Should retaining 50% of the mineral rights of a property reduce the sales value of this property?

Question

I am interested in some acreage in Columbia County, Fl. In a "Special Warranty Deed" to the current owner;" International Paper Company reserved a passive royalty interest (without right of entry) in 50% of the oil, gas, and other minerals (including clay, sand, and gravel) which were owned by the grantor prior to the delivery of this deed." It also states that the grantor does not have to contribute to the cost of any exploration for the mining, and that "this covenant is to touch, concern and run with the lands." And that the grantee can use without payment to the Grantor any clay sand or gravel for the grantees own construction on the property. This property is selling about $3K an acre below the average price. How much does this covenant reduce the value of the property, and will this royalty interest ever run out, or can they come at any time and exercise their rights? We plan to build and live here permanently, and need to understand the laws. Thank you for your help.

Answer 1

First, the question would be "Does International Paper have any mineral rights?". Often in big companies they use a standard boiler plate for all of their sale agreements. So they are passing on 50% of what they own. They might own 100% of the mineral rights and they might own none of the mineral rights or anywhere in between.

Second, they are not taking the right of entry. That means they do not have the right to go onto the property to remove any of the minerals. They won't be putting up an oil well in your backyard.

Third, they will not pay to see if there are any oil or gas or other such valuables below the earth. (If a company really thinks they are there usually you don't pay for them to explore anyway).

The royalty runs with the land which means it exists as long as the land does (forever).

So, if you never plan to drill for oil, or have the gravel or clay removed from the property, then you're not missing out on anything.

How much this is costing you depends on what might actually be below the property and how big the property is, and how much of the mineral rights they are passing to you.

Answer 2

Most commonly in the simplest terms all you are getting is the surface of the land (about 10 or 20 feet deep)
In what I see you may get 50% of anything below the surface with all the expences of finding it.
I see no time limit as to the interest ever being released. Water is often concedered a mineral so be aware of this if you are going to drill a well.

Answer 3

This sort of clause is not uncommon, the unusal part is the at no cost to the vendor clause. This clause makes the property almost worthless to you as it leaves you dangerously exposed to a very high financial risk. I suggest you walk away from this deal, it sounds very dodgy to me.