Posted on November 13, 2018
If you’re a property developer, investor or owner, are you aware of the main risks associated with mines and minerals? Steve Packer, Director at Pii, discusses when a mines and minerals policy should be considered in this article, featured in Estates Gazette.
When a property is purchased, the land that comes with it is not always included. According to English common law, the landowner owns everything below the surface, down to the Earth’s centre. However, in some parts of England and Wales, it’s very common for a property title to contain a sentence that excludes mines and minerals from the surface owner’s ownership.
In essence, a property with the titles to the mines and minerals excluded has two owners: the owner of the surface, and the owner of the mines and minerals. This means that even though the surface owner owns the land and may have a structure on it, the owner of the mines and minerals title would be within their rights to mine the resources on the land.
Types of rights
There are a few ways in which mineral rights can be in different ownership from the land above them. These include custom and practice, rights of the law, transfer rights and manorial rights. Custom and practice refers to the unwritten rules that exist within mines and minerals ownership, which occur in parts of Cornwall, Derbyshire and the Forest of Dean, while rights of law acknowledges that oil, coal, silver, gold and gas belong to the Crown. Transfer rights occur when the mines and minerals are expressly reserved as part of a transfer, which becomes possible when a landowner sells their land but retains the mineral rights, or sells those rights separately.
Manorial rights are present when the land was part of a former estate or copyhold land. Copyhold land is land given by the Lord of the Manor to the tenant for the tenant to work and occupy. Over time, this kind of land ownership has been phased out as tenants gained freehold titles for property. However, they would not have been able to take advantage of any manorial rights, meaning that rights to mines and minerals would still lie with the Lord of the Manor.
Transfer rights and manorial rights represent the most common types of claims.
Property developers, investors, and owners should be aware of the main risks associated with mines and minerals being excepted from a title, which is that future development on the land could result in compromising the reserved minerals. this could be an extremely costly oversight, as companies could:
– be forced to pay compensation for trespassing on the minerals;
– have an injunction made against the development as a result of the trespass, which would prevent works from being completed or carried out; or
– be asked by the owner to pay on completion of the development.
While it won’t be a priority to anticipate this, a mines and minerals policy should be considered for a property if:
– The land purchased is near a former estate.
– In the title of the property, rights to mines and minerals are withheld.
A close look at the title will confirm whether the rights to mines and minerals have been purchased. Should the land be located near a potentially active site (or there are other mines in the area), consider a mines and minerals policy.
A property title with the rights to mines and minerals withheld usually comes in one of the following forms, and would be accompanied by a map detailing the exclusions. Should any of the following examples form part of your property title, a mines and minerals policy is recommended:
(1) As to the land edged and numbered 1 in blue on the title plan the mines and minerals together with ancillary powers of working are excepted.
(2) As to the land edged and numbered 2 and 3 in blue on the title plan only the mines and minerals are excepted.
(3) As to the land edged and numbered 4, 5 and 6 in blue on the title plan the mines and minerals together with ancillary powers of working are excepted with provision for compensation in the event of damage caused thereby.
– You’re a developer
If you’re developing an area and you will not be purchasing the rights to the mines and minerals policy of the land, exercise caution. Some unfortunate developers have found that owners of the rights to the mines and minerals of land do not want additional buildings to be erected. As many developments require considerable subterranean construction, some developers have needed to halt proceedings or have been found guilty of trespassing on land owned by someone else. the owners are within their rights to object to the development by invoking their rights to the mines and minerals in the area.
In a dispute that arose in 2010 between the Countess of Lonsdale and Tesco, the supermarket giant had purchased a development site in Cumbria for £18m in 2006. The Countess expressed her displeasure with the development by invoking her rights to the minerals in an attempt to stop construction on the site. Following a year of legal proceedings, the council revoked its choice to sell the land, and Tesco faced a significant loss.
New developments are not the only structures which are subject to mines and minerals claims. Even long-standing developments can be adversely affected by future claims by the owner of the mines and minerals policy, and developers can be forced to significantly alter or completely destroy a development.
Weighing up the risk
When it comes to mines and minerals claims, the risk to your business varies. The UK is very diverse geologically, and it can be very difficult to identify a risk until it is too late. It is important to consider the commercial value of any mines and minerals on a plot of land prior to purchase. Still, much of the risk assessment is a guessing game: it is almost impossible to gauge the value of the substances in land without physically digging them up.
These rights have the potential to affect almost any structure, so it is wise not to ignore them, even if the chances of a claim under this issue seems uncommon. The natural option, in this case, is to attempt to purchase the rights from the owner (if the identity of the owner is revealed). If the owner does not disclose their identity, businesses should consider taking out a mines and minerals insurance policy to protect themselves.
Steve Packer is a Director at Property Insurance Initiatives.
Photo by ginghill on Unsplash