What’s the difference between surface rights and mineral rights?

When you purchase a property, it’s natural to focus on what’s sitting on top of the ground – the house itself, a garage, or another structure. But what about the minerals under your property?

Surface rights refer to the right to use the surface of the property, while mineral rights refer to the right to explore underground resources. It’s important to understand surface rights vs. mineral rights in case you can use one or both.

Read on to confidently understand your land rights and feel empowered as you decide to convey or keep your mineral rights.

What are surface rights?

Just like the name suggests, surface rights grant owners access to the physical properties on a piece of land. For example, you might have rights to the following at surface level:

• Buildings
• Dwellings
• Farming 

Surface rights also give you access to other items just under the ground surface:

• Wells
• Septic tanks
• Underground storage tanks

However, surface rights and mineral rights are often separate – for example, you might own the surface rights but not the mineral rights on the same property.

What is a surface rights agreement?

Surface rights agreements grant a party the right to use and develop the surface area of a piece of land but protect your property through negotiations or legal boundaries. For example, when a landowner leases their land for agriculture, development, or recreational use, they retain ownership of the mineral rights beneath the surface of the property.

The surface use agreement might include:

• Terms of use
• Lease duration
• Compensation
• Activity restrictions

You ensure the agreement is upheld by addressing specifics regarding maintenance, liabilities, and how other parties can access the land based on local regulations.

What are mineral rights?

Mineral rights grant homeowners the right to exploit resources under a property, such as gold and oil. The property owner may not always have mineral rights, but may have surface rights. Mineral rights owners can access or use the minerals without owning an interest in the property.

Minerals might include:

• Oil
• Natural gases
• Gold, silver, mercury, or other precious metals
• Coal
• Aluminum, copper, or other nonprecious or semiprecious metals
• Rare earth elements

Mineral rights owners can use the area they own for minerals or can sell the rights to private companies or other organizations to explore and use. 

Homeowners can convey mineral rights, which means they can transfer ownership or grant extraction rights to another party through a few ways:

• Selling: You permanently transfer mineral rights to another party in exchange for compensation.
• Leasing: You keep mineral rights ownership but allow another party to extract resources in exchange for royalties (also called royal rights) or payments.
• Severance: You sell the land to a buyer while keeping the mineral rights. 

However, it’s important to understand all your options, because conveying mineral rights might impact how you use your property.

What is right of entry?

“Right of entry” is legal access granted to an individual or entity to enter and access your property. You can grant the right of entry through a contract, lease, or agreement. For example, an agreement might lay out the requirements, time frames, and purpose of mineral rights owners to access a homeowner’s land.

You can protect yourself and your property by clearly defining the right of entry to avoid misunderstandings, protect privacy, ensure proper compliance, and set clear and legal boundaries for access.

Split estates: When mineral and surface rights are divided

Rights can be sold or leased separately in the form of an estate, which can grant rights to entities in varying degrees:

• Unified estate: A unified estate ties mineral and surface rights together.
• Severed estate: A severed estate separates mineral and surface rights ownership.
• Fractional estate: In a fractional estate, one owns a portion of the mineral rights. 

A landowner might sell or transfer mineral rights while maintaining surface rights (such as transferring the right of another entity to drill on their land). In other words, one party may own the right to farm the land, while another party owns the right to drill for gas underground. Note that it is possible for multiple entities to have access to mineral rights on a landowner’s property, such as separate responsibilities for mining coal and accessing oil.

Impacts of split estates on homeowners

How might a split estate affect you as a homeowner? It can be challenging to balance land use, environmental impact, community/social considerations, and legal and financing impacts, so it’s important to understand all the possibilities.

Legal impacts

Mineral owners don’t have to inform the surface owner about split mineral rights, so it’s not always clear when you buy a piece of land whether or not the mineral rights have been split.

There are two things you can check to learn more about mineral rights: the deed and the title of a property.

• Deed: The legal document used to convey ownership and rights from a seller to the buyer. Check with the clerk and recorder for the county where the land is located for the mineral deed. Learn as much as you can about deed restrictions.
• Title: The theory of ownership used to show who has interest or rights in the home. You’ll also want to ensure a title search occurs, which involves searching public records to check for liens, property deed ownership, and other items that could impact title. Title insurance can protect you against losses if something is amiss. 

State regulations may also impact your decisions regarding mineral rights – each state has different tax laws, ownership rights, and land-use rules.

Ultimately, it’s important to recognize that owning land doesn’t always mean you own the minerals beneath it. Mineral rights could go to a different entity even if you hold the property deed.

Financing impacts

You may receive a cash flow benefit if you choose to purchase mineral rights, but do your due diligence as a buyer. Look into the nature and rights transferred, such as reviewing property records, consulting with lawyers who understand real estate law, learning about municipal rules and zoning, and obtaining assessments from professionals about the property’s mineral offerings.

To finance mineral rights, you’ll need to have a strong credit history, credit score, and collateral. Collateral involves offering up existing assets to reduce the lender’s risk. Note that some lenders might have limited experience financing these types of purchases, which means they may scrutinize your repayment capabilities and the mineral value itself, leading to mortgage implications.

How can I secure surface and mineral rights?

So, is it better to convey or keep your mineral rights? It depends, but it’s important to think through how securing either might affect the property’s value, resale, and development.

Consider asking the following questions:

• Have the mineral rights been severed or sold in the past?
• Can you provide a title report showing who owns the mineral rights?
• Has anyone retained partial rights on this property?
• Can I sell or lease the mineral rights in the future if I own them?
• Is the area zoned for mineral extraction?
• How will these factors affect property values? 

Also consider factors like the mineral quality/quantity, extraction costs, market demand, zoning, infrastructure development, and market trends. These factors might be hard to predict, so it’s important to get a professional in your corner who understands landowner rights.

The bottom line: Surface and mineral rights can be secured with a bit of work

Underground resources on your property (like oil, natural gas, or other natural resources) can become a lucrative source of income for you. However, it’s important to understand mineral rights vs surface rights and ask the right questions if you plan to purchase in an area known for mining or drilling, including the potential impact to how you use your land.

Ready to explore your financing options? Learn more to learn about how to fund your next project with Rocket Mortgage®.