If you neglected to read the fine print in your real estate contract or didn’t let a lawyer in on the deal, you may have kissed goodbye the mineral rights under your new home.
Now that fracking — horizontal drilling for shale oil and gas — is invading residential areas, land developers and builders are cashing in by grabbing up mineral rights below homes in developments they build in 25 states. Lance Astrella, a Denver Lawyer claims, “All the smart developers are doing it.” And they’re doing it with little or no disclosure to unsuspecting home buyers.
The country’s largest homebuilder, D.R. Horton, has already taken possession of mineral rights in tens of thousands of homes in states where shale drilling is currently happening or about to happen in North Carolina, Alabama, Mississippi, Virginia, New Mexico, Nevada, Arizona, Oklahoma, Utah, Idaho, Texas, Colorado, Washington and California. According to Reuters, County records show the builder has already snagged the mineral rights on more than 10,000 Florida lots. The company leases the rights to an energy company that may develop, drill, produce, withdraw, capture, pump, extract, mine or transport minerals, resources and groundwater under or around property starting at a depth of 30 feet.
Other companies appropriating these potentially lucrative mineral rights in this multi-billion dollar business that can pay production profits of 25% include Oakwood Homes, the Groce Companies, Wynne/Jackson, Shea Homes, Ryland Group, Pulte Homes and Beazer Homes.
Last year when 700 homeowners in a North Carolina subdivision simultaneously learned that fracking was fast approaching their neighborhood AND that D.R. Horton had taken over the mineral rights below their homes, they revolted and contacted the State Attorney General’s office. D.R. Horton responded with a statement saying they had instructed their sales agents to inform buyers before signing contracts that mineral rights had been severed from their homes. Buyers disputed this. Horton also claimed their deeds, titles and sales contracts contained this information. In fact their contract merely included a nebulous clause giving D.R. Horton “all geothermal energy and resources” located “on, in or under the Lot.”
The irate homeowners won their case when the builder agreed to return the rights to them.
Not so lucky were new homeowners in Greeley, Colorado. Cordially Invited to a community get-together, the homeowners were astonished to hear that an energy company, Mineral Resources, had purchased the mineral rights from their developer and was scheduled to begin drilling in their neighborhood. Twenty two well heads were to be constructed directly across the street. Company officials assured them, however, that home owners would have plenty of input in choosing the shrubs and greenery to conceal the operation.
Immediately hiring a lawyer, the residents filed an appeal. Greeley already had 425 wells within city limits, but the residents argued that such a large project so close to a residential neighborhood posed a possible threat to their health, to their homes in case of accidents and to their finances. Who would be able to sell their homes now? Who would buy them?
Unmoved, the city rejected their appeal seven to zero.
Research continues on whether the fracking process causes ground, air and water contamination with no definitive results so far.
In the meantime, if you’re signing a contract on a new home in a development and you want to walk away with the mineral rights to your own property, be sure to check early in the game if the builder has already signed, sealed and delivered those potentially lucrative rights to himself.
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