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Greetings all... my wife and I have have been preparing to put in an offer on a home in Garner and we almost got an unpleasant surprise today.
Due to some miscommunication, our realtor was under the impression that the listing agent was saying that the current owner did not own the mineral rights to the piece of property we wanted to buy.
I had heard about this practice, but only vaguely, and hadn't been giving it much thought, but this incident suddenly brought it to the forefront of my mind, and I spent several hours today researching the deeds on this property and the general subject of home builders retaining the mineral rights on homes that they sell (don't tell my boss).
I don't want to rehash the whole controversy on this thread (you can read all about it if you google "Mineral Rights severed North Carolina") but I was having a hard time finding any actual facts about the situation circa 2014.
What I learned was
A) Many home developers were apparently in the habit of retaining the mineral rights to homes that they sold.
B) This practice is apparently very common in oil states like TX and OK but has become more common throughout the country as fracking technology has made it more possible to extract natural gas from previously undrillable areas.
C) There was an uproar over this in NC in 2012 concerning the home builder DR Horton (who built some of the homes in the subdivision we're considering but not the specific one we want to buy).
D) Horton claimed that they had suspended the practice (pending the finalization of NC state regulations involving fracking) and were returning the mineral rights to some or all of the homeowners who had bought from them.
Unfortunately, most of the news articles I found were from 2012 or early 2013. Also, being news articles about a new, exciting controversy, they tend to be lean towards sensationalist coverage. By way of contrast, our realtor said that a friend of hers told her that mineral rights were only severed in about 1% of all home sales. So I'm trying to find out some actual facts.
The NC legislature passed a law last year requiring disclosure of the mineral rights status during a home sale, but unfortunately, one of the options is "No Representation", which makes the whole thing fairly useless. My realtor tells me that many realtors are just checking "No Representation" for every home they sell, as a matter of course, to avoid potential liability.
Anyway, as I said, I don't really want to rehash the general controversy, or talk about fracking in general (I'm against it), but I'm looking to see if anyone knows any hard facts about this situation, such as:
1) How widespread is it really?
2) Are there any other home builders in the Triangle area who are known to have retained the mineral rights as a matter of course?
3) Any home builders who are known definitively *not* to engage in this practice?
4) Does anyone know any more specifics about D.R. Horton's practices? They claimed they were going to give back all the mineral rights they had previously severed, but that was really just a press release. I didn't find any followup news item to confirm that this had ever actually been done for anyone besides those who had specifically requested it.
I know we have a few realtors on this board so I'm hoping y'all will throw in your two cents' worth.
I had a nice chat with someone who owns several oil wells in the mid-west states. He said NC is very dangerous to frack because the water table is so close.
I had a nice chat with someone who owns several oil wells in the mid-west states. He said NC is very dangerous to frack because the water table is so close.
How does that make it more dangerous than other areas?
All gas drilling penetrates the groundwater table.
Live in a watershed - that is almost a certain guarantee they won't be fracking in that area. And yes, parts of Durham falls into the Falls Lake watershed.
Thanks for the link. This paragraph makes me think it's that much more important to retain the mineral rights:
"North Carolina’s current forced pooling law entitles property owners who did not sign a lease to collect 100 percent of the value of gas under their land, even though they contributed nothing to the expense of getting the gas out. This is known as the “free ride” statute, and many see it as an incentive not to sign a lease and hold out for a much better royalty. But it also means that energy companies have no incentive to drill in those areas."
I am not 100% on this, but I don't think it really matters if you're buying a home from a developer. I believe the estate could have been split and mineral rights severed before the land being built on even came into the hands of the developer — might've been split generations ago. I think you'd just need to run a check on it before you buy anything if you want to retain the mineral rights, and just not buy unless you know you will also be buying the mineral rights. But the forced pooling issue is still there no matter who owns the mineral rights.
Interesting read. I guess it's really only an issue for people with large plots of land right? Or are they drilling under heavily populated areas as well?
Live in a watershed - that is almost a certain guarantee they won't be fracking in that area. And yes, parts of Durham falls into the Falls Lake watershed.
Everyone lives in a watershed.
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