[Durham INC] Homes sold in Durham minus mineral rights -- Fracking to come?
Tom Miller
tom-miller1 at nc.rr.com
Thu Apr 12 18:40:19 EDT 2012
In North Carolina, with the exception of some large tracts in the western
counties where mining was/is a real industry, it is extremely unusual for a
seller to reserve mineral rights. In the western US, reservations are not
unusual - this accounts for the Utah-drawn deed Gary mentioned. A
reservation of mineral rights in this state can be made in a the deed
conveying the property from the reserving seller and then left out of all
subsequent deeds. It can also be made in a plat, easement, or declaration
of covenants of the subject property recorded by the reserving seller before
the deed to a purchaser is made. Again, the deed will refer to the plat,
easement, or covenants to perfect the reservation. All of this is common in
NC residential development, but for things like the right of architectural
review, not mineral rights.
Under NC law, the seller of a property has no express duty to point out to a
purchaser that the seller has reserved mineral rights. It is presumed that
the purchaser will protect himself by reading a deed before he closes.
Under the standard form residential sales contract commonly in use in NC
during the last three decades, a seller's reservation of mineral rights
would have to be included expressly (i.e., written in), otherwise, the
seller in that contract makes a broad promise to provide marketable title,
free of unusual encumbrances and objections to fee-simple title. The
standard contract is not mandatory, however, and many development firms do
not use it.
When the seller uses a real estate broker to sell the seller's property, the
seller's broker actually has a higher duty under the law than the seller has
himself. The seller's broker must disclose a material fact to the
prospective buyer even if the seller chooses to say nothing. A fact is
material if it is one that the ordinary, reasonable, and prudent buyer would
want to know before deciding to purchase. The fact, standing alone, does
not in itself have to be determinative. It merely must be one that a buyer
would want to weigh against other facts. Using this test, the seller's
intention to make the transfer subject to a broad reservation of mineral
rights would be material by any measure. The seller's broker would have
duty to expressly disclose such a fact if he the agent actually knew of the
fact or if the broker reasonably should have known of it. Because it is
fact that might be revealed only through a search of the seller's title, an
seller's agent might not know that the reservation would be found there.
Title searches are the practice of law and a real estate agent may not
practice law.
When the seller and the seller's brokers are merged, then the seller may
have to make the disclosure. For example, a developer, Oil and Gas
Development Company, buys a 500 acre tract of land which it calls Oil and
Gas Estates, and intends to sell lots for residential construction. Instead
of hiring Pine Tree Realty in the nearby town to sell the lots, O&GDC
creates its own real estate company, O&G Realty, and gets it licensed as a
broker in NC. If O&GDC intends to reserve mineral rights in its sales to
lot purchasers, then O&G Realty must disclose the reservation to prospective
purchasers. Because of the proximity of O&GDC and O&G Realty, it would be
very difficult for the O&G Realty brokers to say that they did not know or
should not have known about the reservation. If, however, O&GDC hires Pine
Tree Realty to sell the lots and keeps them in the dark about the
reservations and if a reasonable broker in the same circumstances would not
have discovered the reservations, then Pine Tree may have not duty to
disclose. There are other scenarios, but I have made the main points.
A buyer should hire an attorney to search the title of any property he hopes
to buy. The attorney searching the title will provide the buyer with an
opinion about the quality of the seller's title and not for the buyer any
shortcomings or problems that appear of record during the period of
reasonable search (30 to 60 years). The law does not require such a search,
prudence does. If the buyer is borrowing money, his lender may require it
as a condition of the loan. Such a search should find a mineral rights
reservation. The search, however, is performed immediately before the
scheduled closing - after the time a buyer might reasonably walk away from
the deal. Also, the reservation, if it is consistent with some provision of
the sales contract, may not indicate itself to the attorney as a problem.
A buyer's best protection is to read his contract thoroughly and to ask
questions. This may be, as a matter of the real world, unrealistic.
Consumers, even sophisticated ones, are often overwhelmed by the paperwork
attendant to real estate transactions. They assume, not unreasonably, that
the forms they sign are at least routine and reasonably neutral. They
assume, again not unreasonably, that the professionals surrounding them will
catch all problems. But, as I have pointed out, it is possible for the
professionals not to catch mineral rights reservations.
One of the problems would-be frackers will have in NC is obtaining the
rights to go beneath the property of citizens who do not expressly allow
them to do it. Where property is already significantly carved up into small
parcels (like most parts of the original 13 colonies), it is very hard to go
back and reassemble the extraction and passage rights that might have been
more easily obtained when the property of the state was still divided only
in giant grants and tracts in the hands of a few. This is why fracking
might still be pulled off so easily in the western US where giant parcels
still exist. As I understand it, fracking sometimes involves drilling
horizontally for miles. There are not very many parcels in the populated
parts of NC that run for miles on the surface or underground. All the same,
an NC purchaser who does not wish to buy property subject to someone else's
right to extract minerals or pass beneath the surface of the property,
should declare his wishes and ask hard questions before he signs a contract
to purchase.
Tom Miller
-----Original Message-----
From: inc-list-bounces at rtpnet.org [mailto:inc-list-bounces at rtpnet.org] On
Behalf Of Will Wilson
Sent: Thursday, April 12, 2012 5:23 PM
To: Melissa Rooney
Cc: inc-list at rtpnet.org; Gary Berman; durhamenviro at yahoogroups.com
Subject: Re: [Durham INC] Homes sold in Durham minus mineral rights --
Fracking to come?
this response from Gary Berman (does real estate law):
Hi, Will. In a state in which the ground contains valuable minerals, it's
common for sellers to retain the mineral rights when conveying land.
Occasionally, when deeds for Durham property are prepared in one of those
states, the deed form contains a pre-printed clause that specifies that the
seller retains the mineral rights.
For example, the building at the southeastern corner of Watts and Green
used to be a Mormon church. The property was sold to Beth El Synagogue.
Coming from the Mormon organization, the deed to Beth El was (not
surprisingly) prepared in Utah, and the deed contains a clause that reserves
the mineral rights for the seller.
Such clauses have been rare in this part of North Carolina.
But you asked for insight. I don't have much of that. However, I wonder
how mortgage lenders will react when they find out that the proposed
collateral for a loan doesn't include mineral rights. And I'm curious about
how much the reservation of mineral rights will affect the value of real
estate.
On 4/12/2012 4:11 PM, Melissa Rooney wrote:
> I don't understand much about this mineral rights stuff. Soil and
> Water Conservation Board member Danielle Adams knows quite a bit more,
> but I was unable to talk for very long to her. I understand she may be
> speaking at an upcoming INC meeting...? This would be excellent for
> many reasons: stormwater problems, fear of fracking, mineral rights
> (which apparently are being sold for very little -- far less than they
should be worth), etc.
>
> I just wanted to raise the red flag by passing this information to
everyone I know.
> I can barely keep up with what's going on in my household these days,
> so I hope that, together, we can all stay informed and prevent
> catastrophic decisions by our local and state gov'ts...
>
> Melissa
>
>
> ----------------------------------------------------------------------
> ----------
> *From:* "TheOcean1 at aol.com"<TheOcean1 at aol.com>
> *To:* kjj1bg at yahoo.com; mmr121570 at yahoo.com
> *Cc:* inc-list at rtpnet.org; durhamenviro at yahoogroups.com
> *Sent:* Thursday, 12 April 2012 1:12 PM
> *Subject:* Re: [Durham INC] Homes sold in Durham minus mineral rights
> -- Fracking to come?
>
> *It's been a good number of years since I took the pre-license Real
> Estate class, and maybe the curriculum has changed. What I recall is
> the statement, "from the core of the earth to the highest heavens", or
> something to that effect.*
> **
> *I just re-read the Offer To Purchase contract, and the words "Mineral
Rights"
> aren't mentioned anywhere. I've read a bunch of articles, and watched
> the youtubes, and in one the fellow says that folks find out about it
> at the closing table - and just want to close!*
> **
> *Since Realtors are surely going to take blame, it would be very nice
> to know how we can prevent it. I suspect if this were to happen at one
> of my closings, I'd tear up every piece of paperwork on the table. But
> even that won't effect the guy a few blocks away who sold his rights
> to a company capable of drilling sideways.
>
> **Bill Anderson*
> REALTOR
> (919)***282-8209*cell
>
>
> www.FrankWardRealtors.com<http://www.frankwardrealtors.com/>
>
> (919) 688-5811 Office
> (919) 688-2094 Fax
> theOcean1 at aol.com
> In a message dated 4/11/2012 7:45:13 P.M. Eastern Daylight Time,
> kjj1bg at yahoo.com writes:
>
> Melissa,
> Is this not being disclosed to buyers? Are we now going to have to
purchase
> mineral rights separately from land/home? Could cities or counties
prohibit
> this?
>
> Sent from my iPhone. Take typos and autocorrect errors lightly
please.
>
> On Apr 10, 2012, at 6:30 PM, Melissa Rooney<mmr121570 at yahoo.com
> <mailto:mmr121570 at yahoo.com>> wrote:
>
>> This really worries me, so I wanted to share the info with those who
I
>> know care about what goes on beyond their personal property lines:
>>
>> Currently, houses in Durham are being sold minus the mineral rights
...
>> this is scary wrt the possibility of Fracking and who knows what
else.
>>
>> See the links below. And please keep your eyes open for any
information
>> pertaining to Fracking and Mineral Rights in Durham. We will likely
need
>> to make our elected officials well aware of the hazards for our
county.
>>
>> Does a Developer Sale of Mineral Rights to an Energy Company
Foreshadow
>> Fracking
>>
>>
>> http://www.indyweek.com/indyweek/does-a-developers-sale-of-mineral-ri
>> ghts-to%20-an-energy-company-foreshadow-fracking/Content?oid=2970445
>>
>>
>>
>> It is also in the Herald Sun:
>>
>> Builder sells homes without mineral rights. It was when he was
>> finalizing the purchase of his new home in Durham last month that
>> Danny Conyers first heard the words "mineral rights" brought up.
[You
>> may need to register to view this article.]
>>
>>
http://www.heraldsun.com/view/full_story/18181034/article-Builder-sells-home
>> s-without-mineral-rights
>>
>> Here is a link to a video about Fracking in NC (by Durham resident
Tina
>> Motley Pearson for Clean Water for NC):
>>
>> Fracking for Natural Gas in NC... Can it Happen Here?
>>
>> http://www.youtube.com/watch?v=hsrVF-DVFz4
>>
>>
>> --Melissa (Rooney)
>>
>> _______________________________________________
>> Durham INC Mailing List
>> list at durham-inc.org<mailto:list at durham-inc.org>
>> http://www.durham-inc.org/list.html
> =
>
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--
http://www.biology.duke.edu/wilson/
New Book: http://www.constructedclimates.org/
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