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Permalink Reply by Skip Peel - Mineral Consultant on December 19, 2011 at 11:57

Buyers want a subordination agreement from the mortgagor to secure their title in the case of a default by the mortgagee.  Most mortgage companies are willing to sign a subordination agreement covering mineral rights.  Contact your mortgage company and ask.

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Permalink Reply by Krkyoldhag on December 21, 2011 at 3:03

My experience has been with ONE situation.  The person had a house in Keller that was one of the "underwater" properties.. that's a nice way of saying he owed $75,000 on the property then it was currently valued.  He had the mineral rights for that property in Barnett Shale.  Could not sell it b/c the lien belonged to Chase bank.  He got involved in the redo of his loan..same story you hear about on that...Chase dangled him for 9 months then said foreclosing  that he didn't make enough money to redo the loan, even tho he was making the payments on time each month. 

No way could sell the mineral rights.  BUT the good news is he held on to the property until he could sell it, closed just days before the foreclosure and KEPT the mineral rights in the sale  (valued at $5000 at that time).

He "lost" $80,000 on the house in real money but if you add back the value of the rights he held that cuts it to $75,000 loss. 

So there is your answer..no you cannot sell mineral rights so long as you have mortgage on the property but if you sell it you can retain the rights.

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Permalink Reply by Skip Peel - Mineral Consultant on December 21, 2011 at 3:30

The owner of the surface estate can sell their mineral rights with a subordination agreement executed by the mortgagor.  All the mortgagees of properties prospective for the Haynesville Shale were able to get the agreements as far as I am aware.  Chesapeake requested that a number of residential property owners get the agreements prior to executing an oil & gas lease. 

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Permalink Reply by kittycatmama on December 22, 2011 at 6:40

Some property owners leased early in 2008, sold mineral rights late 2008 (knowing they were behind on their mortgages and going to let the house go). In those cases, I do not think the mineral rights stay with the purchaser of those rights. Seller was trying to get as much money as he/she could before bailing on the loan. I have checked with attorneys and they think minerals are back with the property. Note that on more recent mineral purchases in Desoto that the purchaser of the minerals is filing a request to be notified if a foreclosure is in process.

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Permalink Reply by Skip Peel - Mineral Consultant on December 22, 2011 at 6:56

Buyers do not like clouded titles.  Experienced buyers have always required subordination agreements where land and/or structures are mortgaged.  Less experienced buyers may very well have purchased minerals without understanding the potential consequences.

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Permalink Reply by Andrew on December 8, 2012 at 10:20

KCM,

In the situation you described, the results are likely to be different from transactions involving "non-distressed" sellers. Alienations of property shortly before a bankruptcy or action to collect a debt are closely scrutinized by courts to determine if the transaction was designed to defraud the creditor. If so, there are procedural remedies available to the creditor which would most likely result in rescinding that conveyance.

There is more on this particular topic on this thread: http://www.gohaynesvilleshale.com/forum/topics/louisiana-foreclosure

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Permalink Reply by P.G. on December 22, 2011 at 18:12

How can a mortgage company make claims or hold liens on something that isn't really considered owned until harvested like minerals...?

Aren't the only things owned, when it comes to minerals, the right to seek the minerals?

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Permalink Reply by Henry on December 23, 2011 at 0:47

I think that is true for gas and oil.  RS 31.6:

"Ownership of land does not include ownership of oil, gas, and other minerals occurring naturally in liquid or gaseous form, or of any elements or compounds in solution, emulsion, or association with such minerals." 

However, if you own the land, you actually own the solid minerals.  RS 31.5:

"Ownership of land includes all minerals occurring naturally in a solid state."

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Permalink Reply by kittycatmama on December 23, 2011 at 1:48

iF you have a mortgage you own the property SUBJECT to that mortgage. If the mortgage goes unpaid, there goes the property. It can get very complicated.

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