GENERAL ASSEMBLY OF NORTH CAROLINA
1991 SESSION

CHAPTER 234
SENATE BILL 645

AN ACT TO MAKE CHANGES IN THE LAW RELATING TO THE CREATION AND PERFECTION OF SECURITY INTERESTS IN RENTS AND PROFITS.

The General Assembly of North Carolina enacts:

Section 1.  G.S. 47-20 reads as rewritten:
"§ 47-20.  Deeds of trust, mortgages, conditional sales contracts, assignments of leases and rents; effect of registration.
(a)	No deed of trust or mortgage of real or personal property, or of a leasehold interest or other chattel real, or conditional sales contract of personal property in which the title is retained by the vendor, shall be valid to pass any property as against lien creditors or purchasers for a valuable consideration from the grantor, mortgagor or conditional sales vendee, but from the time of registration thereof as provided in this Article; provided however that any transaction subject to the provisions of the Uniform Commercial Code (Chapter 25 of the General Statutes) is controlled by the provisions of that act and not by this section.
(b)	For purposes of this section and G.S. 47-20.1, the following definitions apply:
(1)	'Rents, issues, or profits' means all amounts payable by or on behalf of any lessee, tenant, or other person having a possessory interest in real estate on account of or pursuant to any written or oral lease or other instrument evidencing a possessory interest in real property or pursuant to any form of tenancy implied by law, and all amounts payable by or on behalf of any licensee or permittee or other person occupying or using real property under license or permission from the owner or person entitled to possession.  The term shall not include farm products as defined in G.S. 25-9-109(3), timber, the proceeds from the sale of farm products or timber, or the proceeds from the recovery or severance of any mineral deposits located on or under real property.
(2)	'Assignment of leases, rents, issues, or profits' means every document assigning, transferring, pledging, mortgaging, or conveying an interest in leases, licenses to real property, and rents, issues, or profits arising from real property, whether set forth in a separate instrument or contained in a mortgage, deed of trust, conditional sales contract, or other deed or instrument of conveyance.
(3)	'Collateral assignment' means any assignment of leases, rents, issues, or profits made and delivered in connection with the grant of any mortgage, or the execution of any conditional sales contract or deed of trust or in connection with any extension of credit made against the security of any interest in real property, where the assignor retains the right to collect or to apply such lease revenues, rents, issues, or profits after assignment and prior to default.
(c)	The recording of a written document in accordance with G.S. 47-20.1 containing an assignment of leases, rents, issues, or profits arising from real property shall be valid and enforceable from the time of recording to pass the interest granted, pledged, assigned, or transferred as against the assignor, and shall be perfected from the time of recording against subsequent assignees, lien creditors, and purchasers for a valuable consideration from the assignor.
(d)	Where an assignment of leases, rents, issues, or profits is a collateral assignment, after a default under the mortgage, deed of trust, conditional sales contract, or evidence of indebtedness which such assignment secures, the assignee shall thereafter be entitled, but not required, to collect and receive any accrued and unpaid or subsequently accruing lease revenues, rents, issues, or profits subject to the assignment, without need for the appointment of a receiver, any act to take possession of the property, or any further demand on the assignor.  Unless otherwise agreed, after default the assignee shall be entitled to notify the tenant or other obligor to make payment to him and shall also be entitled to take control of any proceeds to which he may be entitled.  The assignee must proceed in a commercially reasonable manner and may deduct his reasonable expenses of realization from the collections.
(e)	This section shall not exclude other methods of creating, perfecting, collecting, sequestering, or enforcing a security interest in rents, issues, or profits provided by the law of this State."
Sec. 2.  This act becomes effective October 1, 1991, and applies to all assignments of leases, rents, issues, or profits, including collateral assignments, whether recorded prior to or after the effective date of this act.
In the General Assembly read three times and ratified this the 6th day of June, 1991.

─────────────────── 
James C. Gardner
President of the Senate

─────────────────── 
Daniel Blue, Jr.
Speaker of the House of Representatives