A due-on-sale clause is a provision found in a loan agreement or promissory note. It allows the lender to demand full repayment of the loan if the borrower sells or transfers ownership of the property that secures the loan. This means that if the property changes hands, the lender has the right to call the entire balance due, although they are not obligated to do so.
Due-on-sale clauses are commonly used in real estate transactions and mortgage agreements. They are relevant in civil law, particularly in property and contract law. Borrowers should be aware of these clauses, as they can impact the sale of property. Users can manage related documents using tools like US Legal Forms, which offers templates drafted by attorneys to help navigate these situations.
Here are a couple of examples of abatement:
Example 1: A homeowner with a mortgage containing a due-on-sale clause decides to sell their house. The lender may require the homeowner to pay off the remaining loan balance before the sale can proceed.
Example 2: A borrower inherits a property with a mortgage that includes a due-on-sale clause. If they want to sell the property, they must first pay off the mortgage or negotiate with the lender to avoid calling the loan due. (hypothetical example)
| State | Notes |
|---|---|
| California | Due-on-sale clauses are enforceable, but some exceptions exist for certain types of transfers. |
| Texas | Due-on-sale clauses are generally enforceable, but there are specific regulations regarding their application. |
| Florida | Enforcement of due-on-sale clauses is common, but lenders must provide proper notice. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Acceleration Clause | A provision that allows a lender to demand full repayment of a loan if the borrower defaults. | Applies primarily to defaults, while a due-on-sale clause applies to property transfer. |
| Assumption Clause | A clause that allows a buyer to take over the seller's mortgage under certain conditions. | Assumption clauses allow for transfer without full repayment, unlike due-on-sale clauses. |
If you are considering selling a property with a due-on-sale clause, review your mortgage agreement carefully. Consult with your lender to understand your options. If necessary, seek legal advice to navigate the implications of the clause. For those who wish to handle the documentation themselves, US Legal Forms offers templates that can assist in creating the necessary legal documents.
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The lender may require you to pay off the remaining mortgage balance before the sale can proceed.