Also known as: assumption agreements · assumption of contract · debt assumption agreement
Written by attorneys · grounded in primary & secondary sources — see below
A promise by the transferee of mortgaged real estate to perform the obligation secured by the mortgage. The promise renders the transferee directly liable to the mortgagee to the extent stated in the agreement.
Aaron Adams sold his factory to Avalon Pharmaceuticals under a deed that credited the outstanding mortgage balance against the purchase price. Avalon executed a separate assumption agreement promising to pay the note held by First Bank. When Avalon missed payments, First Bank sued Avalon personally for the balance due under the assumption agreement.
Eleanor Nichols leased space to Broadway Realty under a lease requiring the tenant to maintain the premises. Broadway Realty later conveyed its interest to a new corporation whose agents expressly assumed the lease covenants on the corporation's behalf. Nichols sued the corporation directly to enforce the maintenance duties assumed in the agreement.
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No. The mortgagee need not sign the assumption agreement. The mortgagee may still enforce the promise as a third-party beneficiary when the transferee agrees with the transferor to perform the secured obligation.
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The mortgagee may sue the transferee personally on the debt before foreclosure or seek a deficiency judgment after foreclosure. Recovery is limited to the amount the transferee agreed to assume.
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Yes. The original transferor remains personally liable unless the mortgagee grants an express release or a suretyship defense applies. The mortgagee may proceed against either party or both.
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