Proving ownership of inherited mineral rights
Recently, I鈥檝e received a number of calls from people trying to determine whether they own mineral rights to land they inherited.
In analyzing their inquiry, one must ask: 1) Did your ancestor own the land in fee simple? 鈥淔ee simple鈥� means ownership of real estate from the 鈥渃enter of the earth to as high as the heavens.鈥� 2) If not, did your ancestor own the minerals below the land surface? Surface rights and mineral rights can be separated. 3) Was your ancestor蘑菇视频 named on the title? If not, did your ancestor gain ownership of the property through an earlier inheritance? and 4) are there any liens, such as mortgages or recorded judgments, or pre-existing leases that affect your inherited rights to the minerals?
The answers to these questions are usually found in the local county courthouse, although sometimes they can be difficult to find. In some cases, if an ancestor lived in another county, it may be necessary to examine the estate records of that county to determine the identity and rights of the heirs.
No investor will buy or lease mineral rights from an heir, or anyone else, until a title abstractor verifies ownership of the mineral rights. A title abstractor is a trained individual who knows how to research documents in the county land records and county court clerk蘑菇视频 office. Title abstractors pull all records appertaining to the ownership of a property, including deeds, leases, royalty leases, mortgages and other documents that affect the title or ownership of the property.
In most cases, the status of mineral rights does not appear on a property deed. Unless specifically excluded from a deed conveyance, minerals are presumed to be included in the conveyance of the surface land. Mineral rights may be severed from the surface land; i.e., they may be sold or transferred separate and apart from the surface land.
Even if a deed does purport to convey mineral rights, the deed may be inaccurate if there are historical transfers of the mineral rights that are unknown. The only way to be sure that a deed actually conveys mineral rights is to research the chain of title to confirm the mineral rights were not previously severed and are still a part of the fee simple estate, or if they were severed from the fee simple estate, the title abstractor must research the current owner of the minerals, and determine whether there are any encumbrances on the minerals.
Title searches do not follow street addresses. In Pennsylvania and most eastern states, real estate is described in 鈥渕etes and bounds,鈥� which are descriptions of land boundaries via surveys. Property records are usually found using grantor and grantee indexes, and searches are usually done by name rather than legal description. Searching by name can be extremely time-consuming and confusing. Most western states use the Public Land Survey System (PLSS) and your legal description will always include a section (or part thereof), a township and a range.
In the case of mineral interests that may have been severed from the fee simple estate by a former owner 鈥� by reservation in a deed, or transfer to a third party or heir 鈥� title abstractors will need to trace the mineral title as far back as possible, even to the original land grant if records allow. Thus, the review of these records is time-consuming and typically involves archaic, hand-written documents.
Sometimes gaps will occur in the chain of title, sometimes called a 鈥渃loud鈥� on the title. A cloud occurs when you鈥檙e unable to determine from the records how a certain grantee came into title. A cloud in the title could also be caused by a faulty legal description and the resulting misfiling of a deed.
Oftentimes abstractors have to search divorce records and probate records to see whether family events affect title to the property or minerals. Also judgment reports have to be searched to see whether there are foreclosures or liens from judgment creditors affecting the title.
Royalty deeds may also be found, which are not the same as mineral deeds as they do not actually transfer the mineral rights but only a right to receive royalties from the minerals if and when they are actually produced. A royalty deed is more like a lease; the grantor of the royalty deed would still retain actual ownership of the minerals, so the title to the minerals would not transfer to the grantee.
The lease will not describe what the lessor or mineral owner owns, but will describe the tract leased by the oil company. And just because a document says 鈥淢ineral Deed鈥� at the top of the page, does not necessarily mean it is a mineral deed. You have to read the document to see what really is conveyed, whether it is royalty rights or mineral rights.
There is no charge to go to the courthouse and search these records; however, piecing together the rights of ownership to a particular parcel is often tedious. Abstractors have to read and understand the legal jargon used in these documents and have to make sure they catch each nuance. Sometimes documents can be searched on-line, but the same tedious review must occur for a title to be guaranteed.
While a good title abstractor rarely makes mistakes, in the event a mistake is made, or if an unrecorded document surfaces where it is impossible for a title abstractor to find it, the potential damage claim is too expensive for most title companies to insure. Title insurance policies will protect the title to the land ownership, but that蘑菇视频 as far as they鈥檒l go. So in addition to the normal investment and business risks associated with acquiring minerals, mineral purchasers and lessees also assume title risks when they invest in minerals.
If you believe you inherited mineral rights and want to sell or lease them to an investor, the investor will usually pay for the title examination. A contract is drawn between the heir and the investor stipulating the terms of the mineral rights sale or lease, subject to a thorough title examination. Once the investor-paid title examination proves that the heir has good title to the property, the heir is obligated to sell or lease the mineral rights to the investor. If title is not proven, the investor generally incurs the loss of the title exam fees with no recourse against the heir.
Before making any decision regarding the disposition of your mineral rights, it is always advisable to seek professional advice from a mineral rights consultant for an evaluation of your mineral rights, and to consult with your lawyer and tax adviser.
David Pearl is vice president of Infinity Resource Group, Inc., a professional mineral rights consulting firm, specializing in the leasing and sale of mineral rights in Pennsylvania, West Virginia and Ohio. Pearl is also president of a natural gas fuel dispensing patent holding company and director of a natural gas fuel island development company. Your questions are welcomed by calling 412-535-9200 or by emailing IRGOilGas@gmail.com.