A landowner mortgaged her land with a due-on-sale clause and wishes to sell by an installment land contract. What is the attorney's best advice?

• A. The bank may accelerate the debt if the land is transferred without prior written consent; a transfer by installment land contract can trigger the clause.
• B. The bank may not accelerate the debt under any circumstance.
• C. The bank must consent to any transfer for the loan to be valid.
• D. The bank is barred from accelerating due to lender restrictions.

Answer: (A)

The main idea here is that a due-on-sale clause lets the lender demand full repayment if the property is transferred without the lender’s written consent. Even though an installment land contract (contract for deed) isn’t a traditional deed transfer, it still represents a transfer of the property’s ownership interests and control, so it can trigger the clause.

Because the landowner plans to sell via an installment land contract, the attorney should warn that the bank may accelerate the loan if that sale occurs without prior written consent. The best course is to obtain the bank’s consent, or alternatively refinance or pay off the loan to avoid acceleration. If consent cannot be obtained, the loan could be accelerated, and the borrower would owe the entire remaining balance immediately.

The other options are incorrect because they falsely assume the bank cannot accelerate, must always consent for validity, or is otherwise barred from accelerating. The lender’s right to accelerate under a due-on-sale clause generally exists, subject to the clause and any applicable negotiated terms.