The Honorable John Paul Capps State Representative P.O. Box 1488 Searcy, Arkansas 72145-1488
Dear Representative Capps:
This official Attorney General opinion is rendered in response to the following question concerning real estate agents:
Does a loan given by a licensed real estate agent to a seller and/or buyer constitute an interest in the property of the seller and/or buyer if the loan is evidenced by a promissory note and secured by an unrecorded second mortgage on the property in question?
It is my opinion that the mortgage held by the agent clearly constitutes an interest in the property.1
A mortgage, by definition, is an interest in property. Indeed, Black'sLaw Dictionary defines the term "mortgage" as follows: "A mortgage is an interest in land created by a written instrument providing security for the performance of a duty or the payment of a debt." Black's LawDictionary, 5th Ed. This principle is also well-established by court decision. See, e.g., Amstar/First Capital v. McQuade, 42 Ark. App. 185,856 S.W.2d 326 (1993); Wilson v. Rogers, 97 Ark. 369, 134 S.W. 318 (1911). The fact that the mortgage may be unrecorded does not affect the validity of the interest created as between the parties. Rogers v. GreatAmerican Federal Sav. and Loan Ass'n, 304 Ark. 143, 801 S.W.2d 36 (1990); Cloverleaf Development v. Provence, 273 Ark. 12, 616 S.W.2d 16 (1981).
Accordingly, I must conclude that an unrecorded second mortgage held by a real estate agent to secure a loan given by the agent to a buyer or seller does constitute an interest in the mortgaged property.
The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Suzanne Antley.
Sincerely,
WINSTON BRYANT Attorney General
WB:SBA/cyh
1 You have not asked about, nor do I take a position on the issue of the impact of this conclusion on any of the Rules and Regulations of the Real Estate Commission, or the Commission's interpretation of those Rules and Regulations.