A Florida Appellate Court recently held that a due on sale clause permitting
mortgagee to accelerate loan upon sale or transfer of proper without the
bank’s consent was triggered when property was transferred as a
result of an involuntary condominium lien foreclosure.
In 2006, mortgagor executed a promissory note and mortgage encumbering
the subject condominium unit. The mortgage contained a due on sale clause
stating that upon sale or transfer of the property without the Bank’s
consent, the Bank would be entitled to accelerate the loan, and if the
mortgagor failed to pay the accelerated loan, the Bank would be entitled
Following a condominium assessment lien foreclosure sale, the property
was transferred to the condominium association, and then to an investment
company. The Bank did not consent to either transfer. Thus, the Bank accelerated
the loan and instituted foreclosure proceedings upon nonpayment of the
The investment company argued that the due on sale clause was not triggered
and the foreclosure proceedings were improper because mortgagor did not
voluntarily initiate either transfer.
On the day of trial, the trial court dismissed the case, without pending
motion, finding it futile as a matter of law because the Bank would be
unable to present any testimony or evidence that mortgagor violated the
due on sale clause in the mortgage because, as both parties agreed, there
had not been a voluntary transfer of title.
On appeal, the Third District Court of Appeal held that because the due
on sale clause at issue did not contain any language limiting it to only
voluntary sales, the clause encompassed any and all transfers of the subject
property – even involuntary sales.
Rosenthal Law Group can assist you with drafting and reviewing contracts
and can provide litigation assistance if faced with complex contract disputes.