Also known as: due-on-sale clause · due on sale clause · due on sale clauses · due-on-sale provision
Written by attorneys · grounded in primary & secondary sources — see below
A mortgage provision authorizing the lender to declare the entire debt due upon any transfer of the mortgaged property without the lender's consent. Federal law generally validates enforcement of the clause even when the transferee presents no increased credit risk. The clause is triggered by conveyance of legal title or an equitable interest such as a land contract.
Dorothy Daniels gave a mortgage on her rental building to Dominion Capital that contained a due-on-sale clause. Two years later she deeded the building to Diego Duarte under a wraparound contract without obtaining Dominion's consent. Dominion discovered the deed during a title search and demanded full payment of the loan balance.
Demetrius Douglas held a portfolio mortgage from Davenport Pharmaceuticals on several rental houses. He entered a land contract selling one house to Danielle Dixon and delivered possession without notifying the lender. Davenport Pharmaceuticals invoked the due-on-sale clause and accelerated the entire portfolio debt.
Select any source to read its text and confirm it supports the definition.
Yes. Execution of a land contract transfers an equitable ownership interest and possession to the buyer, satisfying the clause even though legal title remains with the seller. The lender may accelerate upon learning of the contract.
Supporting sources
No. Modern federal law permits enforcement according to the clause's terms without any showing of harm to the lender's position or change in credit risk.
Supporting sources
No. The clause applies to any transfer of an interest in the property, including deeds to relatives, unless the mortgage itself creates an express exception.
Supporting sources
No. Brief acceptance of payments without evidence of intentional relinquishment does not waive the right to accelerate once the unauthorized transfer is discovered.
Supporting sources
…were not prepared and executed because Sellers discovered that their property was encumbered with a mortgage containing a due on sale clause. Throughout their time on the land, Buyers repeatedly requested that their contract be formalized, and Sellers responded, "We will work it out." {6} A date certain was never determined for…