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Assignments: why you need to serve a notice of assignment

It's the day of completion; security is taken, assignments are completed and funds move. Everyone breathes a sigh of relief. At this point, no-one wants to create unnecessary paperwork - not even the lawyers! Notices of assignment are, in some circumstances, optional. However, in other transactions they could be crucial to a lender's enforcement strategy. In the article below, we have given you the facts you need to consider when deciding whether or not you need to serve notice of assignment.

What issues are there with serving notice of assignment?

Assignments are useful tools for adding flexibility to banking transactions. They enable the transfer of one party's rights under a contract to a new party (for example, the right to receive an income stream or a debt) and allow security to be taken over intangible assets which might be unsuitable targets for a fixed charge. A lender's security net will often include assignments over contracts (such as insurance or material contracts), intellectual property rights, investments or receivables.

An assignment can be a legal assignment or an equitable assignment. If a legal assignment is required, the assignment must comply with a set of formalities set out in s136 of the Law of Property Act 1925, which include the requirement to give notice to the contract counterparty.

The main difference between legal and equitable assignments (other than the formalities required to create them) is that with a legal assignment, the assignee can usually bring an action against the contract counterparty in its own name following assignment. However, with an equitable assignment, the assignee will usually be required to join in proceedings with the assignor (unless the assignee has been granted specific powers to circumvent that). That may be problematic if the assignor is no longer available or interested in participating.

Why should we serve a notice of assignment?

The legal status of the assignment may affect the credit scoring that can be given to a particular class of assets. It may also affect a lender's ability to effect part of its exit strategy if that strategy requires the lender to be able to deal directly with the contract counterparty.

The case of General Nutrition Investment Company (GNIC) v Holland and Barrett International Ltd and another (H&B) provides an example of an equitable assignee being unable to deal directly with a contract counterparty as a result of a failure to provide a notice of assignment.

The case concerned the assignment of a trade mark licence to GNIC . The other party to the licence agreement was H&B. H&B had not received notice of the assignment. GNIC tried to terminate the licence agreement for breach by serving a notice of termination. H&B disputed the termination. By this point in time the original licensor had been dissolved and so was unable to assist.

At a hearing of preliminary issues, the High Court held that the notices of termination served by GNIC , as an equitable assignee, were invalid, because no notice of the assignment had been given to the licensee. Although only a High Court decision, this follows a Court of Appeal decision in the Warner Bros Records Inc v Rollgreen Ltd case, which was decided in the context of the attempt to exercise an option.

In both cases, an equitable assignee attempted to exercise a contractual right that would change the contractual relationship between the parties (i.e. by terminating the contractual relationship or exercising an option to extend the term of a licence). The judge in GNIC felt that "in each case, the counterparty (the recipient of the relevant notice) is entitled to see that the potential change in his contractual position is brought about by a person who is entitled, and whom he can see to be entitled, to bring about that change".

In a security context, this could hamper the ability of a lender to maximise the value of the secured assets but yet is a constraint that, in most transactions, could be easily avoided.

Why not serve notice?

Sometimes it's just not necessary or desirable. For example:

• If security is being taken over a large number of low value receivables or contracts, the time and cost involved in giving notice may be disproportionate to the additional value gained by obtaining a legal rather than an equitable assignment.
• If enforcement action were required, the equitable assignee typically has the option to join in the assignor to any proceedings (if it could not be waived by the court) and provision could be made in the assignment deed for the assignor to assist in such situations. Powers of attorney are also typically granted so that a lender can bring an action in the assignor's name.
• Enforcement is often not considered to be a significant issue given that the vast majority of assignees will never need to bring claims against the contract counterparty.

Care should however, be taken in all circumstances where the underlying contract contains a ban on assignment, as the contract counterparty would not have to recognise an assignment that is made in contravention of that ban. Furthermore, that contravention in itself may trigger termination and/or other rights in the assigned contract, that could affect the value of any underlying security.

What about acknowledgements of notices?

A simple acknowledgement of service of notice is simply evidence of the notice having been received. However, these documents often contain commitments or assurances by the contract counterparty which increase their value to the assignee.

Best practice for serving notice of assignment

Each transaction is different and the weighting given to each element of the security package will depend upon the nature of the debt and the borrower's business. The service of a notice of assignment may be a necessity or an optional extra. In each case, the question of whether to serve notice is best considered with your advisers at the start of a transaction to allow time for the lender's priorities to be highlighted to the borrowers and captured within the documents.

For further advice on serving notice of assignment please contact Kirsty Barnes or Catherine Phillips  from our Banking & Finance team.

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Charges when Selling or Buying Leasehold Property

When you buy, own or sell a Leasehold property, many of your rights and obligations will be set out in your lease. One of your obligations will be to make certain payments to the person or the organisation responsible for administering and managing your building. That person might be a landlord, a management company, or a managing agent instructed by the landlord or management company (referred to below as "the landlord"). The typed of payments or charges can be divided into three groups. They are:

Ground Rent

Your lease may provide for you to make regular payments of ground rent as well as service charges. Although the lease may initially oblige you to pay a fixed amount of ground rent, it may also contain a clause which allows the landlord to increase the rent in years to come. When buying a leasehold property you should always ask your conveyancer to explain if there are any rent review clauses in your lease and explain what this would mean to you in financial terms.

Service Charge

Service charges normally vary according to the amount that is spent by the landlord each year on the upkeep of the building as a whole, including for example, cleaning the communal areas, gardening, maintaining and renewing the structure of the building (including the roof), building insurance. Usually, the lease will oblige you to pay a fixed percentage or a "reasonable proportion" of that amount. You should ask your conveyancer how the service charge is calculated, what it covers and whether the landlord has any plans for expensive remedial works to be carried out to the building for which you will be responsible.

Administration Charges

The landlord is likely to make an administration charge if you ask for a service connected with the buying or selling of a leasehold property. The following are examples of these charges you may have to pay,

When you are selling

1. Sellers leasehold pack: When you are selling a leasehold property it will be your responsibility to pay the landlord's charge to provide a Sellers leasehold pack (usually in the form of a Form LPE1) to provide the leasehold information required by your buyer and their lender.

2. Licence to Assign: It is possible that your lease requires you to obtain a licence from the landlord to sell the property. This involves the landlord approving the buyer as a new owner of the property. You may have to pay both the landlord's and landlord's solicitors charges for consenting to the sale and providing the Licence.

3. Exit or Transfer Fee: A retirement flat lease may include an "exit" or "transfer fee" payable by you from the sale proceeds and expressed as a percentage of the property value.

When you are buying

1. Deed of Covenant: Some leases require a buyer to enter into a Deed with the landlord to confirm that you will be bound by the terms of the lease. The buyer has to pay this charge.

2. Notice of Assignment of Transfer and Charge: The landlord will require that a notice is sent to them notifying of the change of ownership and any mortgage lender. This is to ensure that the landlord has your contact details (these may be different from the address of the property you have purchased) for the purpose of sending you ground rent and service charge invoices, and details of works to be carried out to the building.

3. Certificate of Compliance: The landlord may be required to provide this to confirm to the Land Registry that the change of ownership requirements in the lease have been complied with.

4. Share or Membership Transfer Charge: If you are required to become a member of the Management Company then the landlord may make a charge to transfer the share or membership certificate into your name.

To ensure that you are aware of the above charges and procedures, when you are selling or buying leasehold property, you should ask your conveyancer to review the lease and property title at an early stage.

Hughes Paddison has an experienced residential property team who are able to advise on all aspects of leasehold conveyancing whether you are selling or buying. Please contact our residential property team, we will spend time discussing any queries you have concerning the leasehold property you are buying or selling, and provide you with a conveyancing quote.

The information contained on this page has been prepared for the purpose of this blog/article only. The content should not be regarded at any time as a substitute for taking legal advice.

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Assignments: why you need to serve a notice of assignment

It's the day of completion; security is taken, assignments are completed and funds move. Everyone breathes a sigh of relief. At this point, no-one wants to create unnecessary paperwork – not even the lawyers! Notices of assignment are, in some circumstances, optional. However, in other transactions they could be crucial to a lender's enforcement strategy. In the article below, we have given you the facts you need to consider when deciding whether or not you need to serve notice.

What's the issue?

Assignments are useful tools for adding flexibility to banking transactions. They enable the transfer of one party's rights under a contract to a new party (for example, the right to receive an income stream or a debt) and allow security to be taken over intangible assets which might be unsuitable targets for a fixed charge. A lender's security net will often include assignments over contracts (such as insurance or material contracts), intellectual property rights, investments or receivables.

An assignment can be a legal assignment or an equitable assignment. If a legal assignment is required, the assignment must comply with a set of formalities set out in s136 of the Law of Property Act 1925, which include the requirement to give notice to the contract counterparty.

The main difference between legal and equitable assignments (other than the formalities required to create them) is that with a legal assignment, the assignee can usually bring an action against the contract counterparty in its own name following assignment. However, with an equitable assignment, the assignee will usually be required to join in proceedings with the assignor (unless the assignee has been granted specific powers to circumvent that). That may be problematic if the assignor is no longer available or interested in participating.

Why should we serve a notice of assignment?

The legal status of the assignment may affect the credit scoring that can be given to a particular class of assets. It may also affect a lender's ability to effect part of its exit strategy if that strategy requires the lender to be able to deal directly with the contract counterparty.

The case of General Nutrition Investment Company (GNIC) v Holland and Barrett International Ltd and another (H&B) provides an example of an equitable assignee being unable to deal directly with a contract counterparty as a result of a failure to provide a notice of assignment. The case concerned the assignment of a trade mark licence to GNIC. The other party to the licence agreement was H&B. H&B had not received notice of the assignment. GNIC tried to terminate the licence agreement for breach by serving a notice of termination. H&B disputed the termination. By this point in time the original licensor had been dissolved and so was unable to assist. At a hearing of preliminary issues, the High Court held that the notices of termination served by GNIC, as an equitable assignee, were invalid, because no notice of the assignment had been given to the licensee. Although only a High Court decision, this follows a Court of Appeal decision in the Warner Bros Records Inc v Rollgreen Ltd case, which was decided in the context of the attempt to exercise an option.

In both cases, an equitable assignee attempted to exercise a contractual right that would change the contractual relationship between the parties (i.e. by terminating the contractual relationship or exercising an option to extend the term of a licence). The judge in GNIC felt that "in each case, the counterparty (the recipient of the relevant notice) is entitled to see that the potential change in his contractual position is brought about by a person who is entitled, and whom he can see to be entitled, to bring about that change".

In a security context, this could hamper the ability of a lender to maximise the value of the secured assets but yet is a constraint that, in most transactions, could be easily avoided.

Why not serve notice?

Sometimes it's just not necessary or desirable. For example:

• If security is being taken over a large number of low value receivables or contracts, the time and cost involved in giving notice may be disproportionate to the additional value gained by obtaining a legal rather than an equitable assignment.
• If enforcement action were required, the equitable assignee typically has the option to join in the assignor to any proceedings (if it could not be waived by the court) and provision could be made in the assignment deed for the assignor to assist in such situations. Powers of attorney are also typically granted so that a lender can bring an action in the assignor's name.
• Enforcement is often not considered to be a significant issue given that the vast majority of assignees will never need to bring claims against the contract counterparty.

Care should however, be taken in all circumstances where the underlying contract contains a ban on assignment, as the contract counterparty would not have to recognise an assignment that is made in contravention of that ban. Furthermore, that contravention in itself may trigger termination and/or other rights in the assigned contract, that could affect the value of any underlying security.

What about acknowledgements of notices?

A simple acknowledgement of service of notice is simply evidence of the notice having been received. However, these documents often contain commitments or assurances by the contract counterparty which increase their value to the assignee.

Each transaction is different and the weighting given to each element of the security package will depend upon the nature of the debt and the borrower's business. The service of a notice of assignment may be a necessity or an optional extra. In each case, the question of whether to serve notice is best considered with your advisers at the start of a transaction to allow time for the lender's priorities to be highlighted to the borrowers and captured within the documents.

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Notice of Assignment of Lease

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Issue a notice of assignment or charge on your leasehold property

Transactions such as sales and remortgages require a notice of assignment, or transfer, and/​or charge being served to us. Your lease says we must be told about this.

Costs for this service

• Notice of assignment - £35
• Notice of charge - £35
• Notice of assignment and notice of charge - £70

What you need to know...

Notice of assignment (transfer).

When a lease is sold or passed to someone else it’s known as an assignment to the new owner or owners. The lease says that the council must be told about this.

If you've recently sold your property it is the responsibility of the buyer's solicitor to send us a notice of transfer and pay the fee so that we can update our records. The notice should be issued by the seller's solicitor within one month.

Notice of charge

This is a notice confirming that a mortgage has been secured as a charge against the land registry. This notice should be served alongside the notice of transfer if you are registering a purchase.

You'll also need to issue a notice of charge if you:

• buy a property with a mortgage
• add someone to your mortgage
• remortgage the property (get a new mortgage, or borrow more money on your existing mortgage).

Do it online

Pay for a notice of assignment

Pay for a notice of charge

Pay for a notice of assignment and charge

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Understanding the Concept of an Assignment Fee in Real Estate

Navigating the realm of real estate transactions can often feel like deciphering a complex puzzle, especially for those who are early on their property journey. A concept that can confuse professionals and individuals involved in transactions alike is the idea of an assignment fee in real estate—something that comes into play in various scenarios. In the context of real estate, an assignment fee is an essential concept to grasp, bridging the gap between  creative financing  and the traditional purchase and sale of properties.

What is Assignment in Real Estate?

To understand an assignment fee in real estate, you first have to understand what an assignment is. An assignment contract is essentially the document that gives someone the right to purchase a property. The assignment fee refers to the payment made to an individual, generally known as an assignor, for transferring their rights and obligations under a pre-existing real estate assignment contract to another party, known as the assignee. 

This transaction is particularly prevalent in the practice of  real estate wholesaling . In these transactions, an individual will secure a contract to purchase a property and then assign that same contract to an end buyer, charging a fee for the convenience and the opportunity they present.

A contract assignment fee is a strategic tool for those looking to leverage lucrative opportunities within the market without needing a significant capital investment. It allows for flexibility in the investment realm, enabling professionals to generate income from real estate deals without the traditional barriers of entry. This means people can make headway in their careers without having to obtain mortgage loans or conduct extensive renovations.

In essence, the assignment fee is the financial reflection of the value that the assignor brings to the table in a transaction. The assignor is a useful party for both buyers and sellers, helping the process along by identifying a potentially profitable deal, negotiating terms, and then passing on the right to execute the deal to a suitable party. Understanding this concept is crucial for real estate investors at all stages of their careers, especially those interested in using wholesale strategies and creative financing options.

What is an Assignment Fee in Real Estate?

The assignment fee in real estate is a concept rooted in the overarching principle of a contractual rights transfer. It represents the price that an assignee, someone interested in purchasing property, pays to the assignor for the rights to acquire said property under the terms the assignor has already negotiated with the seller. To make sure you get the right fee for the assignment of a contact, you need to understand the mechanics of how they work. 

This section expands on how assignment fees function in real estate transactions and delves into the factors that influence their amounts.

Explanation of How Assignment Fees Work in Real Estate

When an investor or a wholesaler, known in this case as the assignor, enters into a purchase agreement with a property seller, they acquire the legal right to buy the property at some negotiated, agreed-upon terms. However, instead of completing the purchase themselves, the assignor then finds another buyer, known as the assignee, who is interested in taking over the contract to eventually own the property.  This is when assignment fees come into play. 

The assignee must pay an assignment fee to the assignor for the right to purchase the property. Only once this fee is paid can the assignee step into the shoes of the original buyer, then proceed to close the deal with the seller. The original contract to buy is thus “assigned” from the assignor to the assignee, who from then on becomes responsible for fulfilling its terms.

Factors That Determine the Amount of Assignment Fees

The amount, or monetary value, of the assignment fee can vary greatly from deal to deal, being influenced by a range of factors, which we’ve broken down below:

Property Value and Equity:  Appropriately, the value and equity of the property will inform the assignment fee. A property with high value or substantial equity typically commands a higher assignment fee and vice versa.

Market Demand:  Consider  overarching market trends  when ascertaining an appropriate assignment fee. For example, in a seller’s market with higher demand for properties, assignment fees can increase because of plentiful competition among buyers.

Deal Profitability:  Even in the cases of lower-value properties, the nature of the deal itself will impact the assignment fee. This means that the more profitable a deal appears to be, the higher the fee that an assignor can command.

Negotiation Skills:  In a similar vein to the impact that profitability can have, negotiation skills can also change the shape of an assignment fee. The ability of the assignor to negotiate deals on both ends can directly impact their fee amount, with skilled negotiators often being able to secure higher fees.

Timeframe:  Time is money, and in the case of a wholesale assignment contract, this can be especially true. If the assignor negotiates the situation and closes the deal quickly, they might be able to command a higher fee for the increased convenience of a speedy transaction.

Comparison of Assignment Fees with Other Real Estate Transaction Costs

Assignment fees differ from the costs associated with various other real estate transactions in a variety of ways: 

Earnest Money vs. Assignment Fee:  Earnest money is a kind of deposit made to demonstrate the buyer’s seriousness about acquiring a property. This fee can typically be refunded under certain conditions or applied to the purchase at closing. On the other hand, an assignment fee is a non-refundable payment made to the assignor, specifically for the right to take over the contract.

Closing Costs vs. Assignment Fee:  Closing costs can encompass a variety of fees that buyers and sellers pay at the end of a real estate transaction. These fees can include things such as those associated with title searches, real estate attorney’s fees, and credit report charges. Assignment fees are separate from these, only ever being paid to the assignor for the contract rights.

Commission vs. Assignment Fee:  Real estate agents earn their living through commissions based on the property’s sale price, paid by the seller, generally from their earnings through making the sale. In contrast, an assignment fee is paid by the assignee to the assignor and is not related to the sale price or commission.

Understanding the nature of assignment fees, such as when they’re applicable, how they are calculated in relation to a transaction, and how they compare to other common transaction costs, is essential for anyone involved in real estate investing. This level of understanding is particularly vital in strategies such as wholesaling, where such fees are part and parcel of the process.

Pros and Cons of Assignment Fees

Assignment fees in real estate can be positive elements of transactions for sellers and investors while posing some notable challenges depending on the perspective of all parties involved, including the buyer. Below, we explore the advantages and disadvantages for the enactors of these transactions, as well as the risks and challenges that come with assignment fees.

Advantages for Sellers and Investors

For sellers:.

Quick Sales:  Sellers benefit from the existence of assignment fees as they can do wonders for speeding up the transaction. Wholesaling and the assignment fees that come with it are especially viable solutions when a seller wants to shift their asset quickly. Investors or fellow wholesalers who offer to pay these fees often aim to close deals rapidly.

Fewer Hurdles:  Sellers might avoid some traditional selling hurdles when embracing the nature of wholesaling and assignment fees. In the standard selling cycle, sellers might have to go through various stages, such as multiple showings or a buyer’s own financial approval process. These processes can be skipped altogether when dealing with investors ready to pay an assignment fee.

For Investors:

Profitability:  Investors or wholesalers can use assignment fees as their primary source of income. As it sidesteps the traditional processes of investing and reselling properties, wholesalers stand to make a profit through the assignment fee without having to close on the property themselves. By embracing this system, they also avoid closing costs and the need for financing.

Less Capital:  Wholesaling is a great method for generating income, without needing the same level of seed investment. Since the investor doesn’t need to purchase the property outright, they generally just have to pay a small (often refundable) deposit for the contract; there is less capital required upfront compared to traditional real estate investments.

Flexibility:  Because of the nature of deals that use assignment fees, investors can back out of a particular deal at any time. This can be achieved by offering and assigning the contract to another, more suitable buyer if the deal doesn’t fit their investment strategy or if they cannot secure financing.

Disadvantages for Buyers and Sellers

For buyers:.

Increased Cost:  Assignment fees do often increase the overall cost for the end buyer, as it becomes their responsibility to cover both the property’s agreed-upon price and the assignment fee. In some cases, the assignment fee can be taken from the overall sale price, but this isn’t common, meaning the speedier sale usually comes with an inflated price tag. 

Transparency Issues:  Buyers in these situations can often find it challenging to get full transparency regarding the property’s conditions or the original contract terms if not properly disclosed by the assignor. This shouldn’t be an issue, as long as the wholesaler or assignor does their job properly, but buyers should make sure to vet any collaborators carefully. 

Potential for Overextension:  Sellers may encounter issues if they work with the wrong wholesaler or investor. In some cases, an inexperienced investor can overextend and find it difficult to find a buyer to whom they can assign the contract, slowing down the transaction process and possibly reversing it. 

Market Misrepresentation:  Sellers could face the challenges of market misrepresentation if the assignor markets the property incorrectly or unethically, leading to potential legal challenges. For example, if the assignor lies about the property’s amenities, uses  unrealistic photography , or overvalues it, buyers might respond with legal action. 

Potential Risks and Challenges with Assignment Fees

Legal and Ethical Considerations:  The legality of assignment fees, much like many other aspects of the real estate market,  varies from region to region . Along with the legal side of things, there may also be ethical considerations to consider if parties are not fully informed of the contract terms and fees involved.

Market Fluctuations:  Market conditions can change rapidly—need we remind you of what happened to the housing market in 2008? This means that if the property value decreases or interest rates increase, it will likely become more challenging for the assignor to find a buyer willing to pay the fee on top of the existing property price.

Contractual Risks:  If the assignee fails to close the deal, the assignor might end up legally obligated to purchase the property under the original contract terms. Considering the reasons that most investors choose to embrace wholesaling and assignment fees, this could pose a significant financial risk that they’re not ready to incur.

Reputational Risks:  Assignors who consistently charge unnecessarily high assignment fees might gain a negative reputation in the real estate community among potential clients and fellow professionals alike. It’s important to consider what a fair, mutually beneficial fee should be to avoid potentially negatively affecting future business.

Complexity in Transactions:  Assignment fees add a level of complexity to real estate transactions, which are already fairly complicated at the best of times. There may be misunderstandings or disputes between the involved parties over the terms of the contract, the condition of the property, or the responsibilities each party has.

Both sellers and investors involved in wholesaling and assignment in real estate need to weigh the potential for quick and profitable transactions against the complexities and risks assignment fees introduce. It is crucial for every party involved to conduct suitable due diligence, operate transparently, and possibly seek professional legal counsel to ensure the process is conducted legally and ethically.

Legal and Ethical Considerations

The use of assignment fees in real estate transactions is full of potential, being a viable part of a strategic investment plan. However, while assignment fees and the deals they’re attached to can be highly lucrative, they also come with the potential for legal and ethical quandaries. Here, we delve into the legal regulations and ethical considerations that assignors should consider, highlighting potential issues that could arise from the misuse of assignment fees.

Legal Regulations and Requirements

Regulatory landscape:.

Disclosure Requirements:  Many jurisdictions require the full disclosure of an assignment fee to all parties involved in a transaction, ensuring no one feels like they’ve missed out on any vital information. Failure to clearly express the assignment fee to the buyer can often lead to legal penalties or complications.

Contractual Rights:  There are some contractual points to consider when handling an assignment fee in real estate. The original purchase agreement must expressly allow for the assignment of the contract without the need for repeat consent of the seller, or the investor must obtain written permission from the seller to assign the contract.

Licensing Laws:  Some regions may require an individual enacting a wholesale deal or receiving an assignment fee to have a professional real estate license, as the transaction could be considered as engaging in real estate brokerage without a license. This is worth considering if you want to pursue a career as a wholesaler or investor in general. 

State and Local Laws:  Both assignment fee legality and the ability to assign a contract can vary greatly between the different states and localities of the US. It’s crucial to understand the specific regulations of the area where you’re working and or where the property is located. It’s always important to tailor your approach to real estate for the area that you operate within. 

Ethical Considerations:

Fairness to All Parties:  Ethically, the fee should always reflect the value that’s actually been added by the assignor in finding the deal and should not be exploitative. If you’re working as a real estate wholesaler or receiving an assignment fee in any other way, make sure that you’re offering real value without overstating your contribution to the transaction. 

Transparency:  Assignors must be totally transparent about the property’s condition, the original contract terms, and the assignment fee’s size at every stage of the transaction. Remember, you’re not just trying to avoid legal implications with your honesty; you’re looking to build positive professional relationships built on trust. 

Conflict of Interest:  Ethically, an assignor should avoid any conflicts of interest in all transactions and should not misrepresent the potential value or investment benefits to the assignee. For example, if the assignor knows that an area is losing steam in the market, they should make that clear to their assignee.

Examples of Potential Legal and Ethical Issues

Non-Disclosure:  Failing to disclose one’s assignment fee openly and clearly to the end buyer or seller can lead to lawsuits, as it may be considered a fraudulent practice. It’s absolutely essential that a wholesaler makes it clear what they stand to gain from a deal so everyone understands the transaction from top to bottom. 

Predatory Practices:  Charging exorbitant assignment fees, especially in distressed markets or from vulnerable sellers, which are often hubs for real estate wholesaling, can be seen as unethical and might lead to legal challenges. This is why offering real value and making your fees reasonable is crucial.

Misrepresentation:  An assignor could face serious legal action if they misrepresent the terms of the original contract or the property’s condition for the purpose of securing a higher fee. It goes hand in hand with all of the other aspects of transparency—assignors must be clear and honest at every stage to avoid legal and ethical complications. 

Violation of Licensing Laws:  If an assignor acts as a de facto real estate broker by frequently assigning contracts for fees without a professional license, they might face legal penalties, including fines and injunctions. These laws vary from state to state, meaning it’s best to have a license in place, ensuring you can work in as many areas as possible. 

Breach of Contract:  If the original contract does not allow for the assignment of the property and the assignor proceeds without consent, they are highly likely to be sued for breach of contract. It should go without saying, but every real estate transaction needs to be enacted with the utmost professionalism, ensuring every party is fully aware of its nature. 

It’s essential for every party involved in the assignment of real estate contracts to be aware of the legal and ethical implications. The complex nature of these transactions often warrants the involvement of a dedicated legal professional to navigate the potential minefield of legal regulations and ethical considerations. Moreover, maintaining transparency and integrity throughout the process not only helps assignors avoid legal troubles but also builds a reputation that can lead to more successful deals in the future.

In this exploration of assignment fees in real estate, we’ve navigated their many complexities and nuances. From definition to application, assignment fees are a pivotal mechanism for investors, particularly in the realm of wholesaling.

There are many advantages and disadvantages associated with assignment fees. For sellers and investors, they can represent an expedient route to liquidity and profit. Conversely, for buyers, they can often introduce additional layers of cost and complexity.

The discussion of legal and ethical considerations illuminated the tightrope walked by those who engage in these transactions. The importance of adhering to disclosure norms, maintaining transparency, and aligning practices with the legal stipulations of the local and state jurisdictions cannot be overstated in this particular vein of real estate.

While the concept of assignment fees may appear straightforward, its application is often fraught with potential legal and ethical pitfalls. Those involved in real estate transactions must have a clear understanding of these fees and the corresponding regulations that govern their use.

By engaging in thorough research and due diligence and enlisting expert guidance, navigating the complex world of real estate can be achieved with confidence. The strategic use of assignment fees can indeed unlock opportunities and foster successful transactions, but only when managed with suitable care and consideration of all the variables at play.

For more insightful pieces about the real estate industry,  visit our blog today .

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Title Transfers and Changes

To prove vehicle ownership, it’s important to have a valid, up-to-date, and accurate California Certificate of Title. Here’s how you can transfer and change a title. 

Transfer your Title online!

You can now transfer a title online. Learn more about the steps and get started.

How to Transfer a Title

Anytime there’s a change to a vehicle or vessel’s registered owner or lienholder, that change must be updated in DMV’s records within 10 days and the California Certificate of Title must be transferred to the new owner.

A change in ownership is usually due to:

• Sale, gift, or donation
• Adding or deleting the name of an owner
• Inheritance
• Satisfaction of lien (full payment of car loan)

To transfer a title, you will need:

• Either the California Certificate of Title or an Application for Replacement or Transfer of Title (REG 227) (if the title is missing). 
• The signature(s) of seller(s) and lienholder (if any).
• The signature(s) of buyer(s).
• A transfer fee .

Depending on the type of transfer, you might need to complete and submit additional forms. See below for other title transfers and title transfer forms.

Submit your title transfer paperwork and fee (if any) to a DMV office or by mail to: 

DMV PO Box 942869 Sacramento, CA 94269

Rush Title Processing

If you need us to expedite your title processing, you can request rush title processing for an additional fee.

Transfer Fees

Depending on the type of transfer, you may need to pay the following fees:

• Replacement title
• Use tax, based on the buyer’s county of residence
• Registration

See the full list of fees .

Renewal fees and parking/toll violation fees don’t need to be paid to issue a replacement California Certificate of Title.

Title Transfer Forms

These forms may be required when transferring ownership of a vehicle or vessel:  Application for Replacement or Transfer of Title (REG 227) Vehicle/Vessel Transfer and Reassignment (REG 262) form (call the DMV’s automated voice system at 1-800-777-0133 to have a form mailed to you) Statement of Facts (REG 256) Lien Satisfied/Title Holder Release (REG 166) Notice of Transfer and Release of Liability Smog certification Vehicle Emission System Statement (Smog) (REG 139) Declaration of Gross Vehicle Weight (GVW)/Combined Gross Vehicle Weight (CGW) (REG 4008) Affidavit for Transfer without Probate (REG 5) Bill of Sale (REG 135) Verification of Vehicle (REG 31)

Other Title Transfers

When you’re buying a new car or a used car from a dealership, the dealer will handle the paperwork and you’ll receive your title from DMV in the mail.

When vehicle ownership is transferred between two private parties, it’s up to them to transfer the title. If you have the California Certificate of Title for the vehicle , the seller signs the title to release ownership of the vehicle. The buyer should then bring the signed title to a DMV office to apply for transfer of ownership. 

If you don’t have the California Certificate of Title , you need to use an Application for Replacement or Transfer of Title (REG 227) to transfer ownership. The lienholder’s release, if any, must be notarized. The buyer should then bring the completed form to a DMV office and we will issue a new registration and title.

Make sure you have all signatures on the proper lines to avoid delays.

Other Steps for the Seller When Vehicle Ownership is Transferred

• 10 years old or older.
• Commercial with a GVW or CGW of more than 16,000 pounds.
• New and being transferred prior to its first retail sale by a dealer.
• Complete a Notice of Transfer and Release of Liability (NRL) within 5 days of releasing ownership and keep a copy for your records.

Once the seller gives the buyer all required documentation and DMV receives the completed NRL, the seller’s part of the transaction is complete.

*If the vehicle has been sold more than once with the same title, a REG 262 is required from each seller.

Other Steps for the Buyer When Vehicle Ownership is Transferred

• Current registered owner(s), how names are joined (“and/or”), and lienholder/legal owner (if any).
• License plate number, vehicle identification number (VIN), make, model, year, and registration expiration date.
• Title brands (if any).
• Words “Nontransferable/No California Title Issued,” indicating a California title was not issued and a REG 227 cannot be used (see FAQs).
• Get a smog inspection (if applicable).

Once the buyer has provided the DMV with all the proper documents and fees, the vehicle record is updated to reflect the change of ownership and a registration card is issued.

A new title is issued from DMV headquarters within 60 calendar days.

To transfer a vehicle between family members, submit the following:

• The California Certificate of Title properly signed or endorsed on line 1 by the registered owner(s) shown on the title. Complete the new owner information on the back of the title and sign it.
• A Statement of Facts (REG 256) for use tax and smog exemption (if applicable).
• Odometer disclosure for vehicles less than 10 years old.
• Transfer fee .

You may transfer a vehicle from an individual to the estate of that individual without signatures on the Certificate of Title.

Submit the following:

• The California Certificate of Title. On the back of the title, the new owner section must show “Estate of (name of individual)” and their address. Any legal owner/lienholder named on the front of the title must be re-entered on the back of the title.
• A Statement of Facts (REG 256) confirming the owner is deceased and Letters Testamentary have not been issued. The person completing the statement must indicate their relationship to the deceased.

Use tax and a smog certification are not required.

Vehicle ownership can be transferred to a deceased owner’s heir 40 days after the owner’s death, as long as the value of the deceased’s property in California does not exceed:

• $150,000 if the deceased died before 1/1/20.
• $166,250 if the deceased died on or after 1/1/20.

If the heir will be the new owner, submit the following to a DMV office:

• The California Certificate of Title. The heir must sign the deceased registered owner’s name and countersign on line 1. The heir should complete and sign the back of the title.
• Affidavit for Transfer without Probate (REG 5) , completed and signed by the heir.
• An original or certified copy of the death certificate of all deceased owners.

If the heir prefers to sell the vehicle, the buyer also needs (in addition to the items above):

• Bill of Sale (REG 135) from the heir to the buyer.
• Transfer fee (two transfer fees are due in this case).

To transfer vessel ownership, submit the following:

• The California Certificate of Ownership. The registered owner signs line 1. The legal owner/lienholder (if any) signs line 2. Complete the new owner information on the back of the certificate and sign it.
• Bill(s) of sale, if needed to establish a complete chain of ownership.
• A Vessel Registration Fee .
• Use tax based on the tax rate percentage for your county of residence.

After you sell a vessel, complete a Notice of Transfer and Release of Liability (NRL) within five days of releasing ownership and keep a copy for your records.

How to Update or Change a Title

Because a California Certificate of Title is a legal document, it is important to keep it accurate and up-to-date. Here’s how you can update or change a title. 

Order a Replacement California Certificate of Title

You must order a replacement California Certificate of Title when the original is lost, stolen, damaged, illegible, or not received. 

To order a replacement title, submit the following:

• Application for Replacement or Transfer of Title (REG 227) .
• The original title (if you have it).
• California photo driver license (if submitting form in person).
• Replacement title fee .
• If another replacement title was issued in the past 90 days, a Verification of Vehicle (REG 31) completed by the California Highway Patrol (CHP). This requirement only applies if the registered owner’s name or address doesn’t match DMV records*.

You can submit your application either in-person* at a DMV office or by mail:

Department of Motor Vehicles Registration Operations PO Box 942869 Sacramento, California 94269-0001

If you’re submitting your form to a DMV office, we recommend you make an appointment so you can avoid any lines. 

You’ll receive your title by mail 15-30 calendar days from the date you submit the replacement title application.

*If you’re applying for a replacement title and the registered owner’s name or address doesn’t match DMV records (except for obvious typographical errors), you must submit your application in person with proof of ownership (e.g. registration card) and an acceptable photo ID (e.g. driver’s license/ID card).

Online Replacement Title Request

Visit our Virtual Office to request a replacement title online.

Change or Correct a Name on a Title

Your true full name must appear on your vehicle or vessel California Certificate of Title and registration card. If your name is misspelled, changes (e.g as a result of marriage or divorce), or is legally changed, you need to correct your name on your title.

To change or correct your name, submit:

• California Certificate of Title with your correct name printed or typed in the “New Registered Owner” section
• A completed Name Statement in Section F of the Statement of Facts (REG 256) .

You may submit your application to any DMV office or by mail to:

Department of Motor Vehicles Vehicle Registration Operations PO Box 942869 Sacramento, CA 94269-0001

Removing Information that was Entered by Mistake

If a name or other information is entered on a title by mistake, complete a Statement to Record Ownership (REG 101) .

Frequently Asked Questions

If the vehicle has a legal owner/lienholder, then section 5 of the REG 227 needs to be notarized. If the registration does not show a legal owner/lienholder, notarization is not required.

Need help finding the lienholder on your vehicle title? We keep a listing of banks, credit unions, and financial/lending institutions that may have gone out of business, merged, changed their name, or been acquired by another financial institution.

No. You must obtain a title from the state where the vehicle was last titled.

If you’re unable to obtain a title from that state, provide documentation that they cannot issue a title. A motor vehicle bond may be required

Contact us for more information .

Need something else?

Fee calculator.

Use our fee calculator to estimate any applicable registration or title transfer fees.

Renew Your Vehicle Registration

You need to renew your vehicle registration every 1-5 years in California, depending on the vehicle. Make sure your registration is up-to-date.

Make an Appointment

Some applications can be submitted to a DMV office near you. Make an appointment so you don’t have to wait in line.

General Disclaimer

When interacting with the Department of Motor Vehicles (DMV) Virtual Assistant, please do not include any personal information.

When your chat is over, you can save the transcript. Use caution when using a public computer or device.

The DMV chatbot and live chat services use third-party vendors to provide machine translation. Machine translation is provided for purposes of information and convenience only. The DMV is unable to guarantee the accuracy of any translation provided by the third-party vendors and is therefore not liable for any inaccurate information or changes in the formatting of the content resulting from the use of the translation service.

The content currently in English is the official and accurate source for the program information and services DMV provides. Any discrepancies or differences created in the translation are not binding and have no legal effect for compliance or enforcement purposes. If any questions arise related to the information contained in the translated content, please refer to the English version.

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The Department of Motor Vehicles (DMV) website uses Google™ Translate to provide automatic translation of its web pages. This translation application tool is provided for purposes of information and convenience only. Google™ Translate is a free third-party service, which is not controlled by the DMV. The DMV is unable to guarantee the accuracy of any translation provided by Google™ Translate and is therefore not liable for any inaccurate information or changes in the formatting of the pages resulting from the use of the translation application tool.

The web pages currently in English on the DMV website are the official and accurate source for the program information and services the DMV provides. Any discrepancies or differences created in the translation are not binding and have no legal effect for compliance or enforcement purposes. If any questions arise related to the information contained in the translated website, please refer to the English version.

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• Buying your Freehold

Ask Ashworths about: The hidden cost of owning a leasehold property

When you make your offer for a leasehold flat most people will factor in regular costs that they have to pay to their freeholder or management company by way of service charges. Some will even remember that they need to pay an annual ground rent on top.  However, there is another raft of expenses that are a hidden peril of owning a leasehold – and those are the administrative costs of selling the property.

Without exaggeration, these costs have been known to amount to over £1,000 so whilst there may not be a great deal that you can do about it, it is good to know what sort of costs you may be faced with.

The management pack

As solicitors, one of the first things that we do when instructed to sell a leasehold property is to request “the management pack” from either the freeholder or the managing agents.  This pack contains all of the information that a purchaser will need about the management of the flat, including:

• Details of any service charge arrears
• Details of the current service charge budget
• A note of any forthcoming major works
• A copy of the service charge accounts themselves
• A copy of the current buildings insurance

However good a leaseholder’s record keeping, it is unlikely that they will have all of the documentation in their own possession and the process of requesting the management pack from a third party has become almost automatic.

Professional firms of managing agents earn a significant part of their income from charging for management packs.  Fees of around £500 are becoming increasingly common.

Trap 1 – If the property is managed by one company and owned by another company (who collects the ground rent) you may need to pay for two separate packs.

Trap 2 – Even if you own a share in freehold , the person who deals with day-to-day administration may charge a fee for collating the information and sending it through.

Licence to assign fees

Some leases, but by no means all, contain a provision that require an outgoing tenant to obtain their freeholder’s consent to them selling their lease.  This “Licence to Assign” will generally be produced by the freeholder’s solicitor who, you guessed it, will charge for producing the licence which will eventually need to be signed by the seller, the freeholder and the buyer.

Licence to assign fees can be as much as £750, and of course will be subject to VAT (which few individual purchasers can reclaim).

Because it is the seller that is obliged to obtain their freeholder’s consent, it is usually the seller that ends up paying for the cost of obtaining it.

Deed of covenant fees

Whilst rarely needed at the same time as entering into a Licence to Assign, some leases require an incoming tenant or purchaser to enter into a direct contract with the freeholder or management company to pay service charges and otherwise to observe the provisions of the lease – “a Deed of Covenant”.

Trap 3 – Very often the wording of the requisite Deed of Covenant is set out at the back of the lease, but this will rarely stop a freeholder or managing agent charging to supply the necessary document.

Who pays for a Deed of Covenant will often be the subject of negotiation between a buyer and seller.

Notice fees

Nearly all leases contain a provision requiring a purchaser to serve a formal notice on the freeholder after they have completed their purchase.  Usually the freeholder needs to be notified of both the fact that the lease has changed hands (or, more technically, that there has been “an assignment”) as well as the fact that there is a new mortgage on the property (a “notice of charge”).

Some freeholders are very happy to accept notice of assignment and notice of charge on a single document and to charge a single, nominal fee.  Other freeholders see these notices as yet another revenue stream and £100 plus VAT for each notice is not uncommon.

Notice fees will nearly always fall for the purchaser to pay.

Share transfer fee

Another cost usually picked up by the purchaser are the fees paid to the managing agent or freeholder for transferring the share certificate in the management company from the name of the seller into the name of the buyer.  This can be another £100 or more.

Freehold estates

Whilst this note has been prepared in the context of the transfer of a flat, on some larger, newer developments where an estate charge or rent charge is made a similar raft of charges might be charged by the managing agents or roads association or similar.

We are happy to discuss your requirements with you and to advise in general terms on all aspects of the transaction and the estimated legal cost. Please either contact us by telephone or email us at: [email protected]

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The leasehold and freehold reform act, share of freehold – sounds perfect but what does it mean, gifted deposit – what is it, we are pleased to welcome areej regeb and hoshvan sadiq to the team.

In observance of Juneteenth, Bobtail will be closed on Wed, Jun 19. We will return on Thu, Jun 20, and process invoices accordingly. Have a safe holiday.

Learn how to set up your business for success this year on our blog .

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What Is A Notice Of Assignment In The Trucking Industry?

To understand a notice of assignment, trucking company owners first have to be familiar with factoring—and to understand factoring, we’ll have to discuss the nuances of cash flow in the shipping industry.

Basically, the challenge for fleet owners (and owner-operators) is that their customers take forever to pay their invoices. You deliver a load and issue the invoice. The shipper may take 30 or 45 or 60 days—or more—to pay that invoice. Meanwhile, you’ve got fuel costs, payroll, insurance payments, and the thousand other financial obligations that keep your trucks on the road. You need that invoice paid now .

Factoring is the industry’s solution for quick payments to carriers. A factoring company steps in and pays your invoice today. Then that company collects from your customer, the shipper or broker who hired you to haul a given load. For their service, the factoring company keeps a low percentage of the total invoice value. (With Bobtail, the factoring fee ranges from 1.99% to 2.99%, depending on the volume of invoices you factor.)

Note that factoring is not a loan; the factoring company buys your invoices, so there’s no compounding interest or credit impact. Factoring beats loans as a cash-flow solution, hands down.

Struggling with slow payments from shippers and brokers? Keep cash flowing the simple way with Bobtail factoring.

With these preliminaries out of the way, we’re ready to answer the question that brought you here: What exactly is a notice of assignment in trucking?

Defining The Notice Of Assignment In Trucking

Factoring requires shippers and brokers to make changes in their billing systems. You’re no longer the collector on a factored invoice; the factoring company is. Accounts payable departments are busy places, and it’s easy for a shipper’s finance team to get confused when you do the work but another company collects the payment (after that company pays you, of course).

A notice of assignment clears up the billing relationship in a factoring agreement. A notice of assignment is a contractual document, supplied to both the carrier and the customer, that tells the customer to pay the factoring company, not the carrier.

The notice of assignment is an essential piece of paperwork, one of the documents you’ll have to keep on file as you establish a factoring relationship. You’ll have to sign the notice of assignment, and so will your customer. In short, this is a contractual agreement that carries legal consequences, and clarifies who exactly the shipper should pay for a delivered load.

Why is a notice of assignment important?

Consider the case of a trucking company that shifts to factoring after months or years of collecting directly from a shipper. That carrier’s payment details are already set up in the shipper’s accounting systems. Due to accidents or willful fraud, it’d be easy for the carrier to collect on an invoice twice—once from the factoring company and again from the customer.

In that scenario, the factoring company loses money, or at least becomes embroiled in a flurry of paperwork and legal challenges. So the notice of assignment is designed to protect the factoring company. But this document provides benefits for you, the carrier, and your customers, too.

How A Notice Of Assignment Benefits Shippers And Carriers

Who needs more paperwork? While it may seem like just another legal document, notices of assignment are actually helpful for all three parties involved in a factoring payment deal: the factoring company, sure, but also the carrier and the customer.

For shippers , the notice of assignment is a strong incentive to update payment details in their accounting systems. It delineates the nature of the financial agreement. It provides visibility and clarity that avoids conflict down the line. Most importantly, factoring companies require shippers to sign a notice of assignment—and factoring benefits customers, too. It keeps them from having to renegotiate payment terms, and gives them the full 30 or 60 days to pay, which allows them to optimize their own cash utilization.

Carriers also benefit from the clarity that comes with a notice of assignment. This document allows you to rest assured that the customer won’t accidentally pay you for a factored invoice, so you don’t have to spend all day trying to get the money into the right hands—or face collection threats of your own.

The binding agreement contained within a notice of assignment protects you from legal problems. It’s simply smart business to make sure everyone knows exactly who should get paid, and for what. Notices of assignment accomplish this goal—and, with Bobtail, the paperwork is simpler than you might think.

Simplifying Notices Of Assignment

Traditional factoring companies aren’t the most efficient financial operators in the world. They make you sign restrictive contracts. They might even tell you who you can work with, and who you can’t. They stack hidden fees on everything from set-up to ACH transfers to terminating the deal. And they make you fill out reams of paperwork before depositing a cent.

Bobtail is different every step of the way. We started this company to eliminate the inefficiencies in the factoring process, and that includes personalized assistance with handling notices of assignment.

When you sign up with Bobtail—a quick, online process involving a single application form—you’ll get a personal account manager who’s always ready to answer questions and solve problems. They’ll issue your notice of assignment and make sure your customers understand the document and why it’s necessary.

All you have to do is carry on carrying loads.

When you decide to factor an invoice, the process is even simpler. Just deliver the load, upload the invoice, attach a rate confirmation and a bill of lading, and get paid. It’s all done through Bobtail’s online system, so you can handle financing from the rig. We also provide a user-friendly digital dashboard that makes it easy to track every invoice at every step of the financing process. There’s simply no easier way to factor an invoice.

At Bobtail, we believe that you know what’s best for your business. That’s why we don’t make you sign a long-term contract; this is no-contract factoring. You pick which accounts to factor and which to collect from directly, and we don’t have volume requirements or exclusive financing deals.

We also don’t charge hidden fees. You just pay a flat factoring fee so there’s no confusion on exactly how much cash will hit your bank account—or when. Invoices are filled the same day you submit them, or the next day if the invoice arrives after 11 a.m. Eastern time.

Don’t be intimidated by a notice of assignment in trucking—or any other documents related to your factoring service. With Bobtail, our devoted customer service team makes sure everything runs smoothly, and we’re there to help every step of the way. Or, as one Trustpilot review puts it:

“They always answer the phone! The staff is very helpful and cordial. The three things I love are: Payments are on time, the website is easy to use, and great customer service!”

(Read more customer reviews on Trustpilot.)

Ready to improve cash flow without the headaches? Sign up to learn more today.

If you have questions about account set-up, notices of assignment, or anything else related to factoring, contact the Bobtail sales team at (410) 204-2084, or email us at [email protected].

Caroline Asiala is the Digital Marketing Manager at Bobtail. With a background rooted in advocating for migrant rights, Caroline leverages her expertise in content creation to support small trucking businesses, many of which are immigrant-owned and operated, with the information they need to make their businesses thrive.

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AssignToday Blog

All About Assignment Fee: The Only Guide You’ll Ever Need

In real estate, when a buyer and seller enter into a purchase contract, a buyer will on occasion decide to sell an assignment of the contract to another buyer. To facilitate this, there is generally an Assignment Fee charged to the new buyer.

What Constitutes An Assignment?

This is when someone has entered into a contract to purchase a property but decides to sell their interest in the property before they take possession, and before closing. The original buyer sells their contract to a new buyer but it should be noted, they are not actually selling the property since they do not yet own it.

They are really selling their agreement to purchase the property and the new buyer takes over the rights and obligations of the original buyer as contained in the original Purchase Agreement.

The original Purchase Agreement likely contains language regarding how an Assignment is to be handled and may include the need for the original seller to approve the Assignment to the new buyer. It should also detail the fee structure for the Assignment Fee, whether it is a flat fee or a percentage of either the original purchase price or the new purchase price agreed to between the original buyer and the new buyer.

How Do Assingment Fee Works?

Assignment fees are not all the same. If the property is a presale unit – one which has not yet been built – an assignment fee of between 2% and 5% of the sale price is fairly typical. This fee is payable to the developer.

In some instances, developers may also charge an Administration Fee to facilitate completion of the Assignment Agreement. This can be anywhere from a few hundred dollars to several thousand dollars.

If you are selling an Assignment of a resale unit, any profits generated above the original purchase price to the amount being paid by the new buyer may have to be split with the original seller. Always check the original purchase contract to see how this is be addressed and if there is any question, check with your lawyer.

If a profit is made on the sale of the Assignment, this income will most likely be taxed as income. Check with your accountant or financial advisor for the implications to your situation.

Real Estate Fee

If the property is listed for sale with a realtor, real estate fees and commissions will be an added expense impacting the overall profit to the original buyer. It should be noted, there may be restrictions on listing a property for sale, particularly in a presale situation, since the original developer/seller may limit how may units can be resold under Assignment Agreements.

Legal fees on Assignment Agreements can be higher than with a straightforward real estate transaction. This is due to the complexities of dealing with more than one agreement since both the original Purchase Contract and the Assignment Agreement need to be handled.

If you are contemplating either buying or selling an Assignment , it’s best to obtain professional advice and assistance before undertaking. Failing to understand how the transaction works, or the associated financial considerations are best avoided by utilizing experienced professionals to guide you through the process to successful completion.

Meghna Negi

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Can a landlord charge a notification fee not specified in the lease?

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Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Regarding Dedicated Cores

A Notice by the Securities and Exchange Commission on 06/14/2024

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I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

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Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), [ 1 ] and Rule 19b-4 thereunder, [ 2 ] notice is hereby given that on June 3, 2024, Cboe EDGA Exchange, Inc. (the “Exchange” or “EDGA”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

Cboe EDGA Exchange, Inc. (the “Exchange” or “EDGA Equities”) proposes to amend its Fees Schedule. The text of the proposed rule change is provided in Exhibit 5.

The text of the proposed rule change is also available on the Exchange's website ( http://markets.cboe.com/​us/​equities/​regulation/​rule_​filings/​edga/​ ), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room.

In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.

The Exchange proposes to amend its fee schedule to amend the fees and increase the maximum cap for Dedicated Cores. [ 3 ]

By way of background, the Exchange recently began to allow Users  [ 4 ] to assign a Single Binary Order Entry (“BOE”) logical order entry port  [ 5 ] to a single dedicated Central Processing Unit (CPU Core) (“Dedicated Core”). Historically, CPU Cores had been shared by logical order entry ports ( i.e., multiple logical ports from multiple firms may connect to a single CPU Core). Use of Dedicated Cores however, can provide reduced latency, enhanced throughput, and improved performance since a firm using a Dedicated Core is utilizing the full processing power of a CPU Core instead of sharing that power with other firms. This offering is completely voluntary and is available to all Users that wish to purchase Dedicated Cores. Users may utilize BOE logical order entry ports on shared CPU Cores, either in lieu of, or in addition to, their use of Dedicated Core(s). As such, Users are able to operate across a mix of shared and dedicated CPU Cores which the Exchange believes provides additional risk and capacity management. Further, Dedicated Cores are not required nor necessary to participate on the Exchange and as such Users may opt not to use Dedicated Cores at all.

The Exchange proposes to assess the following monthly fees for Users that wish to use Dedicated Cores and adopt a maximum limit. First, the Exchange proposes to provide up to two Dedicated Cores to all Users who wisht o use Dedicated Cores, at no additional cost. For the use of more than two Dedicated Cores, the Exchange proposes to assess the following fees: $650 per Dedicated Core for 3-10 Dedicated Cores; $850 per Dedicated Core for 11-15 Dedicated Cores; and $1,050 per Dedicated Core for 16 or more Dedicated Cores. The proposed fees are progressive and the Exchange proposes to include the following example in the Fees Schedule to provide clarity as to how the fees will be applied. Particularly, the Exchange will provide the following example: if a User were to purchase 11 Dedicated Cores, it will be charged a total of $6,050 per month ($0 * 2 + $650 * 8 + $850 * 1). The Exchange also proposes to make clear in the Fees Schedule that the monthly fees are assessed and applied in their entirety and are not prorated. The Exchange notes the current standard fees assessed for BOE Logical Ports, whether used with Dedicated or shared CPU cores, will remain applicable and unchanged. [ 6 ]

Since the Exchange currently has finite amount of physical space in its data centers in which its servers (and therefore corresponding CPU Cores) are located, the Exchange also proposes to prescribe a maximum limit on the number of Dedicated Cores that Users may purchase each month. The purpose of establishing these limits is to manage the allotment of Dedicated Cores in a fair manner and to prevent the Exchange from being required to expend large amounts of resources in order to provide an unlimited number of Dedicated Cores. The Exchange previously established a limit for Members of a maximum number of 20 Dedicated Cores and Sponsoring Members a limit of a maximum number of 25 [sic] Dedicated Cores for each of their Sponsored Access relationships. [ 7 ] Now that the Exchange has a better understanding of User demand relative to its available space since the initial launch three months ago, the Exchange proposes to increase that cap and provide that Members will be limited to a maximum number of 60 Dedicated Cores  [ 8 ] and Sponsoring Members will be Start Printed Page 50654 limited to a maximum number of 25 Dedicated Cores for each of their Sponsored Access relationships. [ 9 ] The Exchange notes that it will continue monitoring Dedicated Core interest by all Users and allotment availability with the goal of increasing these limits to meet Users' needs if and when the demand is there and the Exchange is able to accommodate additional Dedicated Cores.

The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act. [ 10 ] Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5)  [ 11 ] requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5)  [ 12 ] requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange also believes the proposed rule change is consistent with Section 6(b)(4)  [ 13 ] of the Act, which requires that Exchange rules provide for the equitable allocation of reasonable dues, fees, and other charges among its Members and other persons using its facilities.

The Exchange believes the proposal is reasonable because the Exchange is offering any Users who wishes to utilize Dedicated Cores up to two Dedicated Cores at no additional cost. [ 14 ] The Exchange believes the proposed fees are reasonable because Dedicated Cores provide a valuable service in that it may provide reduced latency, enhanced throughput, and improved performance compared to use of a shared CPU Core since a firm using a Dedicated Core is utilizing the full processing power of a CPU Core. The Exchange also emphasizes however, that the use of Dedicated Cores is not necessary for trading and as noted above, is entirely optional. Users can also continue to access the Exchange through shared CPU Cores at no additional cost. Indeed, less than half of the Exchange's Members currently use Dedicated Cores. Depending on a firm's specific business needs, the proposal enables Users to choose to use Dedicated Cores in lieu of, or in addition to, shared CPU Cores (or as noted, not use Dedicated Cores at all). If a User finds little benefit in having Dedicated Cores, or determines Dedicated Cores are not cost-efficient for its needs or does not provide sufficient value to the firm, such User may continue its use of the shared CPU Cores, unchanged. The Exchange also has no plans to eliminate shared CPU Cores nor to require Users to purchase Dedicated Cores.

The Exchange also believes that the proposed Dedicated Core fees are equitable and not unfairly discriminatory because they continue to be assessed uniformly to similarly situated users in that all Users who choose to purchase Dedicated Cores will be subject to the same proposed tiered fee schedule. Further all Users are entitled to up to 2 Dedicated Cores at no additional cost. The Exchange believes the proposed ascending fee structure is also reasonable, equitable and not unfairly discriminatory as it is designed so that firms that use a higher allotment of the Exchange's finite number of Dedicated Cores pay higher rates, rather than placing that burden on market participants that have more modest needs who will have the flexibility of obtaining Dedicated Cores at lower price points in the lower tiers. As such, the proposed fees do not favor certain categories of market participants in a manner that would impose a burden on competition; rather, the ascending fee structure reflects the (finite) resources consumed by the various needs of market participants—that is, the lowest Dedicated Core consuming Users pay the least, and highest Dedicated Core consuming Users pay the most. Other exchanges similarly assess higher fees to those that consume more Exchange resources. [ 15 ] It's also designed to encourage firms to manage their needs in a fair manner and to prevent the Exchange from being required to expend large amounts of resources in order to provide an additional number of Dedicated Cores. Moreover, as discussed above and in more detail below, the Exchange cannot currently offer an unlimited number of Dedicated Cores due in part to physical space constraints. The Exchange believes the proposed ascending fee structure is another appropriate means, in conjunction with an established cap, to manage this finite resource and ensure the resource is apportioned more fairly.

The Exchange believes it is reasonable to limit the number of Dedicated Cores Users can purchase because the Exchange has a finite amount of space in its third-party data centers to accommodate CPU cores, including Dedicated Cores. The Exchange must also take into account timing considerations in procuring additional Dedicated Cores and related hardware such as servers, switches, optics and cables, as well as the readiness of the Exchange's data center to accommodate additional Dedicated Cores in the Exchange's respective Order Handler Cabinets. The Exchange has, and will continue to, monitor market participant demand and space availability and endeavor to adjust the limit if and when the Exchange is able to accommodate additional Dedicated Cores. The Exchange monitors its capacity and data center space and thus is in the best place to determine these limits and modify them as appropriate in response to changes to this capacity and space, as well as market demand. For example, since the launch of Dedicated Cores on February 26, 2024, the Exchange has increased the prescribed maximum limit twice (including this proposal) as a result of evaluating the demand relative Start Printed Page 50655 to Dedicated Cores availability. [ 16 ] The proposed limits also apply uniformly to similarly situated market participants ( i.e., all Members are subject to the same limit and all Sponsored Participants are subject to the same limit, respectively). The Exchange believes it's not unfairly discriminatory to provide for different limits for different types of Users. For example, the Exchange believe it's not unfairly discriminatory to provide for an initial lower limit to be allocated for Sponsored Participants because unlike Members, Sponsored Participants are able to access the Exchange without paying a Membership Fee. Members also have more regulatory obligations and risk that Sponsored Participants do not. For example, while Sponsored Participants must agree to comply with the Rules of the Exchange, it is the Sponsoring Member of that Sponsored Participant that remains ultimately responsible for all orders entered on or through the Exchange by that Sponsored Participant. The industry also has a history of applying fees differently to Members as compared to Sponsored Participants. [ 17 ] Lastly, the Exchange believes its proposed maximum limits, and distinction between Members and Sponsored Users, is another appropriate means to help the Exchange manage its allotment of Dedicated Cores and better ensure this finite resource is apportioned fairly.

The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary in furtherance of the purposes of the Act because the proposed tiered fee structure will apply equally to all similarly situated Users that choose to use Dedicated Cores. As discussed above, Dedicated Cores are optional and Users may choose to utilize Dedicated Cores, or not, based on their views of the additional benefits and added value provided by utilizing a Dedicated Core. The Exchange believes the proposed fee will be assessed proportionately to the potential value or benefit received by Users with a greater number of Dedicated Cores and notes that Users may determine at any time to cease using Dedicated Cores. As discussed, Users can also continue to access the Exchange through shared CPU Cores at no additional cost. Finally, all Users will be entitled to two Dedicated Cores at no additional cost.

Next, the Exchange believes the proposed rule change does not impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As previously discussed, the Exchange operates in a highly competitive market, including competition for exchange memberships. Market Participants have numerous alternative venues that they may participate on, including 15 other equities exchanges, as well as off-exchange venues, where competitive products are available for trading. Indeed, participants can readily choose to submit their order flow to other exchange and off-exchange venues if they deem fee levels at those other venues to be more favorable. Moreover, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”  [ 18 ] The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: “[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .”. [ 19 ] Accordingly, the Exchange does not believe its proposed change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

The Exchange neither solicited nor received comments on the proposed rule change.

The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act  [ 20 ] and paragraph (f) of Rule 19b- 4  [ 21 ] thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved.

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:

• Use the Commission's internet comment form ( https://www.sec.gov/​rules/​sro.shtml ); or
• Send an email to [email protected] . Please include file number SR-CboeEDGA-2024-020 on the subject line.
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CboeEDGA-2024-020. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website ( https://www.sec.gov/​rules/​sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Start Printed Page 50656 Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552 , will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR-CboeEDGA-2024-020 and should be submitted on or before July 5, 2024.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. [ 22 ]

Sherry R. Haywood,

Assistant Secretary.

1.   15 U.S.C. 78s(b)(1) .

2.   17 CFR 240.19b-4 .

3.  The Exchange initially introduced Dedicated Cores and corresponding pricing on March 1, 2024 (SR-CboeEDGA-2024-008). On March 20, 2024, the Exchange refiled the proposed fees (SR-CboeEDGA-2024-009). The Exchange amended the Dedicated Cores fees on April 1, 2024 (SR-CboeEDGA-2024-012). On April 12, 2024, the Exchange withdrew that filing and submitted SR-CboeEDGA2024-014. On May 13, 2024, the Exchange withdrew SR-CboeEDGA-2024-009. On June 3, 2024, the Exchange also withdrew SR-CboeEDGA-014 and submitted this filing.

4.  A User may be either a Member or Sponsored Participant. The term “Member” shall mean any registered broker or dealer that has been admitted to membership in the Exchange, limited liability company or other organization which is a registered broker or dealer pursuant to Section 15 of the Act, and which has been approved by the Exchange. A Sponsored Participant may be a Member or non-Member of the Exchange whose direct electronic access to the Exchange is authorized by a Sponsoring Member subject to certain conditions. See Exchange Rule 11.3.

5.  Users may currently connect to the Exchange using a logical port available through an application programming interface (“API”), such as the Binary Order Entry (“BOE”) protocol. A BOE logical order entry port is used for order entry.

6.  The Exchange currently assesses $550 per port per month. See Cboe EDGA Equities Fee Schedule.

7.   See Securities Exchange Act Release No. 99983 (April 17, 2024) 89 FR 30418 (April 23, 2024) (SR-CboeEDGA-2024-014).

8.  The prescribed maximum quantity of Dedicated Cores for Members applies regardless of whether that Member purchases the Dedicated Cores directly from the Exchange and/or through a Service Bureau. In a Service Bureau relationship, a customer allows its MPID to be used on the ports of a technology provider, or Service Bureau. One MPID may be allowed on several different Service Bureaus.

9.  The fee tier(s) applicable to Sponsoring Members are determined on a per Sponsored Access relationship basis and not on the combined total of Dedicated Cores across Sponsored Users. For example, under the proposed changes, a Sponsoring Member that has three Sponsored Access relationships is entitled to a total of 75 Dedicated Cores for those 3 Sponsored Access relationships but would be assessed fees separately based on the 25 Dedicated Cores for each Sponsored User (instead of combined total of 75 Dedicated Cores). For example, a Sponsoring Member with 3 Sponsored Access relationships would pay $19,950 per month if each Sponsored Access relationship purchased the maximum 25 Dedicated Cores. More specifically, the Sponsoring Member would be provided 2 Dedicated Cores at no additional cost for each Sponsored User under Tier 1 (total of 6 Dedicated Cores at no additional cost) and provided an additional 8 Dedicated Cores at $650 each for each Sponsored User, 5 Dedicated Cores at $850 each for each Sponsored User and 10 Dedicated Cores at $1,050 each for each Sponsored User (combined total of 69 additional Dedicated Cores).

10.   15 U.S.C. 78f(b) .

11.   15 U.S.C. 78f(b)(5) .

12.   Id.

13.   15 U.S.C. 78f(b)(4) .

14.  Of the Users that currently maintain Dedicated Cores, approximately 35% maintain 1 or 2 Dedicated Cores and therefore pay no additional fees.

15.   See also Cboe U.S. Options Fees Schedule, BZX Options, Options Logical Port Fees, Ports with Bulk Quoting Capabilities.

16.   See Securities Exchange Act Release No. 99983 (April 17, 2024) 89 FR 30418 (April 23, 2024) (SR-CboeEDGA-2024-014).

17.   See e.g., Securities Exchange Act Release No. 68342 (December 3, 2012) 77 FR 73096 (December 7, 2012) (SR-CBOE-2012-114) and Securities Exchange Act Release No. 66082 (January 3, 2012) 77 FR 1101 (January 9, 2012) (SR-C2-2011-041).

18.   See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 , 37499 (June 29, 2005).

19.   NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770 , 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).

20.   15 U.S.C. 78s(b)(3)(A) .

21.   17 CFR 240.19b-4(f) .

22.   17 CFR 200.30-3(a)(12) .

[ FR Doc. 2024-13058 Filed 6-13-24; 8:45 am]

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