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Real Estate

ASSIGNMENTS: Assigning your lease, rights in a partnership or intellectual property

Just like any other contractual right, real estate property rights can also be assigned. But, there are special duties and liabilities attaching to transfers of the right to possess property.  The assignor transfers with an assignment the complete remainder of the interest (in the contract or property) to the assignee. There should not be any sort of reversionary interest retained by the assignor in the right to possess. The assignee’s interest has to lie adjacent to the interest of the next person to have the right to possession. If a tenant assignor reserves any time or interest, then the act is not an assignment, but a sublease instead.

The contract in question, when the assignment takes place, determines the liability of the assignee. Generally, however, the assignee has possession of the property or the right to obtain same with the lessor (the original other party to the assigned contract/lease). Along with possession of the property comes the duty on the part of the assignee to perform certain obligations under the original assigned contract (lease), that is to pay rent. Likewise, the lessor continues with the obligations under the original contract in maintaining or repairing the land.

When the assignor agrees to continue paying rent to the lessor but defaults, the lessor can sue both the assignor under the original contract signed with the lessor along with the assignee. The latter is involved because by taking possession of the property interest, the assignee has obliged him/herself to perform duties under the terms of the original assigned contract, such as the payment of rent.

Notwithstanding the clause that the landlord might withhold consent to an assignment, the general rule is that the landlord would not withhold consent unreasonably unless there is a provision stating specifically that the landlord has the option to withhold consent at landlord’s sole discretion.

Partnership rights

It is also possible for a person to assign the rights to receive the benefits going to a partner in a partnership. That, however, does not empower the assignee to gain thereby any of the assignor’s rights with respect to the operation of the partnership. The assignee can not vote on partnership matters, inspect the partnership books, or take possession of partnership property. Actually, the assignee can only be given the right to collect distributions of income, unless the remaining partners consent to the assignment of a new general partner with operational, management, and financial interests. If the partnership is gone, the assignee can only claim the assignor’s share of any distribution following the dissolution.

Intellectual property rights

Though such things do not exactly fall under real estates, the ownership of intellectual property, which among others consists of trademarks, patents and copyrights, could be assigned. It is, however, necessary to note that special conditions attach to the assignment of patents and trademarks. An instrument in writing (such as an assignment agreement) is the most common form of assignment of patent rights but it can also be carried out by other operations of law, for instance, succession law (e.g. wills) or foreclosure law. In regards to trademarks, the person owning the mark has to transfer not only the ownership of the mark, but also the goodwill associated with the mark.

It is not uncommon for companies to request employees that they assign all intellectual property created by them while they were under the employment of the company. Generally, this forms a part of the Employment Agreement, but it is sometimes done in the U .S. through a specific agreement called Proprietary Information and Inventions Agreement (PIIA), or a Assignment of Works Agreement in Canada.

Successive assignments

It is not uncommon to find an unscrupulous assignor assigning the exactly same rights to multiple parties, usually for some consideration. In that situation, the rights of the assignee are depending on the revocability of the assignment, and on the timing of the assignments relative to certain other actions.

It is a curious left over from the common law that when the assignment was donative (i.e. a gift), the last assignee happens to be the true owner of the rights. If, however, the assignment was for consideration, the first assignee to actually possess the assigned contract is the true owner of the rights. Traditionally, the first assignor with equity, meaning the first to have paid for the assignment, would have the strongest claim, while remaining assignees would possibly have other remedies.

Statute of frauds

Having regard to the fact that the assignment of a real estate deal is essentially a contract for the transfer of an interest in land, the statute of frauds is sometimes evoked in concerned disputes. Thus, in an action for specific performance, there has to be an agreement to convey land satisfying the statute of frauds. The provisions of the statute is regarded to have been satisfied if the contract to convey is supported by a writing or writings containing the essential terms of a purchase and sale agreement and signed by the party against whom the contract is to be enforced. Should there be no written agreement, a court of equity is authorized to enforce an oral agreement to convey only when the part performance doctrine is satisfied. Anyway, in most jurisdictions, part performance is proven when the purchaser pays the purchase price, has possession of the land, and makes improvements on the land, all with the permission of the seller. Just by paying the purchase price, no jurisdiction is satisfied. 

One way to relieve the burden of your obligations is to assign the contract stipulating your promises to perform, hoping that the assignor will take over.  This can be strategic at a time when selling your contract or interest is difficult because of timing or poor market conditions.  Contact the lawyers at Levy Zavet PC to discuss your assignment deals or what we can do for you and the contracts you are in.

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