Legal Question in Real Estate Law in California

Re: Promissory note on Hard Money Loan

I am not sure of what your question is. If you d not have that "due on sale" clause in the promissory note then it is not part of the contract and is undenforceable. Once you have signed the written contract yo can not add anything to do, including to provide an interpretation of an already existing clause, unless all parties agreement to the addition.

You want to be sure that the borrower fully understands the terms of the loan. If someone else is arranging the loan and found the borrower, you want to meet with the borrower to evaluate their abiity to pay you back. There are numerous false loan real estate operations.

To cover yourself, I would send a letter [signature required]after you meet with the person and before they sign the loan papers and then right after the loan has been processed pointing out in bold face capital letters and very simply English [perhaps with a simple example]what the terms are. Have all the borowers

[spouse even if they are not on the loan] sign adn date and return an original to you. All of this is probably unneccessary but does not involve much work or time; it is like insurance, which you never use but just in case. And remember the usery laws apply against you.

Re: Promissory note on Hard Money Loan

That clause is known as a "due on" clause, although in previous posts on this website I have called them "due on sale clauses."

I note from your post that you claim the clause is in your promissory note. Normally, a "due on" clause is in the deed of trust. The deed of trust and the promissory note refer to each other, but it the clause is usually in the deed of trust.

If your property has four or less residential units (I am assuming it is single family residential, if it is commercial, you have another problem) then the due on clause is not valid unless the clause is set forth in both the promissory note and the deed of trust. (Civ. Code sec. 2924.5.)

There are other provisions that govern enforcement of due on clauses, including situations in which it is not enforceable.

I am not aware of any requirement that the beneficiary give any notice other than that prescribed by Civil Code section 2924.5.

You may want to speak to a knowledgeable real estate attorney in your area before taking any other steps.

Very truly yours,