We own mineral rights in Colorado and are in the process of trying to get our home sold. To avoid the mineral rights ownership from becoming a sticking point in a sale, we have thought of transferring those rights to another family member. My question is, if this is done, would we need to declare anything regarding the rights in the sale of the home (ie. retaining them)?
If this is an option, what would be the best way to go about getting this done quickly. Thanks - Cathy
You can deed off the mineral right assuming you actually own them to begin with. Are you sure you have title to them? Lots of folks don't realize they do not have a true "fee simple" title to the mineral right.
You can write a simple mineral deed to transfer your mineral rights. Since over-conveyence is possible, I would make sure the deed is vetted first. Secondly, you will have to disclose that the minerals are not transferred in the sale of the house. Same issue with water rights. If you have water rights, they have to be explicitly defined for a proper deed.
Depending upon the size of the parcel, retaining the mineral right comes with it a possible loss in value to the surface property. Two reasons, First, they might want them and think they have "value". Secondly, since the owners would have a loss of control over the mineral rights, they might have some resistence to buying the property. That is especially true if the area is "hot" for exploration and doubly true the smaller the parcel.
If you have a small parcel (20 ac or less, maybe larger), then when you deed off the mineral rights you might be able to deflect that last doubt of a buyer by not retaining the right of engress/egress on the surface. In other words, the land owner can prevent a company from building a well location on the property but they could not stop a horizonally drilled well from penetrating beneath them. Colorado also has some viewscape issues regarding locating a well near a house..
Hi Cathy -
I am not an Attorney, only a Field Landman in Texas, and suggest that you always consult with an Attorney specializing in Colorado Real Estate law and/or Colorado Mineral Estate law for questions like this.
Having said that, from my experience the cleanest and most above-board way for you to retain your minerals is to simply reserve them in your Deed to whoever buys your property.
I would never advise or advocate "sneakiness" (Moses didn't bring down the Ten Suggestions), but title to mineral interests are not typically covered in a Title Company's review of title for a closing and title insurance purposes. Mineral title research is much, much, much too expensive for typical residential or even commercial real estate transactions.
Rather than scrambling around trying to figure out a way to hide them and then hopeing nobody finds out, just add a provision reserving "...all oil, gas and other minerals in, on and under or that may be produced and saved therefrom..." the land to your deed and don't bring the subject up. If the Buyer brings the subject up, you'll just have to hold the line or negotiate a compromise at that time.
No matter the outcome, at least no one will be ever able to say that you withheld information or tried to "get away with something" during the course of the transaction. I'm from the South and can tell you from truth that a reputation for being "Tacky" will outlive you.
T L Shields is correct: Whatever rights that are not specifically reserved pass forward.
If your Buyer is concerned about oil companies coming on their property, then simply do not reserve the rights of "ingress and egress" [the right to come and go or to enter and to take away], which is typically included as part of a mineral reservation. You could even specify that they pass forward to the new owner if that would make them more at ease. That way, no oil company can come on their land or build a pipeline through their backyard without their permission.
Your idea a transferring your mineral rights to another family member is not particularly a bad one, but before you elect to go that route you should do a little research in the the concepts of Warranty of Title and the Doctrine of After Acquired Title. You can Google or any other Search Engine them - I'm sure you will find more than enough links for them to "learn you up some".
I don't know how Colorado law applies in such circumstances, but under Texas law it is my understanding that you certainly have the right to transfer title to your minerals to another family member or a family trust or any other entitity (Church, Boy Scouts, Children's Hospital Trusts, anything) before your sale to the new owner and that they will then not pass forward.
But also that, under the laws defining Warranty of Title and the Doctrine of After Acquired Title, if the mineral interests are ever re-transferred, re-conveyed or even inherited back into your name, that then and in that event, the mineral interests will immediately pass through you and vest in the new owner.
And because of the "heirs and successors" wording of most documents used to convey title to real property, the effect would be the same whether the interests are conveyed back into your name or into the names of your "heirs and successors" - even 1,000 generations down the line: The mineral interests would immediately pass through and vest in the name of the then owner of the land.
For the Purist out there, I agree that it might be argued that interim reservations might interfere with my simple example here, but I am under the impression that you cannot or should not be able to effectively reserve something you do not own at the time.
Hope this helps -
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Thanks for your reply. - Cathy
T L Shields said:
You can deed off the mineral right assuming you actually own them to begin with. Are you sure you have title to them? Lots of folks don't realize they do not have a true "fee simple" title to the mineral right.
You can write a simple mineral deed to transfer your mineral rights. Since over-conveyence is possible, I would make sure the deed is vetted first. Secondly, you will have to disclose that the minerals are not transferred in the sale of the house. Same issue with water rights. If you have water rights, they have to be explicitly defined for a proper deed.
Depending upon the size of the parcel, retaining the mineral right comes with it a possible loss in value to the surface property. Two reasons, First, they might want them and think they have "value". Secondly, since the owners would have a loss of control over the mineral rights, they might have some resistence to buying the property. That is especially true if the area is "hot" for exploration and doubly true the smaller the parcel.
If you have a small parcel (20 ac or less, maybe larger), then when you deed off the mineral rights you might be able to deflect that last doubt of a buyer by not retaining the right of engress/egress on the surface. In other words, the land owner can prevent a company from building a well location on the property but they could not stop a horizonally drilled well from penetrating beneath them. Colorado also has some viewscape issues regarding locating a well near a house..
You bring up some good points, thanks for the input. - Cathy
Charles Emery Tooke III said:
Hi Cathy -
I am not an Attorney, only a Field Landman in Texas, and suggest that you always consult with an Attorney specializing in Colorado Real Estate law and/or Colorado Mineral Estate law for questions like this.
Having said that, from my experience the cleanest and most above-board way for you to retain your minerals is to simply reserve them in your Deed to whoever buys your property.
I would never advise or advocate "sneakiness" (Moses didn't bring down the Ten Suggestions), but title to mineral interests are not typically covered in a Title Company's review of title for a closing and title insurance purposes. Mineral title research is much, much, much too expensive for typical residential or even commercial real estate transactions.
Rather than scrambling around trying to figure out a way to hide them and then hopeing nobody finds out, just add a provision reserving "...all oil, gas and other minerals in, on and under or that may be produced and saved therefrom..." the land to your deed and don't bring the subject up. If the Buyer brings the subject up, you'll just have to hold the line or negotiate a compromise at that time.
No matter the outcome, at least no one will be ever able to say that you withheld information or tried to "get away with something" during the course of the transaction. I'm from the South and can tell you from truth that a reputation for being "Tacky" will outlive you.
T L Shields is correct: Whatever rights that are not specifically reserved pass forward.
If your Buyer is concerned about oil companies coming on their property, then simply do not reserve the rights of "ingress and egress" [the right to come and go or to enter and to take away], which is typically included as part of a mineral reservation. You could even specify that they pass forward to the new owner if that would make them more at ease. That way, no oil company can come on their land or build a pipeline through their backyard without their permission.
Your idea a transferring your mineral rights to another family member is not particularly a bad one, but before you elect to go that route you should do a little research in the the concepts of Warranty of Title and the Doctrine of After Acquired Title. You can Google or any other Search Engine them - I'm sure you will find more than enough links for them to "learn you up some".
I don't know how Colorado law applies in such circumstances, but under Texas law it is my understanding that you certainly have the right to transfer title to your minerals to another family member or a family trust or any other entitity (Church, Boy Scouts, Children's Hospital Trusts, anything) before your sale to the new owner and that they will then not pass forward.
But also that, under the laws defining Warranty of Title and the Doctrine of After Acquired Title, if the mineral interests are ever re-transferred, re-conveyed or even inherited back into your name, that then and in that event, the mineral interests will immediately pass through you and vest in the new owner.
And because of the "heirs and successors" wording of most documents used to convey title to real property, the effect would be the same whether the interests are conveyed back into your name or into the names of your "heirs and successors" - even 1,000 generations down the line: The mineral interests would immediately pass through and vest in the name of the then owner of the land.
For the Purist out there, I agree that it might be argued that interim reservations might interfere with my simple example here, but I am under the impression that you cannot or should not be able to effectively reserve something you do not own at the time.
Hope this helps -
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
There is also a difference in how you deed property, deeding it as fee simple would be different than deeding it in "life estate"... the later of the two insures that it passes to legal heirs "upon death" and is considerably easier to defend from title disputes for your heirs. I am not an attorney and like everyone else I highly recommend consulting an attorney and am familiar with an adage that the attorney whom does not have another attorney represent him is a fool.