CHAPTER 253

FORMERLY

HOUSE SUBSTITUTE NO. 1

FOR

HOUSE BILL NO. 211

AN ACT TO AMEND CHAPTER 21, TITLE 25, DELAWARE CODE RELATING TO PERFECTION OF SECURITY INTERESTS IN THE LESSOR'S INTEREST IN LEASES OR RENTS ARISING FROM REAL PROPERTY.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Chapter 21, Title 25 of the Delaware Code by adding thereto a new section which shall read as follows:

"2121. Instruments transferring, pledging or assigning lessors' interests in leases or rents arising from real property as security.

(a) Upon recording, in the office of the Recorder of Deeds in and for the county where the real property lies, of any instrument transferring, pledging or assigning the lessor's interest in leases (whether in existence or thereafter existing) of or rents (including security deposits) arising from real property as conditional or unconditional security for a debt or duty, the interest of the transferee, pledgee or assignee shall be fully perfected as to the transferor, pledgor or assignor and as to all third parties without the necessity of furnishing further notice to the transferor, pledgor or assignor or any lessee, of obtaining possession of the real property, of impounding the rents or security deposits, of filing a financing statement under the Delaware Uniform Commercial Code, of securing the appointment of a receiver, or of taking any other affirmative action, and such interest shall have priority according to the time of recording the instrument in the proper office, without respect to the time of its being signed and delivered.

(a) Except as may be provided in the lease or other agreement by which it is bound, the lessee under any such lease identified in subsection (a) is authorized to pay the transferor, pledgor or assignor, rents and security deposits until the lessee receives written notification that rents due or to become due have been transferred, pledged or assigned and that payment is to be made to the transferee, pledgee or assignee. A notification that does not reasonably identify the rents transferred, pledged or assigned is ineffective. If requested by the lessee, the transferee, pledgee or assignee must furnish reasonable proof that the assignment has been made and is in full force and effect and unless so furnished the lessee may pay the transferor, pledgor or assignor.

(b) Whenever the debt or duty secured by an instrument described in this section is satisfied or performed, and to the extent such instrument is not self-terminating, upon such an event, the transferee, pledgee or assignee shall forthwith cause to be recorded in the office in which the instrument is recorded a document pursuant to which it declares that the instrument is terminated. The recording of such document shall extinguish the instrument and the effect shall be the same as if such instrument had not been made.

(b) Any recorded instrument transferring, pledging or assigning an interest in leases of or rents arising from real property shall be duly perfected as herein provided, except that nothing herein shall alter, change or modify any perfected order of priority of interests in such leases or rents which exists on the date that this legislation is enacted."

Approved July 19, 1995