Mineral Rights What Right? What Value? What problem?

6th November 2013

A new land registration process now in place could inadvertently bring opportunities as well as problems for landowners and owner occupiers, says Robyn Peat, Partner at George F White.

The background to this is that Manorial Rights and Chancel Repair rights in England and Wales had to be protected by registration at the Land Registry by midnight on 12th October 2013 if they were to continue as legally binding rights. Manorial Rights are rights that were retained by the lord of the manor when the land became freehold. They can include rights relating to mines and minerals, rights to hunt, shoot or fish. The change in law should make the register and land ownership more transparent, so that anyone buying a piece of land or property would see what they owned and have more information about what matters they were subject to. The exact number of manorial rights in the country, their extent, and who they belong to, has been unclear, but the October registration date aimed to reduce this uncertainty.

The deadline caused a significant number of applications to be submitted to the Land Registry for both ‘Manorial’ and ‘Mines and Mineral’ right registration, along with an increased awareness by right holders of what rights they hold and what value they might have. Confusingly, owners of mines and mineral rights can continue to apply to register if they want, but they do not have to and this won’t affect their ownership. If rights holders have registered their interest, the property owners (who may not be the rights holders) may receive a letter detailing the third party’s interest. This is often the case if the land was previously owned by large land owners such as the Church Commissioners or historic landowners where all the rights were reserved before the land was sold off many years ago.

This increased awareness of the value of the reservation has highlighted the ability to ransom, providing opportunities and threats depending on your position. It is important to understand the steps that can and need to be taken and more importantly recognise the level of threat that could arise. A number of questions and answers below highlight various scenarios and what possible courses of action are available.

I have Manorial Rights but have not registered them and the deadline has passed, what can I do?

Manorial rights and chancel repair will lose their overriding status if they were not protected by 13 October 2013. However, this is not the case with mines and minerals which can still be registered in their own right if an applicant has sufficient evidence to support a separate title to those mines and minerals being granted.

I am a Landowner and the mineral rights have been reserved by another party, is this a problem?

It is not a problem until you decide to do something with the land which could interfere with their rights. If you are using the land for an acceptable surface land-use, such as standard agricultural, tree planting or establishing roadways, these uses should not cause any interference to the underlying minerals or the mineral owners’ capacity to exercise the mineral rights.

I am a Landowner and I believe that I own the mineral rights but I’ve received a letter stating that someone else is trying to register them. What can I do?

You can object to the registration if you believe you have grounds to do so. You can’t object just because you don’t want the entry to be made and Land Registry would reject this as groundless. To object you would need to prove either that the right or interest no longer existed or that it had been transferred to you or was yours. There is guidance on how to raise an objection, however there can be strict timelines to adhere to, so it’s important to act swiftly.

I am a Landowner and I am in negotiations with a firm for wind turbines on my land and the mineral rights are excepted from the registered title. What should I be doing?

With large wind turbines the base of the turbines could require development into the underlying minerals and also the infrastructure put in place for a wind farm could cause problems and interfere (trespass) with a mineral owner’s capacity to exercise their rights. At the development stage it may not be known whether there is a) an owner of the mineral rights or b) if any minerals actually exist. If this is the case there are two possible actions. The first could be to actually flush out any mineral right owners and test the waters by making an attempt to directly exercise the mineral rights yourself. The second and more cautious and yet sensible approach would be to protect against any assertion of the possible rights by obtaining a suitable insurance policy cover from specialist legal insurers.

I am a Landowner and I have already built on my land with deep foundations. The mineral rights are registered to a third party, but I’ve never heard from them?

If there are mineral rights and they have been registered recently you would have been informed by the Land Registry of this, but only if your property has been registered. If this is the case the right holder would have an over-riding interest and would be able to ultimately ask for your development to be removed, if it was deemed to be restricting their ability to exercise their right, or they could seek damages. Any claim would be determined either on the basis of the amount of loss to the owner, or alternatively the benefit gained by the trespasser. If your development is of high value, there could be significant scope for the right owner to exploit the situation, based on the benefit you have gained.

If the third party had not registered their rights, they could still claim trespass and compensation, but their position to demand this would be weakened as they had not registered their rights.

I am negotiating an option on my land for some potential development. There are registered rights, but it is believed they are of limited value and unlikely to be exercised?

Any developer and funder would not want to take any risks that their development could be stopped half way through by a mineral owner suing for punitive damages. Lenders in particular are concerned about this new activity and would want assurances that any development they were backing would not be subject to trespass and ransom claims at a later date and would normally want to see the reservation either removed through negotiation or accounted for.

It is possible to mitigate against any future problems by negotiating a lease of the sub-surface to cover any land-uses for a suitable period (999 years) at a suitable rent (peppercorn).

I have Mineral Rights and a new purchaser wants to use the land for something I disagree with, what are my choices?

This question is best answered with one of the few pieces of case law on this subject. The recent case of the Countess of Lonsdale vs. Tesco highlights the risks involved. In 2006 Tesco acquired a development site from Allerdale Council in Workington, Cumbria for a sum of £18million. It became evident that the rights to the underlying minerals were held by the Countess of Lonsdale, who then invoked these rights in an effort to prevent the development. This resulted in Allerdale Council rescinding its decision to sell the land. Whilst the case continued for over 12 months and was ultimately settled between the parties, it highlights the importance attached to mineral rights as an active means through which to frustrate development and to seek a ransom payment.

This area of land value has some tools to help assess the value which include assessing the extent of the reservation, any restrictions on use and any compensation clauses, however it is an emerging and complex market, evidence of values is limited and advice should be sought, especially as there is potential to mitigate in some circumstances and negotiate in others. Strong negotiation is key.

Ultimately in these situations is it for the mineral owner to prove that there are minerals in the land which could be developed, or for the landowner to prove that there aren’t? Theoretically there could be a reservation of nothing, because no minerals actually exist, but the ability to ransom is still there as it’s not known. It’s like a game of Poker – you never really know what cards they’re holding.

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