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Buying or Selling in Florida? Beware of Mineral Rights

January 10, 2022

By: Gary Kaleita 

It is not unusual to find mineral reservations in the chain of title to real properties located in Florida. When the State of Florida first conveyed title to state owned lands, it was customary for the state to reserve an interest in all oil, gas and minerals on the property, including the right to drill, mine and excavate for them. These rights were not necessarily a problem if the property was being used for agricultural purposes. However, if the property was to be developed, these rights raised significant issues for developers and their lenders who were not looking to risk a large investment in property that was subject to third parties exploring for or mining minerals.

To release the right of entry and make the title marketable, it was necessary to submit an application to the state, pay a fee and endure a long waiting period. As Florida became more populated, this process delayed economic development. As a result, the state adopted a statute identified in F.S. 270.11(3), stating that “The right of entry to any interest in phosphate, minerals, and metals or any interest in petroleum reserved in favor of the Board of Trustees of the Internal Improvement Trust Fund, the State Board of Education, a local government, a water management district, or other agency of the state is released for any parcel of property that is, or ever has been, a contiguous tract of less than 20 acres in the aggregate under the same ownership.” 

This statute is relied on to extinguish the right of entry for parcels whose size qualifies them for that treatment. In those cases, title insurance companies will affirmatively state in title insurance policies that this statute applies to release the state’s right of entry. If a parcel is too large, it is still necessary to request the state to release its right of entry.

Florida properties are also sometimes subject to mineral reservations held by private parties, as opposed to the state. Typically reserved in deeds when owners sold their properties, they will include a right of entry even if it is not stated in the reservation (unless such a right is expressly disclaimed).

No Florida statute exists protecting improvements if a private party exercised its right to enter your property to excavate or mine. However, there is case law in Florida’s 1st, 2nd and 5th District Courts of Appeal holding that a mineral rights holder cannot so abuse the surface estate as to unreasonably injure or destroy its value. Additionally, the mineral rights holder is answerable in damages to the surface estate owner for any unreasonable injuries done.

While this remains good law in those Districts, this has not been decided at the Florida Supreme Court level. As with any similar situation, “unreasonable” injuries and appropriate recovery would be questions of fact. In reality, it would be an expensive inconvenience if the rights were exercised and improved property was damaged, even if recovery from the exploring party was possible.

Florida’s Marketable Record Title Act (MRTA) may operate to extinguish a private right of entry for exploration, mining, drilling, etc., pursuant to F.S. 704.05, even if the mineral reservations themselves remain. It is worth requesting a title insurer to make the necessary analysis to determine if that applies. They typically do not do this unless requested.

If the right of entry has been extinguished by either of the above statutes, the title insurer should be able to affirmatively state in a title insurance policy that there is no right of entry regardless of the existence of mineral reservations. This renders the title marketable unless the property is to be used for mineral extraction. If that is the case, even though the right of entry is no longer applicable, any minerals extracted by the owner would still belong to the party (if any) who held the mineral reservations.

Even if a right of entry exists, some comfort may be obtained if the property’s zoning does not allow for mining, excavating, drilling, etc. Local land use and zoning regulations could protect the property unless the nature of the area and the zoning were to change.

In addition to the risk of property damage by the exercise of mineral reservations, there is also the business concern of marketability when you sell or finance the property. This could be a threshold issue for a buyer or lender. Title insurance companies will not insure over the right of entry unless it is expressly released by statute or in a recorded instrument, so that is what typically needs to happen. An owner must often negotiate a release price with mineral reservation holders (who are sometimes difficult to locate) to remove the right of entry (if not the entire reservation). Most, if not all, buyers expect this from their sellers.

By consulting with a real estate attorney when buying or selling property subject to mineral reservations, you can minimize their potential adverse impact on the proposed transaction.

Gary M. Kaleita is a shareholder at Lowndes and has been certified by the Florida Bar as a specialist in real estate law since 1993. He can be reached by phone at 407-418-6334 or gary.kaleita@lowndes-law.com.


This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.
Gary

With more than 30 years of experience in real estate law, including over 20 years as a Board-certified expert in the field, Gary Kaleita has acquired the ability to navigate the complexities of sophisticated real estate deals with relative ease.

Gary has a wide variety of experience in real estate development, finance and transactions, condominiums, property owners’ associations, commercial leasing, commercial lending, and title insurance.

Gary enjoys a reputation for anticipating and avoiding problems, rather than merely reacting to them. He has years of experience handling purchases, sales and financings of commercial and residential projects, including office, industrial, retail, multi-family, single-family, condominium, resort, hotel and golf course properties. Gary has prepared and negotiated contracts for sale and purchase, performed due diligence investigations, and handled all aspects of closings, including issuance of title insurance and legal opinions. He has also performed tax free exchanges (both forward and reverse) under Section 1031 of the Internal Revenue Code, and has handled closings for housing revenue bond financing transactions with the Florida Housing Finance Corporation and various local housing finance authorities.

In the area of real estate development, Gary has assisted developers in obtaining land use approvals, plat approvals and permits for various developments from a number of jurisdictions in Central Florida, including planned developments (PD’s) and Developments of Regional Impact (DRI’s). He has drafted and negotiated complex land use documents, including development agreements, cost-sharing agreements, declarations of covenants, conditions, restrictions and easements. He also has experience in mall and shopping center developments, including outparcels, and has assisted developers with the selection, formation and operation of business entities, including commercial and residential property owners associations. He has extensive experience with the formation and operation of both commercial and residential condominiums as well.

In addition, Gary has established somewhat of a boutique practice by acting as local counsel to help out-of-state lenders, investors and law firms navigate the complexities of Florida real estate law. He is frequently engaged by large national and international law firms needing assistance on a variety of issues for their clients doing business in Florida. Gary regularly provides advice on Florida law and custom pertaining to purchase and sale contracts as well as loan documents, addresses local due diligence issues, answers questions involving titles, surveys and title insurance, and provides Florida legal opinions.

Not just another real estate lawyer, before pursuing his career in law Gary served as a U.S. Naval officer on active duty for 4 years in the Mediterranean Sea, first with a patrol gunboat squadron in Italy and then at a communications station in Greece. During this period he traveled extensively throughout Europe, the Middle East and North Africa. He believes his military experience is the source of the practical approach he has developed to problem solving.

Gary also took the initiative, after a homeowner in his own neighborhood was mauled by a Florida black bear in 2013, of researching what his homeowners’ association could do to limit the likelihood of future attacks. In the process, he became an expert in the subject of “bear-wise” communities and drafted a policy that his own homeowners’ association adopted, thereby becoming the first residential community to be officially recognized as bear-wise by the Florida Fish and Wildlife Conservation Commission (FWC). He has since written and spoken extensively on this subject, serves on the FWC’s Central Bear Management Unit Stakeholder Group, and has become a resource for FWC to educate other communities on the importance of bear-wise practices in areas of Florida containing black bear habitat.

Gary focuses on finding pragmatic solutions to complex problems, recognizing that clients want sensible and realistic advice in a timely manner so they can go about their business.

Chambers USA (2015)* reports that Gary has substantial experience acting as lender’s counsel and is acclaimed by market sources as an “extremely responsive, very practical and reasonable” practitioner.


*We make no guarantees or promises that the reader will realize the same or similar results

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