Oil/Gas/Mineral Reservation & Trustees Sale
QUESTION: Mr. Williams
We have found what may be a defect in the title to some mineral rights we own in Duchesne County, Utah. A prior owner reserved the mineral rights when she executed a deed transferring the surface to herself and her new husband as joint tenants. The couple then defaulted on their payments on a loan secured by this property and the property passed in a trustees sale.
Would her reservation be effective or would she have lost those rights when she jointly pledged their property to secure the loan and then lost the property?
Thanks for your time,
ANSWER: I'm not sure about Utah law so...you'll have to check with a Utah attorney BUT...
If this were in many of the states in which I am more familiar, a reservation of minerals will not stand unless she owned the property free and clear of all liens at the time she conveyed the minerals to herself.
In many states you cannot convey to yourself property or minerals that you already own just so you can change from tenant in common to joint tenancy, etc. Many people would use a "straw man" for this transaction.
So, bottom line. If she had the property free and clear in 2001 and conveyed the minerals in 2002 and then mortgaged the property in 2004 and lost the property a year later the reservation will stand because she owned all the property free of liens when she conveyed out the minerals severing them from the surface estate.
Good question and one that I would have a Utah oil and gas attorney review. If you are a subsequent purchaser you need to have this reviewed pretty closely to ID her name used during ownership, the exact wording on the mortgage, etc.
---------- FOLLOW-UP ----------
QUESTION: Thanks for your very prompt and thorough response. We have some indication that there were liens when she received the property in a divorce but can't tell for sure the lien status when she reserved the mineral. This only involves one acre in a 138 acre mineral ownership. The oil company has historically leased the mineral from us and as far as we know still believes we own all 138 acres of mineral. They are wanting a renewal on the 138 acre lease because it expires in a few months and have approved well permits in this 640 acres spacing unit.
My remaining question is which course of action you would suggest:
1. continue to research this on our own to confirm whether we own the acre prior to renewing a lease
2. renew the lease and then wait for them to do the curative work and confirm ownership when there is production in a year or so.
Thanks for your thoughts,
I wouldn't spend another minute on the research. It is grey area and you will be frustrated - only a judge can make a ruling on issues like this.
Renew the lease but remove the paragraph that warrants that you own the minerals. Tell them that they are the professionals and have checked title. They know whether you own it - the lease should not be warranted.