We are considering selling some land in Colorado. The buyer wants the mineral rights included in the sale. The buyer would agree to "overriding royalties" in the purchase agreement which means if the minerals were ever produced the seller would get a percentage of the royalties. What is your opinion of "overriding royalties"...is there any specific considerations we should look at before agreeing to this purchase arrangement? Gail
Gail,
If you have evaluated the potential of the mineral rights and are satisfied that the purchase price is fair to you without discount for a royalty interest, your attorney can include a reservation in the purchase agreement. It should include a prohibition of the buyer's right to deny development of the mineral rights or the RI is worthless.
If your land is in an active area for oil and gas development make sure the minerals are making a fair value contribution to the total price. I've seen proposals recently that demanded mineral rights stay with the surface when the minerals was what the buyer wanted in the first place.