What is an alienation clause?

An alienation clause is a provision found in some loan agreements that enables the lender to require full repayment of the loan if the borrower sells or otherwise transfers the property. This clause is designed to protect the lender’s security interest in the property by ensuring that the original borrower remains liable for the loan. If a property with an alienation clause is sold, the lender has the right to call the loan due, which means the borrower must pay off the remaining balance immediately, rather than allow the new owner to assume the loan.

This clause is particularly significant in real estate transactions. It can impact a buyer's ability to take over the existing financing on a property and may influence the marketability of the property itself. Buyers and sellers must be aware of any alienation clauses in existing mortgages when negotiating a sale, as it can affect their financial arrangements and decisions regarding the property.

The other options relate to different aspects of real estate and finance but do not accurately define what an alienation clause is.