Who carries the burden of proving the reasonableness of a due on sale clause?

In the context of real estate transactions, the burden of proving the reasonableness of a due on sale clause typically falls on the mortgagee. This is due to the fact that the due on sale clause is primarily a provision included in the mortgage agreement that allows the lender (mortgagee) to call the note due if the property is sold or transferred without their consent.

The rationale here is that the mortgagee, as the party enforcing the due on sale clause, must demonstrate its reasonableness to ensure that it aligns with legal standards and does not violate any prohibitions against unjust or overly restrictive clauses. This burden of proof is especially pertinent in legal disputes where a borrower or a prospective buyer may challenge the enforcement of such a clause, claiming it is unreasonable or excessive.

Understanding this dynamic is essential for parties involved in real estate transactions, as it helps clarify the rights and responsibilities of the mortgagee compared to the seller and buyer, who generally are not required to prove the reasonableness of the clause, but instead may be defending against its enforcement. State regulators do play a role in overseeing and ensuring that such clauses comply with legal standards, but they do not carry the burden of proof in individual transactions.