If You Don’t Reserve It, You Lose It! May 18, 2015
This article discusses some unusual aspects of Real Estate Law concerning Mineral Rights. Generally speaking, in a deed, if you as the Seller do not reserve the mineral rights, then the mineral rights pass with the property to the Buyer.
In the usual situation we are actually describing in a conveyance document what it is that is being conveyed. However, in the case of minerals, they are conveyed through silence. I’ve always thought that was unusual.
The Texas Real Estate Commission has promulgated a form of Addendum to the standard One to Four Family Real Estate Contract which attempts to bring customer’s attention to this issue. The Addendum is entitled ADDENDUM FOR RESERVATION OF OIL, GAS, AND OTHER MINERALS. The Addendum recognizes two aspects of mineral conveyancing. First, it recognizes that the mineral estate will be conveyed UNLESS, you check the box to reserve the minerals. Second, it provides the Seller who is reserving minerals the opportunity to waive the use of the surface of the property for development of those minerals.
If the Seller reserves the minerals but waives surface rights, the minerals can still be developed by utilizing neighboring property and drilling underneath the subject property. A Buyer, if they cannot obtain all the minerals from the Seller, would still want a surface waiver so they could make sure their property would not end up being used for drilling purposes.
Now, say the Seller has already signed a Mineral Lease prior to the conveyance of the Property. In that situation, even if the Seller conveys the minerals to the Buyer or even if the Seller waives surface rights, the Buyer cannot be assured of having no drilling activity on their property. This is because the right to development of the mineral estate has already been conveyed to a third party, the Oil/Gas Company.
Another twist is that the Seller may not have any minerals to begin with. The minerals may have been severed in prior conveyances and a past owner may hold the minerals. In that case, the Seller attempting to now reserve the minerals or waive surface rights would have no effect because one cannot reserve something which they do not own.
Finally, as a Buyer, you always want to check the form of the Deed prior to closing. Most sales occur with the Buyer attending the closing and never seeing the Deed until after it has been recorded in the Property Records. Mistakes occur and even if the Contract provided that you were to get the minerals as part of the deal, you still want to make sure the Deed reflects that prior to closing. If the Deed is in error then it can be easily corrected prior to the Seller signing it and it being recorded. Of course the same holds true in the Seller’s situation, if the Contract said the Seller was reserving the minerals, always make sure you review the Deed before you sign it and make sure the Deed mirrors the contract.
If Mineral Rights, and/or Surface Rights are important to you, hire an attorney at the beginning to make sure those rights are protected.
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