U.S. builders hoard mineral rights under new homes

[G_j]

http://mobile.reuters.com/article/idUSBRE9980AZ20131009?irpc=932

Special Report: U.S. builders hoard mineral rights under new homes

By Michelle Conlin and Brian Grow
NAPLES, FLORIDA | Wed Oct 9, 2013 6:14am EDT

By Michelle Conlin and Brian Grow

NAPLES, Florida (Reuters) - Robert and Julie Davidson fell hard for the gleaming new house at the Valencia Golf and Country Club in Naples, Florida. They loved the way the palm-fringed, Spanish-style home backed up to the fifth-hole fairway. And they were taken with the three-bedroom's high ceilings and open plan. Plus the neighborhood - with its power-washed driveways, blooming hibiscus and guarded gatehouse - seemed all "dressed up."

But when the Davidsons paid $255,385 in 2011 for the house on Birdie Drive, they didn't know that they had, in essence, bought only from the ground up, and that their homebuilder, D.R. Horton, had kept everything underneath.

"Wait a second, wait a second," Robert Davidson said after a reporter told him that a search of county records showed that D.R. Horton still owned the oil, natural gas, water and other natural resources beneath his and his neighbors' homes. "Let me sit down a minute here. They have the mineral rights to the land I'm on?"

In golf clubs, gated communities and other housing developments across the United States, tens of thousands of families like the Davidsons have in recent years moved into new homes where their developers or homebuilders, with little or no prior disclosure, kept all the underlying mineral rights for themselves, a Reuters review of county property records in 25 states shows. In dozens of cases, the buyers were in the dark.

..more..

[dipsydoodle]

1. That's pretty much universal in the UK

and as far as I'm aware always has been so. Freehold property excludes mineral rights.

[DURHAM D]

5. Not at all common in the US.

[GreenStormCloud]

13. Wrong. It is extremely common.

It just isn't talked about much because nobody cares.

[DURHAM D]

15. But it is not universal like other parts of the world.

[GreenStormCloud]

17. What other countries do is their business.

The thread OP was talking about the U.S. Splitting off mineral rights is universal for housing developments, and has been for many decades.

In rural areas, where you may be buying hundreds of acres, it isn't that common.

[DURHAM D]

19. I responded to someone from the UK, not the OP.

From you - "splitting of mineral rights is universal for housing development and has been for many decades". This is true in some but not all parts of the US. It appears you are from Texas and seem to think your experience is universal to the entire US.

[jeff47]

22. It's common to the entire US.

And has been since the subdivision was developed in the 1950s.

[GreenStormCloud]

24. I have lived in several states.

Born in Texas. Lived in Missouri, Georgia, Alabama, Mississippi, Louisiana, Virginia, Rhode Island, Florida. Owned property in some of those. At one time had a Real Estate salesman license in Louisiana. Returned to Texas a few years ago.

[dembotoz]

2. think of the new strip mine as an expanded koi pond

[Paladin]

3. Welcome to the wonderful world of split estates.

Differing ownership for surface and mineral rights is a lot more common than most people realize---particularly in areas of long-time mineral production (like most of Texas and Oklahoma) or areas where the state or federal government owns lands (like a huge portion of the Rocky Mountain states). The title insurance you get with a property acquisition should detail just who owns what, but that's not a dead-solid certainty.....

[DURHAM D]

6. The difference is that everyone

knew at the time of purchse if the mineral rights had been severed in the oil and gas producing states.

[Paladin]

8. True enough.

If you purchase a house in the Houston area with the expectation that the mineral rights are yours, you're probably going to be disappointed; likely as not, those rights were severed 50 to 75 years ago. Just to add to the joy, the mineral estate is legally considered to be dominant over the surface estate. Buyer beware......

[Mariana]

9. Is the information not in the documentation anymore?

I've bought several homes over the years, in different states, (one just a couple of months ago) and the mineral rights ownership information was always clearly stated on at least one of the documents that I signed.

[DURHAM D]

10. I am in North Carolina and D.R. Horton and other developers

started severing the mineral rights a decade or so ago without telling anyone, including the real estate agents, and apparently the closing attorneys did not reveal it to their clients. Actually if buyers were moving into a new development the builder/developer was likely paying the closing attorney as part of the "deal" so the attorneys had compromised loyalties. They just kept quiet iow.

In North Carolina buyers did not think to ask about the sub-surface rights until recent high profile court cases about the unethical practices of developers. I bought a house 23 years ago in a new development and asked the attorney (provided by the builder) about the mineral rights. The first thing out of his mouth was "Where are you from, no one ever asks that?" My response, from a part of the country where we know to always ask.

[packman]

4. It's Nothing new to--

anyone living in Pennsylvania or who has lived there. Houses have been destroyed, even entire town blocks because of something called "subsidence" (not sure of spelling). It was nothing to see a house slide off its foundation because of the mining going on under it. I remember a large Catholic Church being torn down because of it. Seems that as the mine was being tapped out, they tore down the coal pillars for the few extra tons that supported the mine roofs which in turn caved in the ground and anything sitting on it. Basically, you owned NOTHING except the house. Coal companies, gas companies, and anyone else with the dollars could do just about anything with the ground under it.
Got so bad that insurance companies even offered, for a fee of course, mine subsidence policies. God forbid that you would even think about suing the coal cartels.

[MineralMan]

7. More reasons to either read everything involved in a real estate

transaction or have an attorney do it and tell you what it means. You may decide that you don't care about the mineral rights and go ahead with the purchase, or it may be something that kills the deal. If you don't know what you're buying, that's your fault. It's all disclosed in all of those documents you signed. If you don't read them, you don't know what you're signing.

In any case, if you're buying in a condominium development, you don't own the land anyhow. You own your building, or the part you live in, anyhow. That's basic.

Read stuff, everyone. Read.

[DURHAM D]

14. Actually, in a condominium development you do own an undivided interest.

So if there are 100 units in the development you own a 1/100th interest in all buildings and common areas.

[MineralMan]

16. Well, that's true, but with that interest, you can't really control

much of anything. If you don't like the mineral rights ownership, the time to act is before you buy. It's not going to change. That was my real point. Developers often hold onto those rights in the hope that there will be mineral development at some point, giving them additional profit from the property.

Personally, I see it as a conflict of interest issue, and would never buy a condominium property under any circumstances, nor any other property bound by a Homeowner's Association clause. It just doesn't make any sense to me. I'd rather rent.

I don't rent, though. I own a home and the land under it and around it. I own the mineral rights, too, although there's nothing to be gained from that where I am.

My mother-in-law, though, does live in a condo development. I enjoy reading the minutes of the HOA meetings. I don't enjoy the nosy interference of the board, though. It is a big hassle, overall.

[DURHAM D]

20. Just imagine...

If your mil's condominium association still owned their mineral rights and they got a couple of producing wells the owners would not have to pay monthly assessments.

[MineralMan]

21. No oil anywhere near that project. It's on old glacial moraine.

[Uncle Joe]

11. Just another example of how greed is taken to a whole new level.

Thanks for the thread, G_j.

[jsr]

12. Recommend.

[kelliekat44]

18. More capitalism working as it was meant to for the greedy. nt

[jeff47]

23. This isn't new. And it's spelled out in the purchase contract.

Reserving the mineral rights became common in the US along with the subdivision. Builders went from being hired to build one house on a vacant lot to buying a tract of land, building lots of houses and then selling those houses. With the "old way" of building a house, the builder doesn't own the land. With the "new way", the builder starts with ownership, they can retain ownership.

The buyers were not kept in the dark. They kept themselves in the dark. The purchase contract has to explicitly reserve the mineral rights. Not bothering to read the contract is not being kept in the dark.