Your deed to real property conveys the mineral rights unless the seller reserves them or they were previously deeded to another party. When you mortgage your land, the lender has a lien against all of your land including your mineral rights. Any sale of those rights is subject to the mortgage lien. In order to give clear title to the buyer of mineral rights, you need to obtain a release from your lender.
Severed Mineral Rights
Before you sell your mineral rights make sure you really own them. Severed mineral rights refers to split ownership of surface and mineral rights. First you examine your deed to see if there is any reference to mineral rights. If the deed is clear you still might not own the minerals. A prior owner could have sold them. Only a complete title search answers the question. That title search will consider the effect of state law. For example, under North Dakota law, if mineral rights are not used within a 20 year period, the rights revert back to the surface owner due to their abandonment.
Sale vs. Lease
A significant difference exists between selling and leasing mineral rights. A lease of mineral rights lasts a set period of time, while a sale is permanent. Both, however, may violate the standard provisions in a mortgage deed of trust. Because mortgage liens attach to the land, they follow the mineral rights in a sale. Even a lease may violate restrictions against transfer, not to mention the activity surrounding the extraction of minerals which is most likely prohibited.
Deed of Release
A deed of release serves as a legal means for a lender to release its interest in mortgaged property. The deed releases all or part of the secured property. In the case of mineral rights, it releases just those rights, leaving the surface rights still subject to the mortgage. The lender may well require monetary consideration to execute the release, because the property after the sale of mineral rights is not as valuable.
Effects of Sale
One reason a lender may not be willing to release the mineral rights is the activity following the sale. The holder of the mineral rights has the right to come on the property, erect structures necessary for extraction, dig and drill, store hazardous materials and basically conduct a commercial business on property that contains a residence. The potential damage to the lender's security may be more than it is willing to tolerate.
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