There's a paragraph property buyers should read more closely

Spectrum, by Robert Mahar

I have recently been involved in a transaction in which "mineral rights" (vis-a'-vis "surface rights") became a deal breaker. In pursuit of definition of these rights, some very interesting aspects became apparent. Considerable effort, time and money was involved in pursuit of closure of this real property transaction on the part of both negotiators.

In the final seconds of the closing procedure, just before the last initialing of the last paragraph of the last page of a supplemental document which was not to be recorded but rather, kept in the files of the title company for their record, I had to pause. Initialing the provisions of this paragraph would culminate in the transfer of title and acceptance of exceptions. This paragraph contained reference to a private party having a warranty deed to the mineral rights (not rights defined as subsurface rights, but rather the "mineral rights"); I was informed that this procedure was derigguere, and the information contained therein had no practical bearing on title. Not satisfied with that assurance, and not finding any exception in the warranty deed for mineral rights reserving surface use to the property title holder, I asked if this meant that the holder of the mineral rights warranty deed could, at any time, enter onto the property for purposes connected with the "mineral rights." I was told by legal council that only a holder of "patented" mineral rights could exercise such unannounced and unpermitted "private property" entry. The mineral rights deed must specifically exempt the surface rights and uses if the property title holder is to practically have anymore than "suffrage" use of the property.

Further inquiry at various sources revealed the mineral rights holder to be a former homesteader, who was granted a warranty deed to the mineral rights in 1959. So far the picture for practical use of the property looked pretty standard since the state owns all subsurface rights anyway and their regulations for use of these rights trumps the private holding, unless the original holder had obtained the aforementioned patent for his mineral rights which gives the original holder a patented mineral claim outside the jurisdiction -- and restraints -- of state regulation or recourse. The homesteader relative to my transaction will not release the surface rights but has made some vague references to their worth without the slightest hint of what that worth might be.

It seems that in 1959, when these mineral rights deeds could be executed, there were certain people (I was told lawyers) who urged the homesteaders to bear the extra cost of patenting their mineral claims. These mineral rights and patents are granted to the original holder and to his heirs and assigns forever.

This situation has existed since 1959 with no more than a passive blink by lenders, title companies and real estate brokers who evidently have not wanted to rock the boat and stall sales by telling a potential buyer he was buying little more than squatter's rights! Not so with a commercial loan. Lenders will not make commercial development loans without clear surface rights to the property.

Very nearly the entire Valley has been homesteaded. I doubt that any homesteader intentionally passed up any opportunity to hold on to any possible future return for his homesteading effort, hence the patented mineral right without surface right exception (which gives the homesteader practical ownership and control whether he sells the property or not forever). It seems reasonable to assume that the majority of "private property" in the Valley is no such thing, but in fact is open to a negotiated interest of the mineral rights (read surface rights) with the homesteader, his heirs or assigns who may by now not be in the state or ever heard of the Mat-Su Valley and could care less about it.

Not withstanding my personal frustration with this state of affairs I began to be more aware of the broader implications of these "patents." For instance:

How come all the media information concerning coal-bed methane development and Evergreen never contains any reference to private party sale of rights, it's always the state selling rights. One small paragraph on page A6 under a column titled "Minerals in state's hands" alludes to this circumstance and flatly states that private ownership is rare. Not in the Valley it's not.

Why are these title exceptions not recorded?

Why aren't taxes levied for such mineral claims?

What would a potential buyer do if he was told before closing he would only have squatter's rights to a very expensive real estate purchase?

Is it incumbent on the seller of residential property to disclose such a fault in title if he finds out about it?

If it is not a fault in title, since it denies the title holder full use of his property, what is it?

What would happen to property values if no one would buy an encumbered property?

If property values crashed, what would happen to the local banking and investment market?

Since the situation seems to be known to all but the buyer, who is liable for not energetically informing buyers of their real ownership position? The state? The title company? The seller? The real estate broker? The banker? Seems like there is enough potential litigation to go around for everybody!

Is there a basis for class action?

Could Evergreen be using public ignorance to quietly accumulate entry rights from disparate rights holders, heirs and assigns?

I am sure you can come up with a few possibilities that I have not thought of. The ramifications are endless.

Are the powers that be colluding to support a market, or circumvent due process, or avoid legislative action for reasons connected with state/federal agreements and oversights, or pandering to the rights holders.

There is that old saying: Follow the money. The money leads to politicians, old line sometimes wealthy ex-homesteaders, Evergreen Corp., title companies, real estate brokers, lawyers, mortgage lenders and real estate investors, their heirs and assigns forever. Talk about old timers benefits!

Robert Mahar

Palmer