Builders' Retain Minerals Rights

Builders are increasingly retaining the mineral rights to homes they sell, according to a recent investigation by Reuters of county property records in 25 states. That means that while home owners own their homes from the ground up, the builders lay claim to what's beneath the home, such as oil, natural gas, water, or other natural resources.

Home owners are often unaware that builders have retained mineral rights and are displeased when they learn that they don’t own the ground under their feet, Reuters reports. “Many worry about the potential health and environmental effects of fracking,” Reuters reports.

"This is a huge case of buyer beware," says Lloyd Burton, professor of law and public policy at the University of Colorado-Denver. "People who move into suburban areas are really clueless about this, and the states don't exactly go out of their way to let people know."

In most states, sellers aren’t legally required to disclose to home buyers whether they are losing the mineral rights to a property, Reuters reports. Sometimes builders may flag it in sales contracts or deeds, but not all buyers review the paperwork closely.

Reuters’ investigation uncovered numerous builders engaged in the practice of retaining the mineral rights on homes, such as D.R. Horton, Ryland Group, Pulte Homes, and Beazer Homes.

Why do builders want to keep the mineral rights to a home? “The phenomenon is rooted in recent advances in extracting oil and gas from shale formations deep in the earth, fueling the biggest energy boom in modern U.S. history,” Reuters reports. “Horizontal drilling and the controversial practice of hydraulic fracturing, or ‘fracking,’ have opened vast swaths of the continental United States to exploration.” By keeping the mineral rights, builders stand to make a financial gain if “energy companies come calling,” Reuters reports.

Source: “U.S. builders hoard mineral rights under new homes,” Reuters (Oct. 9, 2013)