A licensed North Dakota real estate salesperson is working with a buyer who asks whether a seller can transfer property in Williston subject to an existing mortgage without the lender's approval. The salesperson should advise the buyer that most modern mortgages in North Dakota contain a due-on-sale clause. What is the practical effect of a due-on-sale clause in a North Dakota mortgage?

Correct Answer

A) The due-on-sale clause allows the lender to demand full repayment of the outstanding mortgage balance when the property is sold or transferred without the lender's consent

A due-on-sale clause (also called an acceleration clause triggered by sale) is a standard provision in North Dakota mortgages that gives the lender the right to demand immediate full repayment of the outstanding loan balance if the mortgaged property is sold or transferred without the lender's prior written consent. This prevents buyers from assuming the seller's below-market-rate mortgage without lender approval. Because North Dakota uses mortgages (not deeds of trust) and follows lien theory, the due-on-sale clause is enforced through the lender's right to accelerate the debt and initiate judicial foreclosure proceedings if the full balance is not paid.