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26th March 2020

Mineral ownership

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Ownership of land generally includes ownership of the airspace above the land and of the ground below it. However, it’s not uncommon to find a situation where the underlying minerals are not owned by the surface landowner. This must be addressed before any land development is planned. Rights to oil, gas, silver and gold are vested in the Crown and almost all coal resides with the Coal Authority. However, other metallic and industrial minerals (including sand and gravel) are in private ownership.

This ownership can be recorded in numerous ways. There may be a specific note on the land’s Land Registry title or even a separate title covering just the minerals. In some cases, minerals are in separate hands (or purported to be) as a consequence of the historic rights that belonged to the land’s lord of the manor.

Even if there is no mention of minerals on the Land Registry’s records, there is the potential for a third party to come forward in future and claim ownership. Consequently, in the context of property development, an early risk assessment of the legal risk posed by mineral rights is crucial.

Digging foundations, piling or laying services can infringe on mineral rights, leading to a legal trespass risk. Some owners of mineral rights are acutely aware of this and the threat of a ransom situation can arise, depending on the nature of the proposed development. Surface landowners and developers cannot therefore not afford to ignore the issue. If legal action is taken by a third party mineral rights owner, it could result in either an injunction (which blocks development) or a damages award (which increases development costs). In addition, if separate or reserved mineral rights are recorded at the Land Registry, future plot or unit owners (and their mortgage lenders) are likely to raise concerns about the risk of minerals being worked in the future. This can impact on the progress of sales and lettings.

Fortunately for surface landowners and developers, mineral rights often have limitations. They do not always include the associated rights needed to enter the overlying land and dig it up. Even if they do, since the rights were sometimes created by sales of land decades or even centuries ago, the current owners may be ignorant of their rights and/or difficult to trace. In addition, the probability of mineral extraction in urban settings is low in today’s world, especially within the context of the current planning regime.

Consequently, indemnity insurance policies are available. They are designed to protect the surface landowners (and their lenders) by covering the costs of any potential enforcement action by the owner of the minerals and are a common way of mitigating the risk. Policies are often quick and relatively inexpensive. However, they rely on the owner of the minerals being unaware of either their rights, the potential development and/or the impact it will have on their mineral rights. As a result, insurance will be unavailable if the owner has already been approached and/or alerted to the potential development and their rights. Consequently, landowners and developers must adopt a careful and strategic approach to any mineral rights risk from the outset.

Hewitsons can help landowners and developers with both appraising the risk posed by mineral rights and the steps needed to mitigate and work around them.

For more information please click here to contact Emma Bowman or click here to contact Bryan Guest.