Will mineral rights undermine home sale?


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Dear Real Estate Adviser,
I’m selling my late mother’s home and asked my attorney, who’s not a real estate lawyer, if my mom owned the mineral rights. He wasn’t sure and suggested I research it. (Shouldn’t he be able to determine this?) But just in case, we went ahead and noted on the new deed that I would retain them.

Now, the buyers say I should have mentioned this in the contract and that they — even after getting a price well under appraisal and all of my mom’s furniture — want those rights, too! Do I have a right to back out?
— Linda F.

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Dear Linda,
Your planned retention of mineral rights probably should have been mentioned in that contract, but it doesn’t mean you’ll be forced to include them in the sale. In many states, the seller’s intent of keeping the mineral rights in a home sale doesn’t need to be mentioned in the contract, though new disclosure laws requiring them to be mentioned are cropping up because builders have been hoarding them, spurring complaints from surprised consumers. With recent advances in drilling making previously untouchable natural gas and oil reachable, this is becoming a bigger and bigger issue for homeowners.

You can always try offering buyers the option to back out because you’ll be holding firm on the mineral rights (especially in light of other misgivings you have). But such insistent buyers don’t always withdraw without a fight and may seek compensation, at least for expenses incurred in their post-contract due diligence. Unfortunately, it seems your non-specialist lawyer isn’t well-suited to interpret state real estate laws or handle major complications.

It takes time to sort out mineral rights

In fairness, few attorneys can actually guarantee a quick determination of mineral rights because that’s typically not a part of their services, regardless of their specialty. The process often requires an expert who can construct a chain of title through land-record searches at the county clerk’s office or the county’s (fee-based) private abstract offices.

To determine if there have been previous conveyances of such rights or reservation of them by previous deed holders, the expert may need to search all previous mortgages, liens, affidavits, divorce settlements, defaults, tax sales and the like at the address to come up with an answer.

Consider hiring someone to search

While there are numerous online primers on how to do this, it would probably behoove you to hire a title company or “landman” from a gas-and-oil exploration company to “run title” for you. This could set you back several hundred bucks. And sorry, but that low sale price you offered and any throw-ins such as furnishings and appliances may seem overly generous, but they’re separate issues.

Of course, you may be squabbling over nada here since you don’t know for sure if your mom actually owned those rights to convey. But if she bought the property well before the onset of the natural gas boom and there’s been little or no gas-and-oil extraction/speculation in your area, there’s a pretty good chance she owned them.

Is this worth hassles and delays?

Given the state of things, you may need to request a delay in closing until you determine mineral-rights ownership and their value. You can usually arrive at the latter through online research or neighbors disclosing what kinds of gas and oil leases, if any, they’ve done, what signing bonuses they received and how much in royalties they’re getting and for how long. Then you could ask the buyers for a premium that’s a healthy portion of that sum.

You may need to hire an actual real estate lawyer to sort all this out, in addition to that landman. Is this worth threatened litigation, a delay in closing and the emotional expenditure? Remember, moral victories are mere footnotes in lost battles.

Good luck!

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