In one sentence
A borrower's assignment to the lender of key project contracts, such as construction, management, or franchise agreements.
The longer version
Assigning material contracts lets the lender step into them if it takes over the property, preserving the going concern. Construction contracts, management agreements, and franchise agreements are common subjects.
Each assignment often needs the counterparty's consent, adding parties and documents to the closing checklist.
Common questions
- What is an assignment of contracts?
- A borrower's assignment to the lender of key project contracts, such as construction, architect, management or franchise agreements, as additional security.
- Why do construction lenders take an assignment of contracts?
- So that if the borrower defaults, the lender can step in and keep the contractor and architect working to complete the project.
- Do the contract counterparties have to consent?
- Lenders usually require consents from key counterparties confirming they will perform for the lender if it steps in.
Keep reading
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The due diligence checklist, built to be runChecklists as systems, not documents.
- The commercial loan closing processThe five stages from term sheet to funded.
- Loan closing softwareWhere this item is cleared before funding.