Title search may prevent mortgage surprise

2 min read

Dear Real Estate Adviser,
I have about 10 acres in the mountains and a modest house. Recently, the gas company contacted me wanting to lease five of the acres. But as it turns out, my deed names the previous owner as the party with the surface and in-ground mineral rights, plus it states that this man’s heirs are to inherit these rights.

I bought the land six years ago from a friend whose deceased father had owned it, but he said nothing about the mineral rights. Shouldn’t he have disclosed that? Can I now lease to the gas company or do I have to pay the heirs?
— G. Johnson

Dear G.,
Boy, it sure pays to read all the documents involved in a property purchase, including the deed. Had you enlisted a title company or other service provider to perform a title search for you, this information would have likely been called to your attention. Or even if you decided to examine a copy of the deed at the courthouse, you could have discovered the rights-assignment yourself.

Yes, your “friend” probably should have made it clear during negotiations with you that the mineral rights had already been “severed” from the surface ownership, but he probably had little motivation to do so. And no, you are not in a legal position to lease out those mineral rights now. Only the present owners — your friend and his fellow heirs — have that right.

What you really don’t want at this point is the gas firm coming onto your property to drill for natural gas, especially without compensating you. In some states, such as Pennsylvania and Texas, the state recognizes the rights of mineral owners to develop the resources and to have reasonable access for production and development. As an aside, I’ve seen instances where people buy a heavily forested property without buying the timber rights, then come home from work one day to find half their land cleared!

In your case, call the gas company back and ask it where the drill site will be in relation to your property. If pressed to make a decision on leasing, you can simply tell the gas company you have no interest in a lease. However, the gas company or a “land man” representing it will likely do deed research and then reach out to the family that does own the rights. If, God forbid, your acreage is destined to become a drill site, you may be able to come back and negotiate some goodwill monies for yourself for your inconvenience.

Also, you might want to conduct a title search. This could uncover different owner rights to the property’s minerals, which would muddy the situation and perhaps force a compromise. There have been plenty of instances where the present owner of property sells or leases gas rights without actually owning those rights — although to be honest, that doesn’t sound like the case with your land to be honest.

Bankrate’s content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate’s Terms of Use.

Read more Real Estate Adviser columns and more stories about mortgages. To ask a question of the Real Estate Adviser, go to the “Ask the Experts” page, and select “Buying, selling a home” as the topic.