I am a resident of the state of Ohio. I just purchased all mineral rights and interests including the current lease with a gas company, the lease is not in production, from an acquaintance with a mineral deed that servers the mineral rights from surface rights of his home. My acquaintance never told me his financial situation, I knew he needed money but didn't know his dire situation. We signed a purchase agreement relating to sale of mineral rights and all mineral interests, that I found on the internet and filled in the blanks, and he provided me with a MINERAL AND ROYALTY INTEREST DEED at closing. Both documents were notarized in presence of a notary public. Only later did he tell me that he had received a notice from his primary mortgagor that if he doesn't get current he will get foreclosed upon and in this pre-foreclosure state he had sold me the mineral rights. If he gets foreclosed upon, will it effect me, since he sold me the rights, and told me later he might get foreclosed upon. Will I lose my mineral rights, they were sold to me with a MINERAL AND ROYALTY INTEREST DEED granting me 100% ownership and the deed is at auditors office and waiting to get to recorders office to get recorded? I think after it is recorded it becomes a separate mineral estate and I read I would have to pay taxes on it, which I'm fine doing.
I think it all boils down to whether it's legal to sever the mineral rights without the lienholders permission. If it is legal, I'd say you are ok. I do think it's something you should have verified with a lawyer before you handed over any money.
If the recorded mortgage does not mention the mineral interest is excluded or not included in the mortgage then they are included and if they foreclose (depending on how the mortgage was written, some have it as a trust) then they are the first in line to receive payment after foreclosure sale, if after they get all their money back, with fees including attorney, interest, etc., then you could sue and stand in line but basically you'll probably get zero and the mineral interest will be sold along with the surface etc. at auction. I recently purchased some that was not mentioned as being excluded from the lien and had to get a release for those minerals and record prior to my mineral deed.
Thank You guys both. I always thought, In Ohio if there is a severance of the surface and mineral estate by a mineral deed, the mineral estate gets taxed separately and I pay tax on the mineral estate. The surface owner is taxed separately. The title to the property (parcel) for both surface and minerals was is in his name before the sale of minerals rights by deed to me, and he had a current Gas lease with a gas company. If it wasn't his title, why would a gas company sign a lease with him and get it recorded, knowing the fact he had a previous mortgage? To my understanding he was not required to get a subordination agreement from the mortgagor, and compounding is the fact that the mortgage company did not exercise the due on sale clause even a year after he had signed the gas lease with the company. I would think the company would have done a clear title search before signing anything, and I was in the same frame of mind. With the mineral estate in my name the mortgage company can go after him for due on sale clause as I was reading, but the property still would remain mine as it is separated. Please share your thoughts.
Companies do lease minerals on property that have a mortgage. They also lease minerals without clear title sometimes as a protective measure. You wouldn't need a subordination agreement unless a well was drilled and royalties were being held up for the lack of a subordination agreement. I think you need to see a lawyer versed in real estate law.
More Facts:
- I am the owner of the mineral rights now, there is no mortgage on them. It is the mortgagor of his residential home (surface) who wrote him the per-foreclosure letter.
- The seller had a deed to the entire parcel (his residential property), but he transferred to me the mineral rights, hence severing them from the surface property. His residential deed does not specifically mention mineral rights.
- So why am I bringing the gas company into the discussion?
The reason for this is that if you sell or lease any part of all of property a mortgagor can foreclose upon you citing the due on sale clause. They did not do that even after the mineral lease was recorded (it's been a year or more). My rationale being, if they had any ownership interest in the mineral rights they would have foreclosed on him a year ago. His lease agreement is for 5 years and 1 year is up.
Have you read the entire mortgage document? Sometimes the devil is in the details. The lienholder may have the right but not the requirement to foreclose and could forclose at any time in the future. This housing market is not the greatest and lenders may feel it advantageous to have a house occupied, especially if part or most of the payments are coming in. They could always foreclose later and something is better than nothing. If the seller did not have the legal right under the mortgage to sell the minerals then you may have to get your money back from him, which does not sound like it will be an easy task. I think you should have seen a lawyer first, to get the most benefit from it but you need one now in any case to find out what happens if the property is foreclosed on. Take the mortgage contract to the lawyer. I would bet a good steak dinner that Mineral Joes answer is going to be correct.
Unless specifically excluded from the mortgage contract, the mortgage lein is attached to the minerals and they will transfer with the land in a foreclosure sale.
Even if they are severed by mineral deed of sale and taxed separately by county auditor, as its a separate estate from the original as ownership is separated? Mineral estate recorded under me, and surface still with owner.
Andrew said:
Unless specifically excluded from the mortgage contract, the mortgage lein is attached to the minerals and they will transfer with the land in a foreclosure sale.
RECORDING STATUTES – ESTABLISHING TITLE TO PROPERTY PURCHASED
They never recorded the mineral interests.
If the mineral interest wasn't already severed it was still united with the surface and did not require a separate recording, the surface record covered the minerals also. The lien on the surface with unsevered minerals was also a lien on the minerals. You can't chip off part of the lienholders collateral. Your link leads to an explanation of what happens if two separate entities have secured leases for a single property. The lienholder doesn't have to participate in the footrace because they have a prior claim, the lien was attached at time the surface was bought. How are you going to preceed that?
The minerals are yours, you will owe taxes on them, you can lease them, but they are burdened by the full amount of the mortgage if he had a mortgage prior to your deed and it covered the surface where your minerals were severed from. Normally when a mortgage is taken out on a resident it also covers all surface pertaining to the home, it will be written into the mortgage and unless specified or prior reservation, includes all minerals, water rights, air rights, appurtenances, etc.
In Texas I have bought several similar tracts of land that had prior leases and mineral deeds where the minerals had been sold but no subordination agreements. I now own the minerals and the lease is no good. I have not had any argument from the O/G companies, we just renegotiate a lease and go own. Person who purchased minerals just loses out. You can not sell something you do not own outright without permission for other interest holder.
Do you think you would have the right to sell the house off of a property that there is a lien on? Same with minerals.
As already stated, the lien is bound to Everything described in the original deed - the home, the land, and the minerals. Individual bound under the lien Can't separate and sell any portion off piecemeal without satisfying the lien in full. Good luck.
Rich: The most recent posts by "r w kennedy" and "Mineral Joe" are correct. If the mortgage was filed prior to your purchase of the minerals, you had constructive notice of said mortgage, and your interest is subject to it. In the event of foreclosure, you will lose any interest in the property.
If you are in a position to bring the seller's note current, you might be able to avoid any foreclosure, assuming the mineral interest is of sufficient value to justify such action.
thank you all for your valuable insight.
But the individual with the mortgage HAS separated and sold me mineral rights, now which are recorded under a separate mineral parcel #. All the checks were done by tax dept, auditor, and has been recorded.
oldoak said:
As already stated, the lien is bound to Everything described in the original deed - the home, the land, and the minerals. Individual bound under the lien Can't separate and sell any portion off piecemeal without satisfying the lien in full. Good luck.
Rich,
was there a mortgage or lien on the surface when he conveyed the minerals, if so there is no separating it from the mortgage without a release, no matter what the county, state, tax dept, auditor or anyone else does or says. Yes, you have severed the minerals according to these agencies but not from financial burden that would have been placed upon them prior to severing. No matter what anyone here says or has said, you can separate and sell a portion without satisfying the lien in full, I have done so myself more than once and have seen it done many times, you just must have a release.