The clause that allows the lender to demand full repayment if the property is transferred is called which of the following?

• A. Alienation clause
• B. A due-on-sale clause
• C. A transfer clause
• D. A prepayment clause

Answer: (A)

The concept being tested is how a loan document protects the lender when ownership changes. An alienation clause gives the lender the right to declare the entire loan balance due and payable if the property is transferred. This prevents the loan from being assumed by a new owner under different terms without the lender’s consent, maintaining the lender’s security and control over the loan. It acts as an acceleration mechanism tied specifically to a transfer of title, so upon sale or transfer the lender can require full repayment. While you may hear about a due-on-sale clause describing the same outcome, the standard term used here is alienation clause.