Mineral rights

As applications for mineral-only titles are now being opened up by the Land Registry, Fisher German Partner William Gagie is urging landowners to investigate if mineral rights were retained on historic land sales and register these, as they may provide an opportunity for income.

It has long been possible to separate the surface interest in land from the mineral interest, something which was often done when estates were broken up or off-lying parts sold off and the mineral rights were retained by the estate. However, as the registration of the mineral ownership has not been compulsory, unlike that of surface interests, a comprehensive record has been lacking. This is further complicated by the way the Land Registry has recorded mineral exceptions and ownership.

Titles may state that the “mines and minerals are excepted from this title” or similar, but often it gives little or no clue as to who holds these rights. Even worse, the absence of this wording from a title does not prove that the surface owner also owns the mines and minerals beneath.

Proving mineral ownership

Proving ownership of minerals, which commonly includes materials such as sand and gravel, limestone or granite, can be notoriously difficult. The Land Registration Act 2002 dealt with manorial rights, which must have been recorded at the Land Registry by October 2013 or risk being lost. However, this process made no difference to the freehold mineral rights that many estates retained but have not registered, leaving it just as difficult to locate the historic owners as before.

Developers were therefore faced with two choices when they knew or believed that the minerals were in separate ownership from the surface. They could either seek to identify the mineral owner and negotiate rights to enable their development to proceed, or obtain title indemnity insurance cover in case the mineral owner came out of the woodwork in the future.

The latter was the route of choice as it was cheaper, quicker, and removed the risk of lengthy negotiations. In many cases, no attempt at all was made to locate the mineral owner and as their rights were not recorded by the Land Registry there was no public record to search.

For the mineral owner in this event, the presence of an indemnity policy meant having to pursue a claim against an insurance provider after the development had taken place. Far better to be negotiating directly with the developer when they are chomping at the bit to start work.

Land registry now accepting applications for minerals only titles

Fortunately, the Law Commission has now proposed to bring mines and minerals onto the register and while the final legislation is awaited, the Land Registry is accepting applications for mineral only titles. We would strongly urge estates to look at their historic sale conveyances and investigate if mineral rights were retained. It is something that could affect many estates which have sold off parcels of land over the previous century.

If it is found that mineral rights have been retained, we would recommend that these are registered to prevent developers protecting themselves with insurance and force them into a commercial negotiation to merge the interests with the original estate. Mortgage companies in particular can be very nervous about lending on residential properties where the minerals are separately held, so there is a commercial imperative for the developer to reach a deal.

While every case is different, depending on the actual minerals to be found, the working rights retained and the development proposed, it can provide a useful source of income from an asset that has in most cases been completely forgotten about. We have worked with a number of estates to achieve value in this way, even where no commercial minerals are to be found and the working rights have been limited. Whatever the circumstance, there is likely to be a value if a development is proposed, and although timing is key to obtain this, getting the minerals registered is the first step.

For more information, don’t hesitate to get in touch with William or another member of the Fisher German team.