--- title: Commercial Loans and Fun Blog | due-on-encumbrance clause description: due-on-encumbrance clause | George Blackburne, owner, offers insight into the commercial loans and mortgage industry in this Commercial Real Estate Loan Tips blog. --- [![c-loans-logo-2025](https://info.c-loans.com/hs-fs/hubfs/images/c-loans-logo-2025.png?width=183&height=86&name=c-loans-logo-2025.png)](https://c-loans.com) [Terms of Use](https://www.c-loans.com/terms-of-use) | [Disclaimer](https://www.c-loans.com/disclaimer) | [Blog](https://info.c-loans.com/) # Commercial Loans and Fun Blog ## [Why Commercial Second Mortgages Are So Rare - Part II - Due-On-Encumbrance Clauses](https://info.c-loans.com/bid/86280/why-commercial-second-mortgages-are-so-rare-part-ii-due-on-encumbrance-clauses) Posted by [George Blackburne](https://info.c-loans.com/author/george-blackburne) on Thu, Aug 15, 2013 - [Tweet](https://twitter.com/share) Yesterday I explained that the most important reason why commercial second mortgages are so rare these days is because all of the commercial second mortgage lenders got wiped out in the commercial real estate depression of 1987 to 1991.  Today I will explain a number of legal barriers facing commercial lenders wishing to make commercial second mortgages. [![Click me](https://no-cache.hubspot.com/cta/default/37671/71f8e27c-2820-42c5-ae3c-3329e127410a.png)](https://cta-redirect.hubspot.com/cta/redirect/37671/71f8e27c-2820-42c5-ae3c-3329e127410a) Most modern commercial mortgages contain a ***due-on-encumbrance clause***.  This means that if the borrower places any junior financing on the property, the underlying first mortgage lender has the right to declare the borrower in default and to ***accelerate his loan***; i.e., demand that the borrower immediately repay the loan in full. [![Free List of 3,159 Commercial Lenders Sort By Your Own Criteria](https://no-cache.hubspot.com/cta/default/37671/edc33fe8-9d87-477b-bf2f-07a33d3d2d24.png)](https://cta-redirect.hubspot.com/cta/redirect/37671/edc33fe8-9d87-477b-bf2f-07a33d3d2d24) It gets worse.  Most modern commercial mortgages also contain a provision whereby any alienation of title without the first mortgage lender's permission is grounds to accelerate the mortgage.  ***Alienation of title*** means the transfer of any legal or equitable ownership right in the property.  In this context the word "alienation" means "to make foreign" or "to send away".  When you alienate your wife's affection by yelling at her, you send her love for you to a foreign planet. Okay, let's not forget where we are.  We are talking about the legal obstacles to making commercial second mortgages.  Placing a second mortgage on a commercial property constitutes a form of alienation of title.  You better get the lender's permission first because further encumbering the property is grounds for accelerating the bank's first mortgage. "Mr. Borrower, this is Bob Smith, the loan officer at the bank.  I see that you recently placed a $200,000 second mortgage on your apartment building.  It is my duty to tell you, Mr. Borrower, that because you did not first get our permission, you are now in default on our $3.4 million first mortgage.  We are hereby accelerating it.  Would you please pay off our entire $3.4 million commercial loan by 5:00 p.m. tomorrow?  If you fail to do so, we will be forced to start seizing your assets (like all of the cash in your checking and savings account).  Have a pleasant day." Have a pleasant day? Tomorrow we'll talk about prohibitions against mezzanine loans, preferred equity, and springing personal guarantees. [![Commercial Mortgage Brokers You're Doing It All Wrong](https://no-cache.hubspot.com/cta/default/37671/47353a06-ecdf-49ad-a26d-0bd2888fb186.png)](https://cta-redirect.hubspot.com/cta/redirect/37671/47353a06-ecdf-49ad-a26d-0bd2888fb186) [![Click me](https://no-cache.hubspot.com/cta/default/37671/420746e2-6c74-4c6f-ac0c-b5af90a75c0d.png)](https://cta-redirect.hubspot.com/cta/redirect/37671/420746e2-6c74-4c6f-ac0c-b5af90a75c0d) [![Submit Your Loan to 750 Commercial Lenders Using C-Loans.com.  It's Free!](https://no-cache.hubspot.com/cta/default/37671/9f0b2bed-fb9b-455d-b8be-17d8f7960a2a.png)](https://cta-redirect.hubspot.com/cta/redirect/37671/9f0b2bed-fb9b-455d-b8be-17d8f7960a2a) [![Click me](https://no-cache.hubspot.com/cta/default/37671/a509f69d-0bee-42d1-85c2-67d55b9dffeb.png)](https://cta-redirect.hubspot.com/cta/redirect/37671/a509f69d-0bee-42d1-85c2-67d55b9dffeb) [![Submit Your Bridge Loan to Blackburne & Sons](https://no-cache.hubspot.com/cta/default/37671/3d1170e9-8af6-4add-b4db-dc2aec276b6c.png)](https://cta-redirect.hubspot.com/cta/redirect/37671/3d1170e9-8af6-4add-b4db-dc2aec276b6c)   0 Comments [Click here to read/write comments](https://info.c-loans.com/bid/86280/why-commercial-second-mortgages-are-so-rare-part-ii-due-on-encumbrance-clauses#comments-listing) Topics: [due-on-encumbrance clause](https://info.c-loans.com/topic/due-on-encumbrance-clause) [All posts](https://info.c-loans.com/all) ### George Blackburne III Owner of C-Loans, Inc. ![George Blackburne III C-Loans Owner](https://info.c-loans.com/hs-fs/hubfs/George%20Head%20Shot%20Small%205%20by%207%20copy.jpg?width=158&name=George%20Head%20Shot%20Small%205%20by%207%20copy.jpg) ### Subscribe via E-mail ### Connect with C-Loans ## [![Get the Latest Scoop on C-Loans Inc.](https://no-cache.hubspot.com/cta/default/37671/bacfb58b-143e-40d7-b126-33c182b5b90b.png)](https://cta-redirect.hubspot.com/cta/redirect/37671/bacfb58b-143e-40d7-b126-33c182b5b90b) C-Loans.com® is sponsored by  C-Loans, Inc. — For more information, contact Tom Blackburne 555 University Ave., Suite 150, Sacramento, CA 95825 Telephone: (916) 338-3232 x 317 * Tom Blackburne in Indiana: (574) 210-6686 * Fax: (916) 338-2328 Real Estate Broker -- California Department of Real Estate -- License Number 01330173 Arizona Dept. of Financial Institutions – License Number 0909472 The Florida Mortgage Brokers License Number: 0708758 [Read our many client Success Stories](https://c-loans.com/mortgage-brokers-overview/success-stories/) » © 2025 C-Loans, Inc. 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