Due on Sale: What You Need to Know About This Legal Clause

Q: Can I negotiate the due on sale clause with my lender?

Yes, you can discuss the clause with your lender before signing the loan agreement to see if any modifications can be made.

Q: Are due on sale clauses common in all types of loans?

No, not all loans include due on sale clauses. It depends on the specific terms of the loan agreement.

Definition & Meaning

A due on sale clause is a provision in a loan agreement that allows a lender to demand full repayment of the loan if the property securing the loan is sold or transferred without the lender's consent. This clause is often found in mortgage agreements and serves as an acceleration mechanism, meaning that the entire unpaid balance of the loan becomes due immediately upon the sale or transfer of the property. It is also known as an alienation clause.

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Legal Use & context

Due on sale clauses are commonly used in real estate and mortgage law. They protect lenders by ensuring they have control over who can take ownership of the property tied to their loan. If a property is sold without the lender's approval, the lender can enforce the clause to recover the loan balance. Users can manage related forms and procedures using templates available on US Legal Forms, which are drafted by licensed attorneys.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A homeowner sells their house without informing the lender. The lender invokes the due on sale clause and demands immediate repayment of the loan balance.

Example 2: A property owner transfers their property to a family member without getting the lender's consent. The lender can call the loan due based on the due on sale clause. (hypothetical example)

State-by-state differences

Examples of state differences (not exhaustive):

State	Due on Sale Clause Regulations
California	Due on sale clauses are enforceable, but must be clearly stated in the mortgage agreement.
Texas	Similar enforcement of due on sale clauses, but there are specific protections for homeowners under certain conditions.
Florida	Florida law allows for due on sale clauses, but they must comply with state regulations on notice and enforcement.

This is not a complete list. State laws vary and users should consult local rules for specific guidance.

Comparison with related terms

Term	Definition	Difference
Acceleration Clause	A provision allowing the lender to demand full repayment under certain conditions.	Due on sale is a specific type of acceleration clause triggered by property transfer.
Alienation Clause	A clause preventing the transfer of property without lender consent.	Due on sale is synonymous with alienation but focuses on repayment upon transfer.

Common misunderstandings

What to do if this term applies to you

If you are considering selling a property with a due on sale clause, review your loan agreement carefully to understand your obligations. It may be wise to consult with a legal professional to discuss your options. Additionally, you can explore US Legal Forms for templates that can assist you in managing the sale process while ensuring compliance with your loan terms.

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Quick facts

Typical fees: Varies based on lender policies.
Jurisdiction: Primarily real estate and mortgage law.
Possible penalties: Immediate repayment of the loan balance.

Key takeaways

Frequently asked questions

What happens if I sell my property without notifying my lender?

If you sell your property without notifying your lender, they may invoke the due on sale clause and demand immediate repayment of your loan balance.