A lender in Alaska is evaluating a loan application for a property where the deed conveys only surface rights. The seller has disclosed that the subsurface mineral, oil, and gas rights are owned by the State of Alaska. The appraiser values the surface rights at $280,000. The lender is concerned about the impact of severed subsurface rights on the collateral. Which statement BEST describes the correct handling of this situation under Alaska law and practice?

Correct Answer

C) The lender may proceed using the appraised surface-rights value as the basis for the loan, but must recognize that the deed conveys only surface rights and that state-owned subsurface rights are a normal condition in Alaska

In Alaska, the state owns subsurface rights on a vast amount of land, and it is entirely common for a property deed to convey only surface rights while the State of Alaska retains oil, gas, and mineral rights. This is a normal and well-understood condition in Alaska real estate. The lender may base the loan on the appraised value of the surface rights, provided the appraisal clearly identifies that only surface rights are being conveyed. Licensees must understand and disclose this distinction to buyers and lenders as a material fact unique to Alaska.