Anyone familiar with mineral rights???

14 Replies

Recently I have been purchasing a lot of land & turning them into payments for deed with pretty good success. Many of the clients that I buy land from have the mineral rights but I am having a hard time figuring out the process of putting the mineral rights in my name.( From what I know, just stating on title is not enough & title companies say they don't do it either.) Does anyone know the extra steps I need to do to obtain the mineral rights when I buy the property? My purchases are mainly focused in Nevada.

Anything will help. 

Thanks

I am in Oklahoma and we deal with mineral rights all of the time. Generally, mineral rights are not specifically listed as they are transferred in the language of the deed(i.e. all rights and interests etc) unless the seller specifically reserves them. Around here, most mineral interests were separated from the surface rights years ago because they have so much value by themselves (oil patch). It would be rare that the minerals are still owned by the surface owner in my area. The title search and opinion can tell you if they have been separated. Once again, in my area, most title opinions do not even address the mineral interests because it is assumed they are not being conveyed.  You would have to specifically ask (and pay for) that.

Short answer- if you purchased a property from the owner who had the mineral rights and did not reserve them, then you probably are the owner. You don't have to do anything.

@Karen Margrave  Thank you for the reference...it's been a while since the last time I was on here & totally forgot to search the site before starting a discussion. 

@Paul Choate Thanks for the advice...I'm gonna have to dig more into it cause I thought the exact same thing but everytime I talk to the county...no one seems to be able to give me a straight answer & title says that they don't get involved in mineral rights. I really hope your right. haha

When you buy property, you typical buy every interest in the land the seller has available unless they keep one or many interests. If interests are severed it usually is the mineral rights. Sometimes this can be done by legislation as Paul mentioned. Any title company that doesn't address this for you is garbage. 

Clint

@Pono Wright   in my state all rights the seller has are transferred unless specifically reserved.  this may have been done by the government in the  original homestead act or by a later owner.  I have had many deals where some rights were kept or sold with the land.  Usually it is a reservation like this;  reserving and excepting therefrom however all minerals, mineral rights, oil and gas, and all other minerals of any kind, if any, unto grantor and his heirs assigns.  Sometimes the parties agree to split them and so only 1/2 of the mineral rights are reserved.  it gets really confusing when you have a large farm and the rights are reserved then split among their children, then among their children, etc.  Eventually you have hundreds of owners with half of them being unable to be located.

Oh and I have NEVER had a title insurance policy or opinion address those mineral rights unless you specifically buy a separate policy.  Usually those are done by landmen for oil companies and rarely do title companies deal with those.

@Clint Shelley   I was under the same impression. I see your point with the title companies...unfortunately for me I don't have a lot of options where I'm buying,(In the sticks...haha)

@Jerry W.   Thanks for the great advice

So I just received this message from a title company on some land that I will be purchasing with a title company (chosen by the seller to make them feel more comfortable) in a few days:

"Just to let you know, we do not search or insure mineral rights.

We can add verbiage to the deed-as an accommodation only."


I'm assuming that this is sufficient enough for me to acquire the mineral rights!?...any thoughts.

@Paul Choate  - I'm in OKC and our docs specifically state mineral rights or not and we hold mineral rights on our properties.  Of course a 3/16ths share on a city lot literally costs more in accounting than it pays.

If the minerals are not reserved anywhere in the chain of title then they will convey with the land in the deed, unless specifically reserved in the deed you receive. If they are reserved previously in the chain of title then sometimes this will be listed under the "subject to" section of the deed you are receiving. Attached is an example. Not all deeds will list out all of the reservations so you will have to pay someone to specifically run title back to see if there are any mineral reservations. You can always just have language in the deed you use to convey to your buyer that says you reserve all minerals if any, and you will retain the minerals if they haven't been previously reserved. It varies by state so use a local attorney to draw up the deed with reservation language and then you can probably use the same language in any further deeds.

I do mineral title as my day job and the advice is based on my knowledge of Texas mineral rights only.

@Pono Wright  

  I have done a lot of land in Northern California in and around the Steam gysers and one ranch I bought out by the Homestake gold mine... As has been posted ... if mineral rights are not reserved at some point in the transfer of title then they run with the land and the transfer.

Now when I did my deal out at Homestake they were running around putting big metal poles in the ground and claiming unpatented mineral rights.. at that point it got pretty complex and I sold the property and never really followed up.. But I am sure there are more complexities. But if your just buying old desert plats and there is no obvious mining operations I doubt it really matters either way... I remember many of my deals the US government had reserved the mineral rights and some owner would sqwack but ones you explained to them other than slant drilling its so hard to start a mining operation in CA that its a non event.

@Pono Wright  The important thing to understand about the transfer of property is that the deed itself is only as good as the legal interest of the person giving it. A deed in and of itself does not create the interest held by the person giving it. So, if the grantor puts an interest in the deed, like mineral interests, it only conveys if they actually have them. Deeds are not like a car title. They are like a chain. Once a link is broken, it is a smaller chain with less rights. 

The message from the title company is confusing. I can not imagine the seller wants to sign a deed conveying mineral rights just because the title company wants to "accommodate" you. If the seller has told you they own the mineral rights and is willing to sign a warrantee deed then they are responsible for defending that claim. If it is a quit claim deed, you are on your own. However, if it is important to you in this deal to get the mineral interests then you need to have someone run the title search for the mineral interest and get title insurance on that portion. Someone out there is doing them in your area and this title company should know who. If not, I would question their competency. 

@Deborah Burian  you are right- it is very common for people who still own the mineral interests to list it in a transfer as it is a big deal in Oklahoma. I had a bankruptcy client with one of those small interests (from an inheritance) take it into the bankruptcy with a value of $40 based on what someone had offered them. The trustee took it and sold it for $5000. So hold out hope! I personally don't bother with it on the deeds I create when I am paying $10,000 for a house out here in Shawnee and Seminole. Doesn't mean I don't get the interest if the seller has it. It's just they probably don't have it and it is not worth the cost/time to research it. 

Sorry for the book- Bottom line- the deed you get is not what determines the previous owner's interest (they just created that document!). It does determine your interest. All you can get is 1. what they have AND 2. what they convey to you. When in doubt get an attorney or title insurance involved.

Let's op back to the page 2 of the fundamentals of RE, the concept of ownership and the description of RE. Title to RE is from a point, conceptually at the center of the earth and extending upward to the surface along the boundary lines of the property (as we describe areas by legal descriptions) and extent upward to infinity. That area is pictured as a cone shape, like an ice cream cone with the point at the center of the earth and the large open end being off into space, if you imagine a legal lot being rather round. Title includes all that is contained under, lying upon and above the surface of the ground.

When title is passed, all rights held at the time of ownership, in that cone, are passed unless they are restricted or not passed on to the new owner.

Police powers are the powers of government to restrict the use and transfer of rights in ownership for the public good. Theoretically, your ownership goes upward into space, but the "air rights" are taken by police powers of air space for general and commercial aviation. Mineral rights may be restricted in the same manner. This is not a book, so I won't go into "sun rights" "water rights" "crop rights" and other rights that convey with title.

So, mineral rights are transferred with title unless they have been retained from previous transfers or restricted. An abstract (searching the history of title) must be performed in order to see if certain rights were retained or restricted in the "chain of title".

Title companies insure against the risk of financial loss arising from claim to title. Title coverage generally covers only surface rights as these are reasonably measurable financial losses that can be valued, we can only speculate if gold, or silver, copper, oil, natural gas or diamonds exist 5 miles up from the center of the earth and title coverage can only insure known assumable valuations, not to speculative values. Your title coverage is set to the sale price considering only the economic benefits at the surface of your property. In Schedule BII of the American Standard Title Policy you will see the exceptions that are not insured, such as liens not shown of public record, you will also see that mineral rights are excepted items.

Mineral rights and the retention or transfer go back in history but became practice in the gold rush years in the 1800s, land offices began transferring gold claims aside from other rights in ownership allowing easements over the surface to provide access to minerals below the surface.

There is a market for valued mineral rights much like notes, selling and buying the rights by a certificate of such rights. These certificates may be sold and traded by assignment and become rather difficult in some states in tracking down the ownership of mineral rights depending on filing requirements of the state. The Office of Land Management registers mineral rights of government and private lands, understanding that government was the first owner of all  lands in the country and dedicated to private ownership.

Texas has all rights restricted to some extent and it is assumed that mineral rights do not convey with title transfers unless specifically stated, according to my Texas attorney and title coverage (as mentioned) doesn't include coverage. Coverage may be underwritten specifically as to known, provable deposits in some cases by special policies or contracts, Shell Oil may obtain coverage from special policies that may cover deposits much like inventory, I suppose you could call Lloyds of London concerning such concepts.

Hope a little of the basics helps you grasp the subject of mineral rights.  :)   

     

@Pono Wright  I also work in mineral title. I prepare qualified mineral title opinions in Texas and some other states for oil companies, businesses, and landowners. I would second Matt G. and Jerry W. They seem knowledgeable. I would also encourage you to contact a local real estate or title attorney to help you with drafting a good mineral reservation clause for your contracts and deeds.

I have not found a title company that will insure minerals either. A real estate/title attorney or landman may be able to provide you with a list of existing reservations and mineral conveyances affecting a tract, but you will probably have to pay them quite a bit for each one.

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