Assignment of Rents Is No Longer A Bankruptcy Impediment for Real Property Holding Companies

August, 2022

Since 2017 and under Michigan law, a properly perfected assignment of rents prohibited a debtor from using its rents in a bankruptcy case because the rents were absolutely assigned to the lender.  Beginning on September 22, 2022, the Michigan Uniform Assignment of Rents Act (“MUARA”) becomes effective.  Among other things, MUARA clarifies that a properly perfected assignment of rents does not absolutely transfer ownership of a real property’s rents to the lender, but acts only as a security interest in the rent.  As a result, MUARA will make reorganizing real property holding companies significantly easier.  Schafer and Weiner has significant experience reorganizing real property holding companies, and John Stockdale, Jr. recently attended a seminar sponsored by the Federal Bar Association addressing the details of MUARA.