The borrower is transferring their rights to receive rental income from the property to the lender. This means that while the property is under mortgage, the lender has the right to the income generated from renting out the property.
• Additional Security: The rental income serves as additional collateral for the loan. If the borrower fails to repay the loan, the lender can claim the rental income to cover the outstanding debt.
• Consent to Letting: The clause specifies that the lender must give consent for the property to be rented out. Without this consent, the borrower may not be allowed to rent the property.
• Recovery of Unpaid Rentals and Eviction: The lender is granted the right to take legal action against tenants for unpaid rent and to evict them if necessary.
• Authority to Manage Leases: The lender can make decisions regarding the leasing of the property, including canceling, renewing, and entering into leases, as well as evicting unauthorized occupants.
• Collection of Money from Property Sale: If the borrower sells the property, the lender has the right to collect any money payable from the sale as part of the security for the loan.
• Irrevocable and In Rem Suam: This Latin phrase means that the lender’s rights to take these actions cannot be taken back and are for the lender’s own benefit.

It’s important to note that this is a general explanation and the specific terms of your home loan agreement may vary. The legal language used in such agreements can be complex, and it’s crucial to understand all the implications before signing.

If you’re considering renting out a property that’s under a mortgage, or if you’re unsure about the terms of your loan agreement, it’s advisable to consult with a legal professional who can provide personalized advice based on your situation.

For more information on mortgage agreements and borrower’s rights, you can refer to resources such as the Consumer Financial Protection Bureau or your local housing authority.