Due-on-Encumbrance Clause Law and Legal Definition

Due-on-encumbrance clause is related to the due-on-sale clause and is found in a mortgage or a deed of trust. This is a mortgage provision giving the lender the option to accelerate the debt if the borrower mortgages the real estate further without obtaining the consent of the lender. In other words, the due-on-encumbrance clause allows the mortgage holder to accelerate the mortgage note if the mortgagor places junior financing on the property. Some courts have invalidated such clauses due to the fact that they constitute unreasonable restraints on the free marketability of property.