assignment and assumption agreement mortgage

Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

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assignment and assumption agreement mortgage

by Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

Person presenting documents to another person who is signing them

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
The assignor must agree to assign their rights and duties under the contract to the assignee.
The assignee must agree to accept, or "assume," those contractual rights and duties.
The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
The effective date of the assignment and assumption agreement
Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

Loan Assumption Agreement: Definition, Terms, Example

Jump to section, what is a loan assumption agreement.

A loan assumption agreement is an agreement between a lender, original borrower, and a new borrower, where the new borrower agrees to assume responsibility for the debt owed by original borrower. These agreements are commonly seen in mortgages and real estate.

The agreement is made between the original lender and a new borrower, who will take over mortgage payments on the property. This allows for a smooth transition with no interruption in mortgage payments to be due, as well as avoiding penalties that may have been incurred by the borrower if they were to default or prepay their loan through refinancing or another means.

The original lender typically requires an appraisal before approving this type of loan transfer, which ensures that there is enough equity in the property for both parties involved. In addition, lenders will often require some kind of documentation from those seeking to assume responsibility for paying off the mortgage so they can confirm income levels and creditworthiness before agreeing.

Common Sections in Loan Assumption Agreements

Below is a list of common sections included in Loan Assumption Agreements. These sections are linked to the below sample agreement for you to explore.

Loan Assumption Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.29 28 dex1029.htm LOAN ASSUMPTION AGREEMENT , Viewed September 27, 2021, View Source on SEC .

Who Helps With Loan Assumption Agreements?

Lawyers with backgrounds working on loan assumption agreements work with clients to help. Do you need help with a loan assumption agreement?

Post a project in ContractsCounsel's marketplace to get free bids from lawyers to draft, review, or negotiate loan assumption agreements. All lawyers are vetted by our team and peer reviewed by our customers for you to explore before hiring.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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