On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate acquisitions & dispositions on Wednesday, February 7, 2018.
Most people assume that when they buy a piece a land they’re buying ownership in “fee simple,” meaning that the deed includes everything on it and under it as well. However, that may not be the case if the property happens to be located in an area where there are often significant underground resources.
Surface property rights include the right to build on the land and farm it. Mineral rights, on the other hand, include the right to mine the property for oil, gas and precious minerals like gold and silver. These two rights can be severed and sold (or willed and inherited) independent of each other.
This can create a lot of confusion about who has the right to do what on the property. If you own the surface rights but not the mineral rights, you may not be able to stop someone from reasonable access to mine the land. On the other hand, if you own the mineral rights, a mining company may not be able to simply start digging for gas or oil. The owner of the surface rights has to be considered.
Unfortunately, it isn’t always easy to tell whether or not a property seller is offering fee simple rights or not. It isn’t among the required disclosures in many states to tell a prospective buyer if a property’s mineral rights have a different owner.
That’s why it’s always advisable to have a title search done very carefully before you purchase. If you do find out that the mineral rights are severed on a piece of commercial real estate that you plan to purchase, you have a variety of legal options to explore rather than just walking away.
For example, it’s possible to negotiate a lease agreement with the holder of the mineral rights that will restrict access to the minerals and prevent a mining company from coming in and disturbing things. Alternately, you could try to purchase a share in the mineral rights yourself (if the owner won’t sell them all). That would prevent a company from mining them without your agreement.
Source: Mineral Wise, “Surface Rights vs Mineral Rights in Oil & Gas Leasing,” accessed Feb. 07, 2018
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