Assignor
An assignor is an individual or entity that legally transfers rights, benefits, or interests in a property or contract to another party, known as the assignee. In a real estate context, the assignor is typically the original party to an agreement, such as a borrower, tenant, or contract holder, who chooses to relinquish their position and pass their authority or claims to a new participant. This action initiates the assignment process, effectively handing over the reins of a specific legal relationship.
Purpose and Function
The primary purpose of the assignor role is to enable the transfer of legal standing, allowing for flexibility and liquidity within contractual agreements.
- Facilitating Transfer of Rights: The assignor is the source of the transfer, granting the assignee the legal authority to reap the benefits of a contract, such as the right to purchase a home or collect mortgage payments.
- Exiting Contractual Obligations: Being an assignor allows a party to exit an agreement before its natural conclusion. For example, a business owner (assignor) might transfer their commercial lease to another company to relocate without breaking the lease terms.
- Monetizing Contracts: In investment scenarios, the assignor often uses the assignment as a way to generate profit. By securing a valuable contract and then assigning it to an end buyer for a fee, the assignor capitalizes on their position without taking long-term ownership.
How It Is Used
The role of the assignor appears in various real estate scenarios, each with unique procedural nuances.
- Wholesale Real Estate Investing: A real estate wholesaler acts as an assignor by signing a purchase agreement with a seller and then assigning that contract to an investor (the assignee). The wholesaler collects an “assignment fee” for finding the deal, while the assignee completes the purchase.
- Lease Assignment: A tenant who needs to vacate a property before their lease expires may act as an assignor. They transfer their rights to occupy the space to a new tenant. Crucially, the lease terms usually dictate whether the landlord must approve this action.
- Selling Mortgage Notes: In the lending world, the original lender (assignor) frequently sells mortgage loans to secondary market investors or government-sponsored entities. This frees up the lender’s capital, allowing them to issue new loans to other borrowers.
Importance in Real Estate Transactions
Understanding the responsibilities and risks of being an assign is critical for navigating contract law and liability.
- Residual Liability: One of the most important concepts for an assignor to understand is that assignment does not always equal total release. Unless a legal agreement called a “novation” is signed by all parties, the assignor may remain secondarily liable if the assignee fails to fulfill the obligations (e.g., if the new tenant stops paying rent).
- Contractual Limitations: The ability to act as an assignor is not automatic. Many real estate contracts contain “anti-assignment” clauses that either prohibit transfer entirely or require the express written consent of the other party. An assignor must carefully review these terms to ensure the transfer is valid.
Clarifying Ownership: The assignor formally establishes the chain of ownership or interest. By executing a Deed of Assignment or similar document, they create a clear legal record that they have waived their rights, preventing future disputes over who holds the authority to act.
