Selling Mineral Rights under Mortgage

Mineral rights on mortgaged property are pretty much the same as surface rights when it comes to selling them: you need to get the lender to agree to it. Without a deed of release, the property owner cannot legally sell the surface or mineral rights.

Presuming that the mineral rights are not severed from the surface rights, the property deed has mortgage liens on it in favor of the lender. In other words, until the mortgage is paid in full, the lender has the right to refuse to allow you to go about selling your mineral rights.

The lender has every reason to refuse; selling the mineral rights means the purchaser can enter the property at any time to extract and store whatever natural resources may be present under the surface land. This can pose a serious threat to the security and value of the property, which in turn will impact on the lender’s outlay. But if the lender is amenable, the property owner may be able to secure a deed of release.

The deed of release is a legal document which specifies the extent to which the lender will surrender the interest it has on the property. The deed may refer to the land in its entirety (such as when the mortgage has been paid in full) or in part. If the reason for the deed of release is to enable the sale of the mineral rights, you only need a deed of release for that aspect of the property. The lender will most probably require a certain amount in payment to offset the loss of market value of the land deed resulting from that transaction.

If and when the lender agrees to a deed of release, the next step would be to determine how much those mineral rights are worth. It should be noted that a sale is permanent; once it is done, there are no backsies. It is therefore important to consult with professionals regarding the fair market value of the mineral rights to avoid getting the short end of the stick.