| SUBJECT: | North Carolina Real Estate Licensing Board; Applicability of Act to Participation-Type Loans Negotiated by Mortgage Corporation. |
| REQUESTED BY: | Joseph F. Schweidler, Secretary-Treasurer North Carolina Real Estate Licensing Board |
| QUESTION: | Are mortgage corporations or their officers, who bring together a long term mortgage lender and a borrower, required to secure a real estate broker's or salesman's license? |
| CONCLUSION: | No. |
| OPINION BY: | ROBERT MORGAN, Attorney General Millard R. Rich, Jr., Assistant Attorney General |
A participation type loan is one whereby the long-term mortgage lender takes an equity position in the property whether by purchasing it from the borrower and then leasing it back to the borrower or simultaneously purchasing the property from the borrower and selling it right back to him at on appreciated price. In both of these type transactions, the corporation would be performing the function of bringing together a buyer and a seller for real estate not owned by the corporation.
A hypothetical transaction illustrating the above would be as follows: If borrower X approaches the mortgage corporation requesting a loan to develop property owned by him with improvements such as an apartment complex, and because of the current money market situation, no long-term investor would make the loan to the borrower without an equity participation, could the mortgage corporation then advise borrower X of these facts, and bring him together with investor Y and arrange or assist in the sale of borrower's property to investor Y?
This hypothetical assumes that the mortgage corporation would receive no sales commission or other compensation in connection with purchase of the property by investor or the sale of the property by borrower X. The only fee assumption to be made is that the mortgage corporation would receive only its standard mortgage fees and no other compensation as generally recognized in the mortgage loan field today.
G. S. 93A-2(a) and V are as follows:
"Section 93A-2. DEFINITIONS AND EXCEPTIONS.
"(a) A real estate broker within the meaning of this chapter is any person, partnership, association, or corporation who for a compensation or valuable consideration or promise thereof lists or offers to list, sells or offers to sell, buys or offers to buy, auctions or offers to auction (specifically not including a mere crier of sales), or negotiates the purchase or sale or exchange of real estate, or who leases or offers to lease, or who sells or offers to sell leases of whatever character, or rents, or offers to rent any real estate or the improvement thereon, for others
"(b) The term real estate salesman within the meaning of this chapter shall mean and include any person who under the supervision of a real estate broker, for a compensation or valuable consideration is associated with or engaged by or on behalf of a licensed real estate broker to do, perform or deal in any act, acts or transactions set out or comprehended by the foregoing definition of real estate broker."
(Emphasis added.)