When are Subsurface Rights Sold Separately from Surface Rights?
Many new property owners don’t know much about surface and subsurface rights. It’s not until they make the grand discovery of natural resources or minerals under their land or someone claiming mineral rights walks up their door.
That’s when the question arises of who owns and controls these resources. Subsurface rights are just for that; they are the legal ownership rights for controlling anything underneath your property or land.
Subsurface and surface rights appear the same but govern different domains. A property owner may have surface rights but not subsurface rights and vice versa. So they are both independent of each other and determine the extent of ownership you have on your land.
Let’s look at both rights independently, what they are, what they control, and when they are distinguished in a property sale.
Surface Rights
As the name indicates, surface rights exist over the land’s surface. These include the rights to sell, use and improve everything on the surface of your land.
So with surface rights, you can build, occupy and use the area as you please (as long as you stick to your local zonal codes.) Usually, in the event of a sale or purchase, these are the fundamental property rights discussed and included in the agreement.
Surface rights allow you to build a road, fence, cabin, shed, driveway, barn, plant trees, etc., on your property. These rights can be leased, sold, or bought independently from other rights governing the property.
Subsurface Rights
These are the rights to control everything underneath the ground, like minerals, oil, natural gas, gold, silver, etc. The owner with subsurface rights can extract these resources themself or lease the land to an oil and gas exploration company for the same.
Subsurface rights are commonly referred to as mineral rights.
It is important to note here that a property owner with surface rights may or may not own the subsurface property, as both rights are independent. Moreover,
- One owner may have all the subsurface rights or be shared between different parties.
- Mineral rights and subsurface rights are terms often used interchangeably
- US property rights are divided into surface and subsurface (mineral) estates. Each ‘estate’ is bought or sold separately and independently of the other.
Can You Sell Subsurface Rights Independently?
Subsurface rights are like real property. These rights can be sold, leased, bought, or inherited like surface property. These rights include the rights to control oil, gas, minerals, and other resources below the property’s surface.
The owner with subsurface rights can discover, extract, and use these resources without limitations or interference from other parties. The laws for subsurface rights vary per country and location, and the legislation also keeps getting upgraded with time.
Hence, if you are looking into buying a property, knowing the laws and your rights is essential to avoid undesired situations.
In the US, subsurface or mineral rights generally take precedence over surface rights.
When are Surface and Subsurface Rights Sold Separately?
It’s common practice for people to assume they are getting both surface and subsurface rights when buying a piece of land. On the contrary, when signing off a property deal, the original owner usually just sells the surface rights to the buyer.
Only a property conveyance transfers both rights to the new buyer. It’s the choice of the original property owner whether to transfer the surface rights only to the buyer while retaining the mineral rights to themself or sell both surface and subsurface rights to the buyer.
The property deed is an important document that determines the rights and ownership of a property’s surface and subsurface rights. In a split estate where surface estate is segregated from mineral rights, the two rights are separated, and subsequent sales agreements will not reference the transfer of the mineral rights.
When property owners retain the subsurface rights themselves, it means that in case of a discovery, an oil and gas company will go to the original owner to sign the lease. Here are some important considerations here.
- In most US states, surface rights become secondary to mineral rights.
- Owners with surface rights only cannot claim royalty income on the discovery of minerals, oil, or gas.
- The laws governing subsurface rights vary per state and country.
Transfer of Subsurface Rights
Property owners can transfer the subsurface rights via lease, deed, or will.
Lease
The lessee can use and access the resources underneath the property for a specific time. Lease agreements are more flexible than sales agreements and hence more preferred over the former. Also, many companies like to explore the area on lease instead of buying the whole estate instantly.
The oil and gas exploration companies contact the subsurface rights owners to develop the minerals found on their land.
Such events are great opportunities to make a generous profit on your investment. People often undergo lease agreements with the company that keeps their rights to the resources intact. You also get payment or compensation for developing the resources found on your land.
Participation in Development
You may also opt to be part of the development process instead of leasing the land. This way, since you will have a functional role, you will get more revenue. On the downside, you will also have to share part of the cost of exploration and drilling.
Sale
Property owners may sell the entire subsurface rights or only part of them. Many people prefer to sell a portion of the right and lease the remaining subsurface rights. These rights can be sold through a property deed that clearly states the transfer of ownership of subsurface rights from one party to the other.
That way, the original owner gets cash for sale and can retain certain rights that make them eligible for royalties and bonuses on the part of the property.
Gift/Will
The subsurface rights often pass on from generation to generation as gifts or inherited rights.
The property owners can also specify the person they want to inherit their property’s mineral rights in their will.
Why Do Property Owners Retain Subsurface Rights?
Minerals like uranium, oil, and gas are important resources with a lot of value. Having the legal power or ownership over them is worth it.
Hence, many property owners have retained their subsurface rights and sold only the surface rights to the new owners. This way, they can exercise their right and exploit the resources years and years afterward.
Therefore, it is all the more important to discuss who owns these rights on your property. Nobody wants a surprise heir at their doorstep demanding instant drilling and exploration work on their home!
Conclusion
Mineral laws are constantly being updated and evolving for each state and under federal law.
People with subsurface or mineral rights can use the rights to claim royalties and make more economical use of their land.
When considering buying or selling property, knowing about your state laws and all the rights included in the deed is important.
