Also known as: assume liabilities · assumed liabilities · assuming liabilities · assumption of liability · liability assumption
Written by attorneys · grounded in primary & secondary sources — see below
A promise by the transferee of mortgaged real estate, whether made to the transferor or to the mortgagee, to perform the obligation secured by the mortgage. Once made, the transferee becomes the principal obligor and the transferor a secondary obligor, entitling the transferor to exoneration from the transferee even before any payment occurs.
Andre Antoine sold his mortgaged warehouse to Atlas Ventures. The purchase contract stated that Atlas would continue making payments on the existing loan. Atlas later defaulted. The lender demanded payment from Andre, who remained personally liable. Andre sued Atlas to compel it to perform the mortgage obligation.
Apex Dynamics sold its mortgaged factory to Alpine Mining. The sale agreement required Alpine to assume and perform all obligations arising from financial encumbrances on the property. Alpine stopped making mortgage payments. The lender demanded payment from Apex. Apex sued Alpine to compel performance of the assumed obligation.
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No. A promise by the transferee to perform the mortgage obligation is an assumption whether made to the transferor or the mortgagee. The seller who remains personally liable may enforce the promise directly against the transferee to obtain exoneration.
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No. The seller's right to exoneration arises immediately upon the buyer's default. The seller need not first pay any portion of the debt or wait for lender enforcement action.
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No. The assumption agreement binds the buyer to the seller regardless of whether the lender consents or participates in the transfer. Lender consent affects only the lender's direct rights against the buyer.
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