Inherited Mineral Rights: What Heirs Need to Know Before Selling or Leasing
Inheriting property in Oklahoma doesn’t always mean inheriting a house, farmland, or commercial property. Estates may include mineral rights that have been separated from the surface property for years. If you inherit mineral rights and are curious about selling or leasing them, it’s important to know what you own and how the decision to sell or lease may affect your financial future. This is where an Oklahoma mineral rights attorney steps in to help.
At Entz Burton & Associates, we have long represented Oklahoma mineral owners interested in the sale and leasing of their assets. Attorney Jeffrey Burton serves clients throughout Oklahoma, helping them understand their rights and best interests when they are presented with a lease. Call our mineral rights law firm at 800-633-7230 to schedule a consultation now.
Mineral Rights and Surface Rights Aren’t Always the Same Thing
Oklahoma law recognizes that ownership of minerals beneath property can be separate from ownership of the surface, as recognized in Deruy v. Noah. Someone may sell a tract of land while reserving the mineral rights, which can later be sold, transferred, or inherited separately from the surface estate.
In practice, an heir may inherit the land and minerals together, the minerals without surface ownership, or a fraction of mineral rights.
Determine What Mineral Interest You Inherited
Before signing a lease or purchase agreement, you should work with a mineral rights lawyer to determine what the deceased owner actually owned and what they passed on to you. While someone may hear that they inherited the mineral rights to a property, it’s fairly common for someone to actually own a fractional interest. Imagine a property owner has mineral rights to their 100-acre land. Their mineral rights are distributed among their three children, and then again among the three children’s own children. Several generations down the line, each heir may own a small interest.
Probate and Title Problems
Even with the assistance of a mineral rights attorney, probate and title problems can complicate ownership. Ownership may be difficult to establish when an estate never goes through probate, heirs cannot be located, or generations of owners have passed.
Before you can sell or lease mineral rights, you may have to prove legal ownership. This may require extensive legal preparation and analysis.
Differences Between Selling and Leasing Mineral Rights
Selling and leasing mineral rights are different in several key ways. A sale transfers ownership of all or some of the mineral interest to the buyer. The seller may give up the right to receive future royalties. An oil or gas lease allows an operator to explore for oil or gas while leaving ownership with the mineral owner. The owner may receive a lease bonus and royalties if production occurs. A fair comparison must consider these key differences, rather than comparing a sale price to a lease bonus as if they are equivalent.
Understanding the Terms of an Oil and Gas Lease
Royalty percentage is an important term, but it’s not the only one to discuss with your mineral rights lawyer. Other terms to evaluate include the primary lease term, bonus payment, pooling provisions, shut-in clauses, extension rights, and provisions affecting development of the property. You’ll also need to consider surface property if you own the surface property.
Don’t Assume the First Purchase Offer Reflects the Mineral Interest’s Value
Mineral owners may receive unsolicited letters and phone calls after inheriting mineral rights. However, an offer—especially unsolicited—doesn’t necessarily establish the actual market value of the minerals. Factors that may affect actual value include location, nearby wells, drilling activity, existing leases, and acreage. Rather than accepting the first offer you get, you may want to discuss your options with your lawyer and find out what your property is worth.
Check for Leases, Royalties, or Production
An inherited mineral interest could already be subject to an oil and gas lease. Unpaid royalties, pooling or spacing orders, producing wells, and other agreements could also affect the property. Before relying on a new lease, it’s important to verify whether any earlier leases have expired.
Discuss Your Next Steps With Our Mineral Rights Law Firm
If you’ve inherited mineral rights and you want to know how to protect your rights and financial future, let’s talk about your legal options. Call us at 800-633-7230 or connect with us online to get started.
Attorney J. Michael Entz at Entz Burton & Associates is an experience lawyer in estate planning law, business formation and asset protection serving the families in Oklahoma City and Weatherford office.
