What does "due-on-sale" clause mean in commercial leases?

A "due-on-sale" clause in commercial leases refers to a provision that necessitates the tenant to pay the lease in full if the property is sold. This means that if the landlord decides to sell the property, the new owner has the right to collect the entire amount owed under the lease agreement upon sale, thereby ensuring that the landlord does not continue to be responsible for the lease terms after transferring ownership. It's intended to protect the interests of the landlord by ensuring they receive payment for the full value of the lease, regardless of any changes in ownership.

The other options do not accurately describe what a "due-on-sale" clause entails. For instance, while a provision that prevents a tenant from selling their business could potentially exist in a lease, it is not encapsulated in the definition of a "due-on-sale" clause. Similarly, a clause that allows tenants to transfer their lease to another party contradicts the restrictive nature of a "due-on-sale" clause. Lastly, a mandate for a sale upon lease termination does not align with the concept of "due-on-sale," which specifically concerns the obligations resulting from a property sale, not lease termination conditions.