If you are the successful bidder of an RI at a tax sale and the Defendant owned the minerals, does this mean that the successful bidder owns the minerals or just the royalty?
It would depend on the specific language of the court order and/or the tax deed. No way to answer without seeing the actual deed.
It is just on the Royalty Interest of that particular well(s). Any other wells drilled on the property will still be owned by the mineral interest owner. In Texas, minerals are not taxed. They only become taxable after production.
In legal terms, I believe the mineral interest is actually owned by the operator of the lease, if a lease has been agreed and filed.
In this case, you would just be purchasing the royalty interest. Once the lease expires or production has ceased and the lease expires for lack of production, you no longer own the royalty interest.
The defaulted owner of the royalty interest has a reverter of ownership (title) on the mineral interest from the operator when the lease expires or production ceases and the lease expires due to lack of production.
Thanks for the help!
very good information…
I want to readdress this because I am looking at title in Loving County that included a Tax Sale which only listed the RI in the Judgment and Order. However, in the Sheriff's Deed, the "royalties, mineral interests and/or overriding royalty interests" were conveyed and there is also language in the Exhibit that states "Note: The intent of this Sheriff's Deed is to transfer all of the net mineral acres and/or net royalty acres in the leases and/or units described above." So it is clear that the deed transfers more than just the RI. Had the Sheriff's Deed not explicitly stated that the minerals conveyed, would this person be stuck with RI only in a well that would go "poof" once it stops producing? (much like an override)
In other counties, I have not seen such language that the minerals convey in the Sheriff's Deed when the RI goes to Tax Sale. So I guess this is a case of BUYER BEWARE. Probably be a good idea to look at the local county's Sheriff's Deeds before you bid on that RI !
Royalty interests in Texas are perpetual unless otherwise stated as term royalties. If carved from the WI then they are ORRIs and subject to expiration.
Wade Caldwell has a nice article on that here in the forums regarding the five rights of minerals.
A seller cannot convey what they do not own.
In my experience, property tax delinquency on minerals in Texas is not minerals at all. It is a working interest, overriding interest, or royalty interest (which are by definition in Texas, variations of mineral interest).
I would talk to a title attorney who specializes in minerals / royalties, or title company who produced the deed for Loving County that says they are intending to convey all mineral interest about this issue. If the county wrote up all deeds themselves, you may need to talk to the County Attorney or County Counselor.
When a property is delinquent, such as an individual royalty interest, and that interest is foreclosed and sold on the courthouse steps, it is only that interest - nothing more. Mineral interest is not taxed / assessed in Texas (Some could argue it is, but the value is $0). Variations of mineral interest, such as royalties, working interest, overriding interest, are taxed, and subject to foreclosure. In my county in Texas, they foreclose by individual property tax account. We tax a persons interest by each well they have interest in, even if they own interest in a unit or pool with multiple wells. So you can actually buy a portion of the same persons royalty interest, but only buy their interest in one well, and not the other wells in the same pool, since those are on different tax accounts. Irregardless, they are only auctioning off the royalty interest, and not mineral interest, since the mineral interest was not taxed. A sheriff's deed in this scenario I described should only convey the royalty interest, since the royalty interest was the only interest assessed and delinquent.
Please note that my statements here are limited to Texas only.
Thank you sir. This was exactly my understanding. However, this sheriff's deed in Loving County has confused me. I will take your advice and call the County Attorney or Counselor although I'm guessing they are going to refer me to the law firm that handles the tax sales.