Home Buyer Beware!

By Joao Peixe of Oilprice.com:

Property developers in the US, aware that land value increases massively as soon as mineral deposits are found in the area, have begun to retain oil and natural gas extraction rights beneath the houses that they sell; ready to sell those rights on to any interested energy companies in the future. In many cases they don’t even advise the property buyers.

Tens of thousands of families across the US have bought new houses on golf courses, in gated communities, or in other housing developments in recent years, with no idea, according to Reuters, that they were never buying the rights to the land beneath.

As energy companies rove the country in search of new shale formations to add to the boom in shale extraction, land value increases many times wherever they decide to explore. Developers have decided to take advantage of this by retaining the mineral rights to the land under their houses, and then selling them on at inflated prices if an energy company ever comes a calling.

Reuters discovered that companies like D.R. Horton, the largest homebuilder in the US, have begun to keep all mineral rights when selling their homes, “separating the mineral rights from tens of thousands of homes in states where shale plays are either well underway or possible, including North Carolina, Alabama, Mississippi, Virginia, New Mexico, Nevada, Arizona, Oklahoma, Utah, Idaho, Texas, Colorado, Washington and California. In Florida alone, the builder has kept the mineral rights underneath more than 10,000 lots, a review of county property records shows.”

In many states the fact that mineral rights are not included in the sale of the house does not have to be mentioned to the home buyers, in others it might just be mentioned as a brief clause in a long sales contract, which few people read to the end.

Richard Goodrich, whilst negotiating the purchase of his home at the Valencia Golf and Country Club in Naples, Florida, was one of the few to actually notice that the mineral rights were not included in the price of his house. “If somebody wanted the mineral rights, then obviously there was a value.” He tried to negotiate their inclusion into the purchase of his house, but found that “it wasn’t negotiable. We either gave up the minerals or we didn’t get the house.”

One community in Colorado only found out that they didn’t own the rights to the minerals under their land, when they were invited to a community meeting in which an energy company announced that it would shortly begin drilling for oil and gas beneath their homes. The community took the company to court to try and earn a ban against the fracking, but lost the case. By Joao Peixe of Oilprice.com.

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