ALIENATION CLAUSE Meaning and
Definition
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An alienation clause, also known as a due-on-sale clause or a non-assumption clause, refers to a provision in a legal agreement, typically in a mortgage or a loan document, that grants the lender the right to demand full repayment or foreclosure if the borrower transfers ownership or sells the property without the lender's prior consent. This clause serves to protect the lender's interest in the property and ensure the repayment of the loan.
By including an alienation clause in a contract, the lender retains the ability to retain control over the collateral that serves as security for the loan. It prevents the borrower from transferring the property to a new owner without notifying and receiving approval from the lender. If the borrower fails to comply with the alienation clause, the lender can accelerate the loan, making the full amount due and payable immediately. This puts pressure on the borrower to either repay the loan or seek the lender's consent for the property transfer.
This clause is particularly crucial in mortgage contracts since a sale or transfer of ownership could potentially leave the lender at risk, especially if the new owner fails to meet the financial obligations of the mortgage. The alienation clause helps maintain the lender's rights and control over the loan, ensuring that they have the ability to enforce repayment terms and protect their investment in the property.
Etymology of ALIENATION CLAUSE
The term "alienation clause" is not derived from a specific etymology; rather, it is a legal term that is derived from the meanings of its individual words.
The word "alienation" originates from the Latin word "alienare", which means to transfer or convey ownership. In law, it refers to the transfer or assignment of property or rights to another person.
The word "clause" comes from the Latin word "clausus", meaning closing or shutting. In legal documents, a clause refers to a specific provision or section of a contract or agreement that states a particular condition, term, or requirement.
Therefore, an "alienation clause" in legal context refers to a provision or section in a contract that limits or restricts the transfer of ownership or rights to another person, typically with regards to real estate or intellectual property.
