Mineral Rights Were Reserved on My Property Before I Bought It; What Now?
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The reservation of mineral rights on real property throughout Florida is not uncommon. When the State of Florida first conveyed title to state owned lands, it was customary for the state to reserve an interest in all oil, gas and minerals on the property. This included the right to drill, mine and excavate these interests. Once these properties began to be improved with commercial and residential developments, these rights raised significant issues for developers and their lenders. Why commit significant resources and investment in property that was subject to third parties exploring for or mining minerals?
As Florida grew in population and saw an increase in development, the mineral rights reserved throughout the state were causing numerous roadblocks and delays. As a result, Florida adopted a statute identified in F.S. 270.11(3), stating that
“The right of entry to any interest in phosphate, minerals, and metals or any interest in petroleum reserved in favor of the Board of Trustees of the Internal Improvement Trust Fund, the State Board of Education, a local government, a water management district, or other agency of the state is released for any parcel of property that is, or ever has been, a contiguous tract of less than 20 acres in the aggregate under the same ownership.”
Property owners rely on this statute to extinguish the right of entry for parcels whose size qualifies them for same. In those cases, title companies will affirmatively state in both the owner’s and lender’s title insurance policies that this statute applies to release the state’s right of entry. It is important to understand that if a parcel is too large, the owner is still required to request the state to release its right of entry.
Florida properties are also subject to mineral reservations held by private parties, as opposed to the state. Typically reserved in deeds when owners sold their properties, they will include a right of entry even if it is not stated in the reservation (unless such a right is expressly disclaimed). Unlike with the State-owned mineral rights, no Florida law exists protecting improvements if a private party exercised its right to enter your property to excavate or mine. However, there is case law in Florida holding that a mineral rights owner cannot so harm the surface estate as to unreasonably injure or destroy its value. Additionally, the mineral rights holder is responsible for damages to the surface estate owner for any unreasonable injuries caused. If a property owner finds itself in such a predicament where mineral rights are impacting the marketability of the title, it may be worth negotiating with the owner of the mineral rights for their release.
Florida’s Marketable Record Title Act (MRTA) was passed in order to liberate real property owners from older title defects by prescribing a thirty (30) year limitations period on certain matters of title. MRTA may operate to extinguish a private right of entry for exploration, mining, and drilling, pursuant to F.S. 704.05, even if the mineral reservations themselves are not extinguished. It is worth requesting a title insurer to conduct the necessary analysis to determine if that applies, which is typically not done unless requested. If the right of entry has been terminated by either of the above statutes, the title insurer should be able to affirmatively state in a title insurance policy that there is no right of entry regardless of the existence of mineral reservations. The title will then be deemed as marketable unless the property is to be used for mineral extraction. In that case, even though the right of entry is no longer applicable, any minerals extracted by the owner would still belong to the party (if any) who held the mineral reservations.
In today’s real estate market the risk of property disturbance from mineral rights reservations is less of a concern compared to the business concern of marketability when going to sell or finance the property. Often times, buyers intending to redevelop the property will want the right of entry released at a minimum. Title insurance companies will not insure over the right of entry unless it is expressly released by statute or in a recorded instrument. In order to acquire such a release, an owner may have to negotiate a release for a set price with the mineral reservation holders (who are often difficult to locate, due to the time the rights were reserved, and who usually do not reside or conduct business in Florida) to remove the right of entry. Most, if not all, buyers expect this from their sellers. Whether or not this is achievable is entirely dependent upon the holder of the reservation.
Mineral rights can be tricky and have the potential to cause issues during real estate transactions. It is strongly encouraged that you seek the advice of a seasoned real estate attorney with experience in dealing with mineral rights should you ever find yourself in such a predicament.