release clause

Definition

A provision allowing an owner to sell individual parcels from a larger mortgaged property, common in land development. It's how developers avoid having all their eggs in one very large, very financed basket.

Example Usage

The developer negotiated a release clause that lets them sell off lots individually while still carrying the blanket mortgage on the rest.

Origin

Commercial real estate and development terminology dating to early 20th century subdivision practices

Fun Fact

Release clauses typically require paying down the mortgage by more than the proportional value of the released parcel, ensuring lenders maintain adequate collateral.

Source: Real estate development financing terminology

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