Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney in Arkansas for guidance tailored to your situation.
Detailed Answer
In Arkansas, simply paying the mortgage on a property does not automatically give you an ownership interest in that real estate. Ownership of real property generally resides with the person(s) named on the deed. The mortgage is a security instrument in favor of the lender, not evidence of title. Under Ark. Code Ann. § 18-50-101 et seq., the mortgagee (lender) holds a lien on the property, and the mortgagor (borrower) retains both legal and equitable title until a foreclosure sale or payoff. You do not become a titleholder merely by covering the loan payments.
However, Arkansas courts recognize certain equitable doctrines that can grant a nonrecorded party an interest in real property if specific conditions are met:
- Resulting Trust: If you contribute substantially to the purchase price or mortgage with the clear expectation of gaining an ownership share, a court may impose a resulting trust. See Ark. Code Ann. § 18-11-702 (Defining situations in which trust may arise) (link).
- Constructive Trust or Unjust Enrichment: If you make mortgage payments or improvements under a promise of ownership, and the titled owner reneges, a court can award equitable relief to prevent unjust enrichment. While Arkansas does not have a specific statute for constructive trusts, courts apply general equity principles.
To succeed on an equitable claim, you must show clear proof of an agreement or promise, substantial contributions toward purchase or improvement, and detriment if the promise is not enforced. Absent such evidence, a judge will likely classify you as a volunteer who has no legal claim to title.
How to Protect Your Interest
To avoid disputes, consider these steps before making mortgage payments on a property you do not yet own:
- Get a written agreement outlining each party’s contributions and ownership percentages.
- Have the deed reflect your interest (e.g., joint tenancy, tenancy in common).
- Record any trust or equitable interest through a memorandum of trust or recorded contract.
- Obtain title insurance naming you as an insured party or additional insured.
Helpful Hints
- Review the deed: Ownership is determined by who holds title.
- Document everything: Save bank records, signed agreements, and communications showing intent.
- Consult early: Talk to an Arkansas real estate attorney before making large payments.
- Record notices: Filing a notice of equitable interest can put third parties on alert.
- Consider a quitclaim deed: If the titleholder agrees, execute a quitclaim or warranty deed granting you an interest.