This Is from the SDT/MRT Manual and That It Clarifies the Issue As to If MRT Is Required
This is from the SDT/MRT manual and that it clarifies the issue as to if MRT is required on an Assignment of Rents.
Assignment of Rents: Mortgage
Amendment
No mortgage registration tax (MRT) is due on the
recording of an assignment of rents which is given
as additional security for a principle debt which is
already secured by a mortgage of real property
located in Minnesota. (M.S. 287.04)
With an assignment of rents, the mortgagor agrees
to transfer the mortgagor’s legal right to collect
rents on real property to the mortgagee if the
mortgagor defaults on the terms of the original
contract. It gives the mortgagee the legal right to
collect the rents in lieu of the mortgagor’s
payments under the original contract.
A mortgage assigning rents can function as a first
mortgage only when the original contract itself was
not a mortgage. For example, the original contract
could be a promissory note for a cash loan, which
did not create a lien on real property as security.
Because it was not a mortgage, the original
contract was not subject to the MRT, and no tax
was paid on the principal debt.
However, if the original contract was a mortgage
creating a lien on real property as security, the
original mortgage contract would have been
subject to the MRT. The MRT would have been
paid on the total secured debt of the mortgage
contract before the document could have been
recorded.
In this case, a subsequent mortgage assigning rents
would function as a mortgage amendment. It
would amend the first mortgage by putting up the
rents as additional security for the same principal
debt secured by the first mortgage. And the MRT
would have been paid on that principal debt.
Therefore, because it only provides additional
security for the principal debt of an existing
mortgage and does not increase that principal debt,
a mortgage assigning rents as an amendment to an
existing mortgage is not subject to the MRT.
In summary:
The original contract is a mortgage that secures
the principal debt with a lien on real property.
The MRT was due on the original mortgage
and paid.
The mortgage assigning rents provides
additional security for the original principal
debt.
The mortgage assigning rents does not increase
the original principal debt.
The original mortgage must remain in
existence and not be satisfied.
In order for a new mortgage to qualify as a
mortgage amendment, the original mortgage,
which is being amended, must remain in existence
and not be satisfied.
If the original mortgage is satisfied, the old
obligation and lien are extinguished. Instead of
providing additional security for the original debt,
the new mortgage creates a n independent debt
obligation and lien. As a result, the total debt
secured by the new mortgage is subject to the
MRT.
Assignment of Rents: First Mortgage
A mortgage assigning unaccrued rents on real
property in Minnesota is subject to the mortgage
registration tax (MRT).
The basis of the tax is the debt amount that is
secured by the rents, if all of the real property is
located in Minnesota.
With this type of security for an existing debt, the
mortgagor agrees to assign legal rights to collect
unaccrued rents on real property to the mortgagee.
A mortgage assigning rents can function as a first
mortgage if the original contract was not a mortgage.
For example, if the original contract was a
promissory note for a cash loan that did not create
a lien on real property as security, it was not a
mortgage. The original contract would not have
been subject to the MRT.
A mortgage assigning rents is subject to the MRT
because it secures a debt with real property.
Legally, “unaccrued rents”are defined as part of
real property or land.
Key points about a mortgage assigning rents,
which makes it subject to the MRT:
1. The original contract was not a mortgage; (e.g.
it was a promissory note.)
2. The mortgage assigning rents secures the debt.
3. The MRT is due on the debt secured by the
mortgage assigning rents. If a supplement to a
mortgage assigning rents later increases the
amount of debt secured under that mortgage,
additional MRT would be due on the increase
as is the case for other mortgages.
M.S. 287.01, Subd. 3; Op.Atty.Gen., 6/7/74.