The Denver Post reports that state lawmakers intend to introduce legislation requiring property sellers to disclose whether the proposed sale includes underlying minerals. In Colorado, it is not uncommon for the surface and mineral estates of a property to be “severed” which results in one party owning the surface estate while another party owns the underlying minerals. Severed estates are common in transactions whereby large agricultural tracts were subdivided into smaller parcels and as part of the sale the seller “reserved” the minerals. By severing the surface and mineral estates, the purchaser obtained title to the surface estate for agricultural purposes while the seller retained title to the underlying minerals.
Requiring sellers to disclose the status of underlying mineral rights may result in significant costs to sellers and buyers. In many cases, sellers do not know the status of the minerals underlying their property. It is possible that the mineral and surface estates were separated in long forgotten conveyances dating back more than 100 years. Title companies are hesitant to provide opinions concerning mineral ownership and such opinions are typically provided by attorneys. As you can imagine, having an attorney review a title abstract containing potentially hundreds of title documents results in significant costs. We will continue to monitor this proposed legislation and provide updates regarding its potential applicability to mineral owners including homeowners associations.