Mines and minerals multi-choice test

The common law rule in England and Wales is that a property owner owns everything under the surface of his land down to the centre of the Earth, and everything above the surface up to the sky. However, in some parts of England and Wales there is an exception to this. It is quite common to see on titles a vague note in the property register “mines and minerals are excepted”. That means that the landowner does not actually own everything. He does not own the mines and minerals in the land, which belong to a third party. It is always prudent to carry out an index map search (or SIM), but it is essential that one is carried out where such entry is revealed on the register of title. The SIM will reveal whether the mines and minerals have been separately registered (this will not show on the landowner’s title because the mines and minerals do not form part of that title).  Prior to 13 October 2013, in relation to registered land, parties with the benefit of certain manorial rights, including rights to mines and minerals, were automatically protected as overriding interests. As of 12 October 2013, by operation of the Land Registration Act 2002, owners of such rights have to register them, otherwise they run the risk of losing the rights if there is a disposition of the land for value. Once such a transfer of value is registered without a notice having been entered, the land would, following such transfer, be free of such rights. With regard to unregistered land, a SIM will reveal if any caution has been entered against first registration. After 12 October 2013, unless the right is protected by such notice entered on first registration, the land will be registered free of mines and minerals rights. How are mineral rights created? There are several ways in which mineral rights can arise including: customer practice, rights of the law (which acknowledges that oil, coal, silver, gold and gas belong to the Crown); transfer rights; and manorial rights. Manorial rights arise when the land was part of a former estate or copyhold land. Copyhold is land given by the lord of the manor to the tenant for the tenant to work and occupy. This is now outdated and has been phased out and replaced with the freehold.  Transfer rights occur when the mines and minerals are expressly reserved as part of a transfer. Such rights may exist as appurtenant (ie benefiting a specific piece of land) or in gross (there is no need for any particular land to be benefited). Practical issues So what does a developer do if there are mines and minerals within the land? First, weigh up the risk associated with trespass – for example, sinking foundations which encroach on the mines and minerals. The consequences are that a developer:  a) runs the risk of an injunction being made preventing the works from being completed or carried out; and b) may have to pay compensation. A developer must assess the risks, insofar as it is possible to do so given that it will be practically impossible to gauge the value of the mines and minerals in the land without extracting them. It is, in any event, not really the value of the mines and minerals that is important. It is the trespass aspect that causes the issue. The options broadly are to arrange insurance, negotiate to purchase the mines and minerals rights from the owner, or go ahead regardless. The first two options are mutually exclusive. It is well known that insurers will not offer cover if the owner of the mines and minerals has been approached, as insurers take that as inviting the claim. Insurance The availability of insurance is going to depend on several factors. If possible, the wording of the reservation in relation to mines and minerals should be ascertained (which is sometimes difficult to do). For example, the reservation may stipulate that it relates to mines and minerals at a particular depth, say 100 ft. If, allied to this, there is no ability to enter the surface, the risk of trespass from putting in foundations is low.  On the other hand, if ownership of the mines and minerals has been registered and consultation of the local authority’s local planning shows that the property is zoned as a mines and minerals extraction area, insurance will be difficult to obtain. From a developer’s point of view, insurance should be for the development value of the land. A purchaser properly advised will be looking for cover both in respect of trespass and subsidence (that may be caused by a working of the mines and minerals).  Negotiating a purchase Negotiations will proceed on the basis of what compensation the mines and minerals owner would be awarded by the court in lieu of an injunction. The approach to quantification is that the mines and minerals owner will seek a cut of the development profit. The principle is: what would a reasonable developer pay and what would a reasonable minerals owner accept for the sale of the mineral rights to allow the development to proceed? Each situation will be different and will involve factors already referred to, such as the location of the mines and minerals, whether there is a real (or just a theoretical) danger of committing a trespass, the value of the mines and minerals and whether the wording of the reservation actually allows surface or just underground working.  Carry on regardless The risk here is one of injunction. It must, however, be borne in mind that injunctions are discretionary. The court does not have to grant an injunction, and can award money instead.  In a dispute that arose in 2010 between the Countess of Lonsdale and Tesco, Tesco had purchased a development site in Cumbria for £18m in 2006. The Countess, being against the development, invoked her rights to minerals in an attempt to stop the construction of the site. Following protracted legal proceedings, the local council revoked its decision to sell the land, which demonstrates that the prospect of an injunction being granted has real consequences. On the other hand, let us say the developer is planning a residential development. It is widely accepted that England and Wales is in desperate need of new housing. In such a situation, one could quite easily see a court invoking public policy as a reason for refusing an injunction and awarding damages in lieu. Savvas Fiaca is a partner at Seddons