The Barnett Shale development has had some significant
impacts on Real Estate transactions in North Texas. More and more people want
to retain their mineral estate when selling their home. This can be bad
news to the prospective home buyer if not addressed properly. Let me
start off by stating, I am not an expert in contract and title law nor am I a
lawyer in anyway. If you are currently having this issue please consult
your attorney for advice.
In Texas, all minerals are considered part of real estate.
Most focus on oil and gas when dealing with property in Texas. A real
estate sales contract typically includes both surface of the land rights
as well as the mineral rights below. However, ownership of the minerals,
subsurface rights, can be separated from the ownership of the surface rights,
leading to a dual ownership of portions of the real estate. Subsurface
rights can be further separated but that is a more complex topic than I'm
trying to explain.
A buyer can object to any defect or encumbrance to free and
clear title on the property in a well drafted contract. They have the right to
terminate the contract and receive a full refund of their earnest money if the
seller is unable to cure the title objection. If the buyer fails to
terminate the contract, they must take title to the property with whatever
pre-existing mineral rights are held by others. The seller is obligated
to disclose, in writing, that they want to retain mineral rights. A verbal
statement does not hold up and will result in the entire estate
being transferred to the new owner.
The deed conveys title from the seller to the buyer and will
state the details of mineral ownership. Many times a seller might not
even be aware that they do not even have the mineral rights to their property
because the developer of the land retained subsurface rights when selling the
land to a builder. If you are dealing with this please seek the advice of
your attorney. Real Estate agents can get themselves into big trouble if
they do not properly state the seller’s interest in the sale of their estate.
Stating that the seller wishes to retain "all" or "half"
of a mineral estate is not clear and can lead to termination of the contract by
a potential buyer.
One of the concerns my client/friend had was the impact of
the seller retaining the mineral rights while she owned the property. She
didn't want the seller to be able to bring a drill onto her land and start
digging away. This pertains to the surface rights of the property. This
is not a major issue in a subdivision because of the restrictions on such land,
but it can be a huge ordeal in a sale involving acreage. If the buyer
does not confirm in writing that the seller or any other owner of mineral
rights has waived the surface rights to the property, they very well may be
disturbed by intrusions. To be safe, always make sure your Realtor has
the seller waive surface rights to the property in question and have an
attorney review the deed.
Another concern that was voiced was the impact of mineral
retention on the future sale of the property. A future owner should understand
that many previous owners with real estate in Texas have chosen to retain their
mineral rights due to the proximity of oil and gas developments. However,
an owner of property that is involved in a dual ownership should always
disclose these material facts as early as possible and make sure it is clearly
written in the contract. This can avoid upset buyers and termination of
contracts.
I'm sure you are wondering what you can do to avoid legal
ramifications in the sale of property with and without mineral rights... in the
most simplest of terms, make sure the desires of the parties are clearly
and completely stated in the contract. Make sure you work with your real estate
agent to help you properly address these concerns and press the issue with the
title company who is being compensated to have their attorneys draft the deed.
Fun times!
Bina S Beechum
I am not sure if I am in the market and will encounter this situation anytime in the near future but this was very informative and I am glad you shared this.
ReplyDeleteThanks Fareena!
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