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Issues Involving Conveyances + Reservations
of Mineral Interests
presented by Margeaux Kimbrough
December 3, 2015
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Discussion TOPICS
Requirements for satisfying conveyances and reservations
Voluntary vs. involuntary conveyances
Types of interests typically conveyed or reserved
Pitfalls in complicated conveyances and reservations
Mineral vs. royalty distinction
Fractional royalty vs. fraction of royalty
Joint ownership
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An act by which it is intended to create one or more property interests
What is a Conveyance?
Giving an interest away
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Satisfying Conveyances +Reservations
Writing Granting Language
Adequate Description
Designation of Parties
Proper Execution
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Satisfying Conveyances +Reservations
Writing Granting Language
Adequate Description
Designation of Parties
Proper Execution
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Satisfying Conveyances +Reservations
Writing Granting Language
Adequate Description
Designation of Parties
Proper Execution
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Satisfying Conveyances +Reservations
Writing Granting Language
Adequate Description
Designation of Parties
Proper Execution
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…Grant, Bargain, Sell + Convey…
Located in Section 28, Range 4 of Newport Township,
Washington County, Ohio, being 26.74 acres of land, more or less, and bounded substantially as follows…
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Best Practices
Section1
Township2
Range3
Tract4
Acreage5
County6
State7
Metes + Bounds8
Tax Parcel ID #9
And…
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Satisfying Conveyances +Reservations
Writing Granting Language
Adequate Description
Designation of Parties
Proper Execution
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Satisfying Conveyances +Reservations
Writing Granting Language
Adequate Description
Designation of Parties
Proper Execution
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General Warranty Deed
Grantor covenants:+ Lawful ownership in fee simple+ Free from encumbrance+ Right to convey+ Defense of title
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Ownership Before Severance
Blackacre
X owns Blackacre in fee simple – from the heavens to the center of the earth
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Ownership After Severance
Blackacre
X retains ownership in the surface and the
airspace above Blackacre
Y owns the minerals underlying Blackacre
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Conveyance 1Moe is the fee simple owner of Blueacre Farm. By virtue of a general warranty deed, Moe conveys
to his brother Larry, “Blueacre Farm and an undivided 1/2 interest in the minerals
underlying Blueacre Farm,” and to his brother Shemp, “an undivided1/2 interest in the
minerals underlying Blueacre Farm.”
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Conveyance 2Larry conveys to Curly, by
quitclaim deed, “an undivided ¼ interest in the minerals
underlying Blueacre.”
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1/4 of the 1/2 undivided mineral interest he (Larry) received from Moe (in such case Larry would retain 3/8 of the whole mineral interest and Curly would
receive 1/8 of the whole mineral interest)
1/4 of the whole mineral interest, vesting Larry with1/4 of the whole mineral interest and Curly
with 1/4 of the whole mineral interest
OR
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100% Mineral Interest Underlying Blueacre Farm
Moe’s Interest
Curly’s
Larry’s
Moe’s Interest
Curly’s
Larry’s
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A) 1/4 of the 1/2 undivided mineral interest he (Larry) received from Moe (in such case Larry
would retain 3/8 of the whole mineral interest and Curly would receive 1/8 of the whole mineral
interest)
B) 1/4 of the whole mineral interest, vesting Larry with1/4 of the whole mineral interest and Curly
with 1/4 of the whole mineral interest
OR
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Moe’s Interest
Curly’s
Larry’s
Greatest Possible Estate Rule
1/4 of the wholemineral interest,
vesting Larry with1/4 of the whole mineral
interest and Curly with 1/4 of the whole mineral interest
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Moe’s Interest
Curly’s
Larry’s
Literal Interpretation Rule
1/4 of the wholemineral interest,
vesting Larry with1/4 of the whole mineral
interest and Curly with 1/4 of the whole mineral interest
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Grantor purports to convey a larger fractional interest than what he owns
What is an Overconveyance?
Moe
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Conveyance 1Comic Book Guy conveys the comic book store to Millhouse and reserves unto himself an undivided
1/2 mineral interest
Comic Book Guy Millhouse
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Conveyance 2
BartMillhouse
Conveyance 2Subsequently, Millhouse conveys the comic book store to Bart by general warranty deed, reserving unto himself an undivided 1/2 mineral interest
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RememberDoes not apply in all states
Does not apply to quitclaim deeds
May not apply when grantee has actualnotice of prior outstanding interest
May not apply to oil + gas leases
zRights Associated with Mineral Interests
Reasonable use of the surface
Receipt of profits
Receipt of benefits of production
Obligation to pay costs
Receipt of bonus payments, delay rentals and royalties
Right to transfer, search, develop and produce
Ability to seek partition
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How to Tell the Difference
Look for language that describes the rights being conveyed
“right to enter upon the lands”
“right to prospect for oil + gas”
“right to remove oil + gas”
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“in the event that said premises or any part thereof shall at any time hereafter be
operated for oil or gas or both, there and in that case the royalty oil which may
be produced and saved from said premises and the rents and royalties that may be derived from gas wells drilled thereon shall be owned and
distributed as follows…”
Example
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“in the event that said premises or any part thereof shall at any time hereafter be operated for oil or gas or both, there and in that case the royalty oil which may be produced and
saved from said premises and the rents and royalties that may be derived from gas wells drilled thereon shall be owned
and distributed as follows…”
A) Mineral interest OR B) Royalty interest
Example
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“Moe, grantor…doth hereby Grant, Bargain, Sell and Convey to the said Larry… the following described real estate…reserving to the Grantor, his heirs, executors, administrators and assigns for a period of 20 years
from the date of this instrument, the minerals underlying the real estate, including the right to
enter upon the above described lands and to prospect for, drill, produce and remove oil and gas removable by wells including the right to receive
rents and royalties during said 20 year period from oil and gas leases…”
Example
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“Moe, grantor…doth hereby Grant, Bargain, Sell and Convey to the said Larry… the following described real estate…reserving to the Grantor, his heirs, executors, administrators and assigns for a period of 20 years from the date of this instrument, the minerals underlying the real estate, including the right to enter upon the above described lands and to prospect for, drill, produce and remove oil and gas removable by wells including the right to receive rents and royalties during
said 20 year period from oil and gas leases…”
A) Mineral interest OR B) Royalty interest
Example
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Fixed royaltyOwner is entitled to the stated fraction of gross production, unaffected by the royalty reserved in the lease
an undivided ¼ royalty interest
Fractional Royalty Share of Production
Total Production
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Language that creates a fractional royalty
an undivided ¼ royalty interest
Fractional Royalty Share of Production
Total Production
“A fee royalty of 1/32 of the oil and gas”
“One-half of the one-eighth royalty interest”
“1% royalty of all the oil + gas produced and saved”
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Owner is entitled to a fraction of the royalty retained by the lessor
Fraction of Royalty
Total Production
an undivided ¼ royalty in all royalties received from any oil and gas produced
on the premises
1/8 royalty
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Fraction of Royalty
Total Production
an undivided ¼ royalty in all royalties received from any oil and gas produced
on the premises
1/8 royalty
Language that creates a fraction of royalty
“1/16 of all oil royalty”
“An undivided one-half interest in and to all of the royalty”
“One-half of one-eighth of the oil, gas and other mineral royalty
that may be produced”
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Two or more persons own fractional, undivided interests in the whole
Joint Tenants
Concurrent Ownership
Tenancy by the Entirety
Tenants in Common
Moe + Larry Moe + Martha (husband/wife)
Moe Larry
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Reserving unto the grantors, their heirs, executors, administrators, and assigns, for the period ending February 1, 2016, coal;
also oil, gas and all other minerals removable by wells.
Interpretation 1+ Interest in coal is reserved
until February 1, 2016+ Interest in oil, gas and other
minerals is reserved in perpetuity
Interpretation 2+ Interest in coal is reserved
until February 1, 2016+ Interest in oil, gas and
other minerals is reserved until February 1, 2016
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Thank You!Margeaux KimbroughKegler Brown Hill + [email protected]/kimbrough614.462.5437
@MargeauxEsq
linkedin.com/in/mkimbrough