Legal Definitions - direct order of alienation

Direct Order of Alienation

This legal principle applies in real estate transactions involving mortgaged properties. It establishes who is primarily responsible for a mortgage debt when a property is sold, and the new owner (the "grantee") explicitly agrees to take over the existing mortgage debt from the original borrower (the "mortgagor").

Under the direct order of alienation, if the original borrower defaults on their mortgage payments after the property has been transferred and the new owner has assumed the debt, the new owner becomes directly and legally obligated to make those payments to the lender. This principle ensures that the lender can pursue the party who agreed to be responsible for the debt following the property's transfer.

Here are some examples illustrating this principle:

• Example 1: Residential Home Sale

  Imagine Sarah sells her house to Mark. Sarah still has an outstanding mortgage on the property. As part of their agreement, Mark agrees to assume Sarah's existing mortgage debt. This means Mark takes on the responsibility for making the remaining mortgage payments. A few months later, Sarah faces unexpected financial hardship and, despite the agreement, fails to make a payment on that specific mortgage (even though Mark is now the owner and assumed the debt). Due to the direct order of alienation, the mortgage lender would legally pursue Mark for the missed payment and all subsequent payments, as he is now the party directly responsible for the debt.

• Example 2: Commercial Property Transfer

  A small business, "Cornerstone Cafe," owns its building with an existing commercial mortgage. The owner decides to sell the business and building to "New Dawn Bistro." As part of the sale, New Dawn Bistro agrees to assume Cornerstone Cafe's existing mortgage on the building. If, after the sale is complete, Cornerstone Cafe's original owner somehow defaults on a payment for that specific mortgage, the lender would turn to New Dawn Bistro for payment. The direct order of alienation dictates that New Dawn Bistro, having assumed the debt, is now the primary party responsible for fulfilling the mortgage obligations.

• Example 3: Intra-Family Property Transfer

  Mr. Henderson decides to transfer ownership of a rental property he owns to his daughter, Emily. The property has an existing mortgage. As part of the transfer, Emily agrees to assume the mortgage debt, meaning she will take over the responsibility for making the payments. Sometime later, Mr. Henderson experiences a personal financial crisis and, despite Emily owning the property and assuming the debt, fails to make a payment on that particular mortgage. According to the direct order of alienation, the mortgage lender would legally require Emily to make the payment, as she is the one who assumed the debt upon receiving the property.