Page 10 The Banker’s Advocate Little Rock Office


400 Hardin Road, Suite 100 Little Rock, AR 72211-3502 Phone: 501-324-9019


Fax: 501-324-9028 Email:


asbd@banking.state.ar.us


Northwest Arkansas Office


777 Mathias Drive Suite A


Springdale, AR 72762-0739 Phone: 479-751-5543


Fax: 479-751-5815 Email:


NWArk@banking.state.ar.us


Jonesboro Office 924 South Main P.O. Box 9374


Jonesboro, AR 72403-9374 Phone: 870-972-1744


Fax: 870-972-1762 Email:


jonesboro@banking.state.ar.us


No banks in survey forbid lending on land with lease


No banks responding to


an informal Bank Depart- ment survey prohibit secur- ing a loan with a mortgage on property that has an existing lease for natural gas drilling. One bank does have pro- visions in its real estate mortgages or other loan documents that prohibit a borrower from leasing mortgaged real estate for natural gas drilling in cases in which there is no lease at the time a loan is made. The survey instrument, dated February 9, 2012, was mailed to 22 Arkansas state-chartered banks. Twelve banks returned completed questionnaires – a response rate of 54.55 percent. Three banks that do not


We’re on the Web! www.arkansas.gov/bank


have provisions in its real estate mortgages or other loan documents that pro- hibit a borrower from leas- ing mortgaged real estate for natural gas drilling after a loan is made do require the bank’s consent before the borrower executes a lease agreement or prior to the removal of minerals from the property. Of these three banks,


A publication of the Arkansas State Bank Department


one noted that prior con- sent is a term included in the assignment of “leases and rents” section, while another bank responded that consent by the lender is found in the “Due on


ARKANSAS PRODUCER: This multi-well production facility off Arkansas Highway 285 west of Damascus includes separators, right, that remove water particles from the gas. At left are storage tanks that collect this “produced” water.


Sale” clause in the mort- gage.


This clause states, in part, “Lender may, at Lender’s option, declare immediately due and payable all sums secured by this Mortgage upon the sale or transfer, without Lender’s prior written consent, of all or any part of the Real Prop- erty, or any interest in the Real Property.” In the clause, the term “sale or transfer” is defined as the conveyance of the real property or any right, title or interest in the real property, including by leasehold interest with a term of more than three years.


One bank, not among the three that require prior March 31, 2012


consent, noted that its mortgage does take a secu- rity interest in all mineral rights, including oil and gas.


Nine of the 12 banks responded that there are provisions in their real es- tate mortgages or other loan documents that pro- tect the bank’s interest in the event of environmental contamination generally. None of the 12 banks,


however, have provisions in their real estate mort- gages or other loan docu- ments that protect the bank’s interest in the event of environmental contami- nation caused specifically by natural gas drilling activ- ity.


- Richard S. Plotkin


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