Release Clause
A provision in a mortgage or deed of trust that allows portions of the mortgaged property to be released from the lien upon payment of a specified amount or meeting certain conditions. This clause is commonly used in blanket mortgages covering multiple properties or parcels, enabling the borrower to sell individual portions while maintaining financing on the remaining property.
Example
“The developer negotiated a release clause that would free individual lots from the blanket mortgage as each one sold.”
Memory Tip
Release clause lets you "release" pieces of property from mortgage bondage, like freeing prisoners one by one.
Why It Matters
Release clauses provide flexibility for developers and investors who want to sell portions of their property portfolio while keeping existing financing in place on remaining assets. This can improve cash flow and allow for strategic property sales without requiring full loan payoff.
Common Misconception
A release clause doesn't automatically release property from a mortgage when sold - specific payment amounts and conditions must be met as outlined in the original loan agreement.
In Practice
A developer obtains a blanket mortgage on five commercial lots with a release clause stating each lot can be released for $200,000. When the developer sells the first lot for $300,000, they pay $200,000 to the lender, and that specific lot is released from the mortgage lien while the loan remains on the other four lots.
Etymology
From Old French "relesser" meaning "to let go" or "set free," combined with Latin "clausula" meaning "a closing" or provision.
Common Misspellings
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