Which statement describes a right typically granted by an alienation clause?

Which statement describes a right typically granted by an alienation clause?

• A. Right to demand payment in full
• B. Right to forgive the loan on sale
• C. Right to confiscate rents without notice
• D. Right to terminate the loan upon sale without penalty

Answer: (A)

An alienation clause, often called a due-on-sale clause, is designed to protect the lender when the property changes hands. It gives the lender the right to require the borrower to pay the entire outstanding loan balance immediately if the property is sold or transferred without the lender’s consent. That acceleration—demanding payment in full—is the key effect described by the statement. The other options describe actions that aren’t the typical consequence of this clause: forgiving the loan on sale would release the debt, which the clause does not do; confiscating rents without notice isn’t the standard mechanism tied to transferring ownership; and terminating the loan upon sale without penalty would effectively end the loan, which isn’t what the clause does.

An alienation clause, often called a due-on-sale clause, is designed to protect the lender when the property changes hands. It gives the lender the right to require the borrower to pay the entire outstanding loan balance immediately if the property is sold or transferred without the lender’s consent. That acceleration—demanding payment in full—is the key effect described by the statement. The other options describe actions that aren’t the typical consequence of this clause: forgiving the loan on sale would release the debt, which the clause does not do; confiscating rents without notice isn’t the standard mechanism tied to transferring ownership; and terminating the loan upon sale without penalty would effectively end the loan, which isn’t what the clause does.