The unintended consequences of the new Oklahoma real estate contract forms are numerous and complex. On Friday the Oklahoma Real Estate Commission (OREC) unveiled the new real estate contract forms. The OREC has recommended that licensed real estate brokers and their associates begin using the new forms on November 1, 2009. It's not too late to comment and request that changes be made. Our future economic well being and our national security could potentially be at risk.
The new forms will put into limbo all mineral rights that are not now active or leased, because unproduced oil & gas rights are not tracked nor taxed. Mineral rights will be put in limbo where no one will know what is going on until the State of Oklahoma comes along and takes them as unclaimed property, thereby depriving the landowners of the State of Oklahoma of a significant portion of their wealth.
The county tax assessors only track and tax the surface owners. Oil & gas producers track producing mineral holders in order to distribute royalty checks. Because they are never taxed and do not receive royalty checks, descendants of unproduced mineral holders are unaware of their ownership of severed oil & gas rights. Moreover, privacy laws make it difficult for landmen to find heirs. Detailed census data is closed for seventy years -- that's three generations of tough genealogical work for anyone trying to find holders of mineral rights.
The lawyers, the landmen, the abstract companies, and the title insurance companies will be the big winners of the new contract forms. The consumers, landowners, undeclared mineral holders, and real estate brokers who do not broker oil & gas rights will be the biggest losers.
Potentially the economic engine of the State of Oklahoma will be crippled to the extent that the state may eventually have to quiet title undeclared mineral holders in order to prevent foreign investors from quietly investing in these precious personal property rights that will be regularly severed through the use of the new contract forms.
Only the Osage Nation, who already owns most of the mineral rights in Osage County (all but about 800 acres or so) will be able to conduct business unimpeded by legal problems.
Those of us who sell rural land have been aware of the problems caused by the previous Vacant Land contract forms and have been hoping to get them changed so that the personal property rights would no longer be severed by the vacant land contract forms for "surface rights only." Instead we were shocked to discover that all the new contract forms are written for the purchase of surface rights only. Knowlegable brokers and associates will be crossing out certain words in the new contracts. However, that will not prevent damage being done by ignorant real estate sales associates who will not be realizing that they are not representing the best interests of their buyers and their descendants.
Does this mean that the OREC wants all real estate brokers and associates using these new forms to be representing their clients as transaction brokers? This must be the case, because by law a single party broker must advocate for and work in the best interest of their clients. Any buyer's broker using the new forms without alteration will not be representing the best interest of their buyers and therefore will be leaving themselves open for legal action if they act as a single party broker.
Yeah, yeah, yeah, how can that be? Just wait until the D6 dozers and the drilling rigs start pulling up on your buyer's land! They'll cry when they realize that the mineral estate is dominant over the surface estate. Then they'll call their lawyer who will then call you. You will be responsible for not having explained to your buyer the unintended consequences of their having purchased only the surface rights.
At least with the old forms our buyers were able to purchase all of the rights owned by the seller -- however many and kind of rights those may have been.
Moreover, we can all kiss goodbye to the concept of quiet enjoyment.
http://NortheastOklahomaRealEstate.com
http://BixbyOklahomaRealEstate.com
http://dsolano.homesandland.com
Mineral Rights and States' Rights Issues -- The Gradual Erosion of Property Rights and the Seizure of Power From a State By the Federal Government
Who has jurisdiction when there is a conflict between the surface owners and the owners of the mineral estate? Can the Federal Government constitutionally use it's police powers to restrict access to private property in the form of mineral rights or is this a right of the states and the people under the constitutional principle of federalism?
In a recent article by Robert J. Keir, Appalachian Basin Land Manager, entitled, "The Battle for the ANF is Really a States Rights Issue," this very issue is explored. With the permission of the American Association of Professional Landmen (AAPL), I have reprinted the entire article which recently appeared on pages 13-14 in the September 2009 issue of Landman 2 (Vol. 7, no. 5). What follows are the words of Mr. Keir, with emphases added by me:
The battle between oil and gas owners and the federal government in the form of the U.S. Forest Service regarding drilling rights in the Allegheny National Forest (ANF) has raised a great deal of Constitutional fuss. The argument is focused mostly on Fifth Amendment concerns: "nor shall private property be taken for public use, without just compensation." However, the 10th Amendment issues are more threatening to our liberty and potentially more sinister as the Obama Administration claws power back from the states. "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
The 10th Amendment reaffirms the principle of federalism by providing that powers not granted to the national government nor prohibited to the states are reserved to the states or the people.
In Pennsylvania [as in Oklahoma and in many other states, I must add], the mineral estate is the dominant estate, the surface estate is the subservient estate and the mineral owner has an implied right to use so much of the surface as is reasonably necessary in order to develop these minerals. The surface owner is forbidden to interfere with any reasonable use of the surface by the mineral owner. The term "reasonable" is a bit nebulous, but the Commonwealth of Pennsylvania in the form of statutes, regulations and more than 100 years of case law has established a pretty firm definition of reasonable use.
In fact, the Pennsylvania Supreme Court, in Belden and Blake v. Pennsylvania Department of Conservation and Natural Resources (2009), forcefully reaffirmed the rights of the mineral owner and that the surface owner -- ironically in this case the commonwealth of Pennsylvania -- cannot impose preconditions or control reasonable access to state lands for the purpose of oil and gas development. In a nutshell, the court said that even Pennsylvania was simply just another landowner without a mineral interest underlying the surface and that it -- like any other landowner -- could not impose unreasonable surface access restrictions to the owners of the mineral estate.
The ANF property covers more than a half-million acres spread over four counties. However, in 1923 when the Forest Service started to acquire land parcels for the forest, a decision was made, for economic reasons, not to purchase the sub-surface rights of the properties then being assembled. Therefore, the Forest Service only owns about 7 percent of the oil, gas and minerals under the forest. Private parties own the remaining 93 percent.
The recent settlement reached between the Forest Service, the ADF, the Sierra Club and the Forest Service Employess for Environmental Ethics requires drilling companies to conduct an environmental review in the form of a National Environmental Policy Act (NEPA) analysis, which addresses such issues as road construction near streams, reforestation, landscaping after a well is completed and a biological and heritage resource review. NEPA would also grant third-party input on drilling projects within the ANF.
All of these issues are already regulated by the commonwealth of Pennsylvania in the Oil and Gas Act. As the May 2009 issue of the IOGA newsletter neatly describes, Section 102 of the Act provides:
The purposes of this act are to
(1) Permit the optimal development of the oil and gas resources of Pennsylvania consistent with the protection of the health, safety, environment and property of the citizens of the commonwealth.
(2) Protect the safety of personnel and facilities employed in the exploration, development, storage and production of natural gas or oil or the mining of coal.
(3) Protect the safety and property rights of persons residing in areas where such exploration, development, storage or production occurs.
There is nothing in the NEPA analysis that Pennsylvania does not already cover or forbid. These powers are reserved for the commonwealth because they were not delegated to Uncle Sam by the Constitution.
The ANF is just another large landowner and has no extra special rights compared to other landowners in Pennsylvania. Any attempt by the Forest Service to impose surface use restrictions on oil and gas development in the ANF violates Pennsylvania law and the Fifth Amendment.
On the surface, this conflict is about the restriction of access to private property by a government agency. But ultimately, it is about the seizure of power from a state by the federal government, which makes it a 10th Amendment issue as well.
We should be concerned about this gradual erosion of property rights as the ANF intrudes on individual liberties. But all -- including the most ardent environmentalists -- should be especially alarmed at Uncle Sam's attempt to snatch power away from the states, because if this is allowed to continue, our federalist system as designed by the framers is in severe jeopardy.
This is not the change people voted for, and it is not for the good.
http://NortheastOklahomaRealEstate.com
http://BixbyOklahomaRealEstate.com
http://dsolano.homesandland.com
It's time to buy the whole enchilada, the chocolate cake under the icing, the entire basket of mineral rights -- while oil prices are low.
A family came to an open house the other day and stated that another realtor had told them that the oil rights never come with the land. I am so sick and tired of hearing that. Just because realtors don't know about oil & gas does not mean they should say what isn't true.
Here is the problem. In Oklahoma there are two government agencies that come into play regarding our land -- the Oklahoma Real Estate Commission (OREC) and the Oklahoma Corporation Commission (OCC). OREC governs real estate transactions. The OCC governs oil & gas transactions -- the basis of our state's entire economy. Their jurisdictions are a legal abstraction to try to explain how to convey a basket of rights that is either completely full or has been divided up into several different little baskets that are filled to a greater or lesser degree by the buyers and sellers when they enter into legal transactions.
However, under it all is the land. The concept of fee simple absolute covers the entire bundle of rights from the center of the earth to the air space above. Think of the whole banana, the big enchilada, the entire chocolate cake that is the land, or a big basket of rights. If you have your property in fee simple then you have the biggest possible basket -- and it is full to the brim.
You can then sell the surface only and retain your mineral rights. The fee estate now becomes a split estate. In this case you put the surface rights (the icing on the chocolate cake) into two smaller baskets: one basket is filled to the top with the surface rights and everything else that you did not retain (water rights, air rights, etc.) and keep another basket filled to the top with oil and gas rights. The basket of surface rights has one owner. The basket of oil & gas rights has another owner (the original owner).
The original fee owner can pass on any portion of the mineral rights with the surface of the land. Let's say that the original owner retain's fifty percent of the oil & gas rights. Imagine that the original owner has a basket that is half full of mineral rights (half of the cake part of a chocolate cake). These severed mineral rights are now considered personal property and are no longer considered real estate; the severed mineral rights are now part of the mineral estate and will be conveyed by a Mineral Deed.
It is important to understand that the mineral estate is dominant and the surface estate is servient. The mineral owners, their lessees, and their assigns must have access to an adequate amount of the surface in order to develop the minerals. In Oklahoma, this means that when push gets to shove the mineral estate will win, The surface owners have limited rights and their best option is to be really really nice to the operators who come on their land to explore and drill for oil & gas.
The new surface owner has a basket of surface rights that is full of pretty chocolate icing plus another basket of mineral rights that is filled half way up with the cake part of the chocolate cake; both baskets are linked together by the deed and will remain linked until the new owner or future assignees sever the tie between the two baskets.
Future owners of the mineral rights (the descendants of the original landowner) can continue to divide up the mineral rights into smaller and baskets -- but no one is keeping track of that. Although mineral deeds will appear in the land records of the offices of county clerk, these deeds will not be included in a surface abstract because the title insurance companies do not insure the mineral rights. That's where you have to hire a landman and a good title attorney to find all the owners of the little baskets -- and buy those baskets while the price of oil is cheap. You need to have more than fifty percent of the mineral rights in your basket in order to have any control over the minerals under your land.
Just to confuse the issue, the coal at the surface is typically conveyed with the surface rights and will belong to the surface owner rather than be split along with the oil and gas rights in the mineral estate.
The tax assessor will only help you identify the owner of the basket holding the surface rights. It's tricky, but it can be done. I know many landowners who have bought back the mineral rights under their land. I would encourage everyone to do so.
Why buy your mineral rights under your land? It's simple -- you do it so that nobody else brings a D6 dozer and a drilling rig onto your land without your control or benefit to you and your family. Trust me, there's lots of oil and gas here that is unexplored. You want to be part of it -- either stop it from happening or get a piece of the action. I've been to the new drill sites in Tulsa County where they have struck oil three times in the past week in an area that was previously unexplored.
By the way, does anyone know the descendants of Conn Linn? Tell them they own 50 percent of the mineral rights in the new Mayo-Moore oil lease. Their royalties will escheat to the State of Oklahoma after 7 years. Conn Linn died in 1953 without children. He was born in 1868. The descendants of his siblings may have a right a little basket of oil & gas rights. There was a will, but the heirs could not be found easily. When the oil company who drilled the lease could not find the heirs to Conn Linn, they went ahead and signed a lease with the trust company who owns the surface and the other 50 percent of the minerals. They were able to drill because of a legal process called pooling.
The above is a great example of why you must own more than fifty percent of the rights to your oil & gas. Pooling is what is done to drill anyway when an operator has a lease for at least fifty percent of the oil and gas rights in an area where the operator has other leases around the target lease. They unitize the leases together into a pool. It's complicated.
To prevent being pooled, try to acquire more than fifty percent of the oil and gas rights for your basket.
http://NortheastOklahomaRealEstate.com
http://BixbyOklahomaRealEstate.com
http://dsolano.homesandland.com
Tack Liquidation Sale in Bay Shore on Long Island on 2/28
This came to me through one of my contacts on LinkedIN, Amy Rae Terenzi (Stephenson). Pass it on:
"Hi Everyone, I am not sure if this is the best place to post this, but my friend has recently had a baby and will no longer be running her mobile tack selling business. She is have a liquidation of all her inventory out of her home on Saturday 2/28 and I thought anyone local might be interested.
Here is in the info:
TACK AND RIDING GEAR LIQUIDATION SALE
SATURDAY, FEBRUARY 28
9AM-3PM
Bay Shore, NY
Value Tack has decided to take a break from the mobile tack shop scene...what does this mean for you?
Blankets, saddles, brushes, bridles, bits, pads, wraps, shampoos, buckets, helmets & more...way too much to list, so come and check it out!
Come to our Open House Liquidation Sale on Saturday, February 28 and check out what is left--at clearance prices!
All items will be marked down...offers will be considered for saddles and other big-ticket items...over 75% of our inventory must be sold, so please take advantage!
Call for directions and details--516-458-5706
Appointments are also available for other times. Tack businesses, barn owners and organizations welcome--bulk sales and lots can be arranged. Please call for details."
What is a Short Sale?
A short sale is one among many strategies to avoid foreclosure. For many homeowners it is a last ditch effort to sell a house at market value before it goes to sheriff sale. It helps the seller stay out of foreclosure while the buyer gets a home that is priced by a motivated seller at a price point at or below market value.
Usually a short sale cannot be negotiated until there is a contract to purchase the home. Banks usually will not negotiate a short sale unless the seller has missed a payment or two.
A short sale is often seen
Whatever the cause, in a short sale the homeowner owes more on the house than he can hope to sell the house for, especially after paying closing costs. In lieu of a short sale, a seller can opt to take a check to closing or work out some kind of a payment plan with his lender in order to be able to sell the house and avoid foreclosure.
In a short sale situation the buyer shops for a home and gets loan approval just as when purchasing any other house. The seller negotiates the best deal possible. Usually the seller has already given up and doesn't care how much the house is sold for, as long as it is enough for the bank to approve the deal. The buyer and seller both sign an addendum which amends the contract so that the bank will have a bit of time to approve the purchase contract. Then everybody waits and waits and waits.
There is great disparity between the spirit, philosophy, theory, and intent of a short sale on the one hand, and the reality and practice of short sales, on the other hand. The reality is that the banks can make more money if they let HUD, Fannie, and Freddie take the house back, and so the banks have been reluctant to help out the homeowners by negotiating with the realtors. It's just too much trouble for the banks, and so they take their sweet time and frustrate everyone.
While the banks are dawdling, the buyers get squirrelly and start looking at other houses. In the end, 85% of buyers back out before the bank finally approves the deal.
Most realtors have been there and done that, but have refused to buy the tee shirt. Many have sworn never to get involved in another short sale again. Why? Short sales are a lot of work and provide little satisfaction or profit. Most of us doing short sales feel like we are throwing the proverbial star fish back into the sea. When we are successful in closing a short sale, all parties involved can feel joy at having helped a family avoid foreclosure and can truthfully say, "It made a difference for that one family."
Unfortunately the now famous October bailout by the federal government has only accelerated the foreclosure of many homes in Tulsa County. I could give you many ugly examples to illustrate this statement.
The bailout has assured that the banks were taken care of, but unfortunaely home owners already in the foreclosure process have been shown no mercy. The banks have had no motivation to help homeowners because the loans had been guaranteed or insured by the government.
In my experience the banks that held their own paper without government involvement have been much easier to negotiate with and seem to be a bit more responsive to realtors' efforts to negotiate a short sale.
So my suggestion is that if you are considering the purchase of a short sale, please only make an offer on a house that you really like. It is unfair to the seller to keep the house off the market only to back out two months down the road. For you see, the foreclosure clock keeps on ticking while the banks are sitting doing nothing or pretending that they are doing something.
Sometimes the reason a short sale fails is because of the presence of a third party lien. These seem to shut down all possibility of negotiation. These liens do not show up in the county court records, but are attached to the house in the property records in the county clerk's office. Usually the homeowner is unaware that such a paper exists in their records at the county clerk's office. An extra run to the court house to the clerk's office can help everyone involved. A seller can get around these liens by consulting a good bankruptcy attorney and getting a stay of bankruptcy prior to the sheriff sale.
In short, a short sale is a good opportunity to get a great deal on a house and help a family stay out of foreclosure. I just beg you to be sure you love the house, because it is devastating for a family facing foreclosure to have a buyer back out. I barely stop short at saying that a buyer has a moral obligation to buy a house they have contracted for, but I really can get up on my soap box on this one.
Buyers: Shop carefully, deal carefully, and know that you want the house. Then go for it - and stay with it. Good luck and happy house hunting.
Sellers: Find someone who has some knowledge and experience in dealing with foreclosures who can help navigate you through the short sale process.
I hope this helps.
http://NortheastOklahomaRealEstate.com
http://BixbyOklahomaRealEstate.com
http://dsolano.homesandland.com
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Specializing in horse properties, country estates, vacant land, farms and ranches in Tulsa County and surrounding counties in Northeast Oklahoma; Land & Ranch Division, Coldwell Banker Select Realtors
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