Understanding Land Ownership – Including Surface and Mineral Rights

Interests and Estates in Land

Mineral rights can be complex. By law, property falls into two categories — real or personal. Real property includes land and whatever is permanently attached to land, found on it either by nature, (water, trees, or minerals) or by man (buildings, fences, bridges, roads).

Land is an inanimate thing which persons may, under the law, have different status to the land and the things attached to the land. ie. You can own the surface rights, but you sell the timber rights to farmer John for 25 years.

The nature of the status of the land is fixed by law, and are distinguished as being either a freehold estate or a non-freehold estate. Freehold means ownership without limitations to duration. Non-freehold would be like farmer John who bought timber rights, that only last 25 years.

Freehold estates include estates in fee simple, determinable or conditional fee, and life estates.

Fee Simple

(note: Don’t let the word “Fee” confuse you, it is a legal term, not a charge like a bank fee. )

Fee simple title is the highest form of estate ownership. It is free of any condition or restriction. Every estate conveyed is considered a fee simple unless expressly limited. The owner of a fee simple interest has the exclusive right of its use and sale.

So it is possible that someone owns the surface, another owns the mineral rights, another the royalties to those minerals, another the timber, etc. Each such fee simple owner has the exclusive ownership free and clear of any condition or restriction.

To contrast this case, we examine a deed in a subdivision that is burdened by a home owners association. The homeowner would not have fee simple ownership of his estate. It is burdened by the restrictions placed on his deed by the home owners association.

Surface Estate

Often referred to as surface rights. It is the ownership of the surface of the land. It implies the right that the owner may do whatever he wishes to the land as far as law permits.

Mineral Estate

Often referred to as mineral rights. The mineral estate of the land includes all unusual organic and inorganic substances forming a part of the soil which possess a useful property giving them special value. An exception would be sand, gravel, limestone, etc which are normally considered part of the surface estate as is subsurface water.

Minerals are often severed from the surface estate. Such severance is accomplished with a conveyance or reservation of the minerals in a conveyance. This conveyance or reservation includes minerals or such substances considered as minerals. This is to include such things as natural gas, as it has been often asked by bemused geologists “Is natural gas a mineral?”

Further, this conveyance or reservation includes royalties, bonuses, and rentals.

Determinable or Conditional Fee

This fee is the same as fee simple estate, but subject to an automatic termination triggered by an occurrence or act. Any estate in land may be granted with conditions or special restrictions. The non-performance of the condition, or the occurrence of the event will execute the automatic forfeiture of the estate, but until that happens, the owner enjoys the estate as if it were fee simple.

An example of a determinable fee would be the sale from A to B “so long as the Klipsh Synagogue still stands, then to C.” Another example is a mineral lease which is a determinable fee interest in the mineral estate.

The owner of a determinable fee has all the rights that a fee simple owner has, but there is always the possibility that it may be terminated. If he sells the estate, the buyer accepts the possibility  of termination.

Life Estates

Where property is granted to an individual for as long as he lives, and upon his death shall pass to another party, he is the owner of a conventional life estate. He is called a life tenant of the property, with the right of possession, use and all income therefrom.

Statutory life estates are created automatically upon the death, intestate, of husband or wife; and the surviving spouse becomes a life tenant, with the right of possession, use and all income, to one third of the separate property of the deceased, with the remainder to the legal heirs of the deceased.

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