Due on sale clause

Is it possible for the due on sale clause to be excercised on a lease/option?

I’ve heard some guru’s say yes and some say no.

If a Due on Sale clause is excercised (Which I gather doesn’t happen very often at all) where does that put you, the seller, and the T/Ber in a lease/option?

Rephrasing the previous question, what would happen to all three of you? What scenarios might play out if a bank were to excerise the clause?

Finally, if the clause is excercised on a Sub2, where does that put you and the seller? What steps would you have to take then?

Thanks for your answers :slight_smile: Yes I am a newb lol and yes this is a newbie question. But it’s one of the only things holding me back from investing right now.

JJ BLayde

Good to meet you…

For years now I have been hearing that a loan can be called on a transfer… I haven’t seen it yet… I also have heard that Santa Claus comes every year too… Not that there isn’t a Santa or a loan cant be accelerated just that if you use the proper disclosures and forms when doing a Sub2 or Lease then you’ll be fine… Not having those safety nets in place seems a little dangerous to me…

You asked to explain a scenario… That depends on what your contract calls for… Its not complicated however I would hate to give you advice without first giving you what you should do when building the deal.

Good luck house hunting


I’ve been around this business since 1991 and the only ones talking about the ‘due on sale’ clause are the investors…I’ve yet to see the loan called by the bank. Unless you are planning to call the bank and tell them they should exercise that clause because you transferred title, I don’t think they will call the loan.

Make sure your paperwork is done correctly at your acquisition and you won’t have a problem. Loose paperwork = problems. Get the contract done right and you won’t need to worry about the ‘due on sale’ clause.


Good advice Rob.

It really comes down to can they!! YES they can and if the note is going into default they might!

Will they? Not if there getting paid. I don’t know if everyone knows this or not the economy is bad right now. So if a Lender is getting paid chances are very slim that they will call a note due that they are making money on.

This is what I have seen over the past 16 years.