Revised mineral addendum now available on zipForm

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03/02/2015 | Author: Editorial Staff

The revised Addendum for Reservation of Oil, Gas, and Other Minerals (TAR 1905; TREC 44-2) is available on zipForm. This form became mandatory March 1, and is required when the seller is reserving mineral interests and using the One to Four Family Residential Contract (Resale) (TAR 1601; TREC 20-12) or other residential contracts promulgated by TREC. 

It is optional to use this addendum with the Farm and Ranch Contract (TAR 1701; TREC 25-10), as a lawyer can draft an addendum for use with that contract if the seller is reserving mineral interests.

Categories: Legal
Tags: forms, mineral rights, minerals addendum, legal


Nestor M. Ortiz on 12/12/2015

This is a good topic.  My understanding of the revised TREC 44-2 form is that it is only required if the seller reserves all or a portion of the Mineral Estate.  On the addendum itself, there is a notice before section A that states “NOTICE: For use ONLY if Seller reserves all or a portion of the Mineral Estate”.  Regarding the requirement to use the addendum when using the One to Four Family Residential Contract (Resale) or other residential contracts promulgated by TREC, the TAR post clarifies that it is only required when using such contracts AND seller is reserving mineral interests.  Therefore, if seller is not reserving such interests, it is not required, even when using the One to Four Family Residential Contract.  I’m not sure why there’s confusion after this form revision, but hope this clarifies for some.

Jeanine Ulrich on 03/06/2015

I am an Agent in a rural area in South central Texas and work in several adjoining counties & cities. One city owns all minerals/royalties within the city limits. The next city over does not—homeowners inside the city limits own the minerals/royalties under their residential lot, regardless if 1/5th acre, 1/2 or whatever size. Of course they may have been reserved by a previous owner as the home has been sold over the years but an Agent has to be aware that minerals “may” be available inside city limits for residential lots. It isn’t just applicable to farm & ranch contracts. The reservation clause isnt mentioned on 1-4 like it is on F&R so an Agent has to know to attach Addendum if m&r are being retained by Seller. If not, they will convey to Buyer.

Rick DeVoss on 03/05/2015

Wow, ...I am totally amazed at how much mis-information is out there, and how many Realtors assume that they have knowledge of ALL the possible scenarios across the State of Texas.  ~I will not pretend to have all the answers, but will share some recently learned info.  (after 35 years in the business)

There are many subdivisions that DO have mineral rights under a small lot, such as a tenth of an acre.  Perhaps the newer ones don’t; perhaps your neighborhood doesn’t; but please don’t make assumptions about all the others in the state.  I get a check from Chesapeake frequently.  I spoke with them this week, and learned that a “3-year lease” signed by a homeowner can be extended by the oil/gas company as long as the well is producing.  I was told that “ownership” of the mineral rights could be ascertained by looking up the records at the County Clerk’s office.  Perhaps this is something that should be done upon taking a new listing.

The Addendum is only “mandatory” if the seller wants to reserve his rights to the minerals.  What that means is,  Don’t write it into Special Provisions.  (It doesn’t mean you have to attach the addendum to every contract.)  And I’m sorry to disagree with some agents, but why would you want to reserve your rights to something you don’t own??  Sounds like the seller doesn’t know what he owns, and the agent is too lazy to initiate the research on it.  Without that addendum, any mineral rights which have not been previously sold will convey to the buyer of the property.

Follow this example:  When homeowner A leases the mineral rights to a gas company, and then sells the house to homeowner B, the checks will keep coming to A.  If a standard TREC contract was used in the sale, then the ‘rights’ to the minerals have transferred to B.  However, you should be diligent to advise your buyer that he must send a copy of his Deed to the gas company if he expects to get any future checks in the mail.  Failing to do this means that the gas company will continue to send the checks to A, and she will cash them!

As Residential Agents, we don’t usually “sell” Mineral Rights.  We can cause Mineral Rights to be transferred along with the surface property.  ~But we DO have an obligation to our clients to inform them to check into the status of the royalties, and to make sure that the Deed gets recorded with the oil/gas company in case they should issue any checks in the future.

~So many things to remember….

Joe on 03/05/2015

@Cecil - Please provide links to exactly where you are getting your information, or are you just throwing out an opinion that may not have any basis?  I have NEVER heard of anyone being accused of placing “a deed into the chain of title with false information in it” by simply including a Minerals Addendum..  Have you read the Minerals Addendum. The addendum says “Seller reserves all of the Mineral Estate owned by Seller.” Don’t read more into the document than that. It doesn’t say the Seller owns anything and I fail to see how anyone could be accused of placing a deed into the chain of title with false information by simply executing the Mineral Addendum..

Linda Niehuus on 03/05/2015

@Joe, in subdivisions, the deed restrictions will mention. Outside subdivisions, you can read the deed which would mention any reservations from past. Otherwise, it would take a landman to confirm. I deal mostly in acreage properties, but do some single family on small tracts. As I said before, it is rare that a small tract—especially if in a subdivision—has any minerals intact.

@Melanie, how many acres did you have/sell?

Cecil L. Powell on 03/05/2015

Based on several years of study on this matter, it would seem imperative that both the Sellers and the Buyers should “want” to know if they actually own the Mineral Rights to their property.  The only way to do this is to search the title records and actually find out if the mineral rights were ever sold to another entity.

Ex.  If Seller One sells his property to Buyer One and reserves his Mineral Rights under this current scenerio, but does not actually search to make sure he owns them, then he may be placing a deed into the chain of title with false information in it.  The Mineral Rights may be actually owned by Joe Texan, who bought them in 1876!  ...and how would you ever claim a right to monetary gain, if you don’t have a record of ever owning it???  I suggest that a Seller/Buyer interested in this matter needs to conduct the search at the time of purchase or sale.  P.S. in some states, these rights are TAXABLE!!

Sandy Menley on 03/05/2015

.If the seller owns any minerals, they are automatically conveyed UNLESS they are reserved on Form. 44-2 TREC. See Par B.  Therefore, if the seller is not reserving any of the minerals he owns, and is using the One-Four family contract, the addendum is not required.  There is also a notice at the top of the form that says it is used “ONLY if Seller reserves all or a portion of the Mineral Estate”

Joe on 03/05/2015

@Linda Niehuus - You say that you have never seen a situation where the current owner of a 1 to 4 property has owned them. HOW DO YOU EVER LEARN WHO REALLY OWNS THEM? Do you have a landman, title company attorney ever conduct the research? Do you live around the Barnett Shale or other property that is being drilled or mined for oil, gas or minerals? If you did, you might have seen lots of current owners that own a mineral interest. There are plenty of owners of residential property that own an interest!

Melanie Miller on 03/05/2015

I just sold my home and I do have an active gas lease in force at that address. That is why it IS prudent to reserve those mineral rights if one has the choice/ option to do so. Just because you have never had to deal with that issue in a 1-4 doesn’t mean it doesn’t exist. Home sales in rural areas are much different than that of the cities & suburbs in so many respects. ..and Reservation of Mineral Interests is one of them!

Joe on 03/05/2015

You NEVER know for sure if a current property owner has existing mineral interests or not, unless the research has been done. You should just give your Sellers the option of reserving their interests regardless of who may or may not own them by including the Addendum. If you’re really spending a lot of time talking about Mineral Rights and continually try to minimize the possibilities of whether or not they exist and will convey, then you may want to rethink the issue.

@Sandy Menley, It doesn’t matter if the current owner owns the rights or not. The Addendum says IF the current Seller owns the rights, then they are reserved. You don’t have to do any further research to determine who actually owns them. The form is used all of the time without anyone actually knowing for sure who the owner(s) are.

I find it rather humorous that sometimes Buyers want to spend lots of time negotiating over the fact that the Sellers are reserving the rights with the addendum, even though nobody really knows for sure who owns them.  As a Listing Agent I always recommend that clients start out by reserving their mineral interest. During contract negotiations with Buyers my clients will then have something to negotiate with that often time doesn’t really doesn’t cost them anything.

Up here around the Barnett Shale we have lots of current home owners that receive nice checks from small lot and block residential properties.

@Pat Barker - NOOOO! See my above comments..  Additionally, how would you or the current seller know what happened prior to their ownership. Regardless, even if they did know it doesn’t have to be disclosed. Some sellers might think they own them and they don’t. Other sellers might think they don’t own them, but they actually own a percentage. When meeting with sellers that really don’t know for sure if they own a mineral interest or not, while completing listing paperwork, just ask this question, “in the event that you happen to own a mineral interest in this property, would you like to reserve your interest?” If the answer is YES, then just do the Minerals Addendum and be done with it. There’s nothing further that you or your client needs to do. If you have buyers that want to include the addendum as part of what they want to negotiate for, then so be it..  I say something similar to this often, “Okay my clients will remove the addendum and allow any possible mineral interest convey, but they will not pay for (FILL IN THE BLANK).” Use the addendum as a negotiating tool!

Linda Niehuus on 03/05/2015

It seems unnecessary to “require” this form on 1-4 contracts when the real issue is with F&R acreage properties…for which the form is optional. I understand that attorneys can also draft such an agreement for a F&R property. However, I have never seen a situation where the mineral estate is owned by the property owner in a 1-4 property.  It seems to me that requiring the form in such situations will only be confusing when 99% of the time there will be no minerals to reserve.

Sandy Menley on 03/05/2015

Tthis form would rarely be used on new construction unless the house in on some acreage .  On lots and block subdivisions, minerals are usually reserved by the developer.  If no one has said anything about the seller reserving any minerals, and there is nothing in the contract about the seller reserving minerals, then any minerals owned by the seller convey to the buyer without the need for anything in the contract or this form.

Robert Crain on 03/05/2015

Beth.  Not many recent subdivisions will have any mineral rights. Likely they were severed by the developers or their predecessors in title.  Some examples of homeowners owning the minerals are in the Barnett Shale around Ft. Worth, the Heights in Houston , and other old developments. The oil companies leased and “unitized” many of the home lots in these old areas and the owners participate in the royalties.

The only way to determine if a homeowner owns the minerals is to run the title back to any severance of the mineral estate. 

Remember that the Mineral Owner has the dominant estate and has the right to use the surface to recover those, (sub-surface), minerals.

The Texas Railroad Commission governs drilling in Texas and has rules in place that somewhat govern the surface use. See “Rule of Accommodation”. Citys with “Home Rule’” can control surface exploration use as well.

BTW, it never hurts to reserve the minerals , whether you have them or not, even though it may confuse the parties.

“The meek shall inherit the Earth, but not the minerals.” J. Paul Getty.

Pat Barker on 03/05/2015

If the mineral rights have been previously reserved prior to the current seller, is it necessary to disclose on the listing and is it necessary to use the TREC document?

Sandy Menley on 03/05/2015

Typically in a subdivision, the minerals have been previously reserved by the developer or a prior owner.  My understanding is that this form is only required if the seller owns some of the mnerals, is reserving them AND we are using the 1-4 Family form.

Vincent J. Bila on 03/05/2015

In many cases the reservations for all oil, gas and mineral rights are previously reserved and not owned by seller; therefore no rights to pass on or reserve. We have been disclosing this on contract as such. Is a form necessary ?

Nancy Carothers on 03/05/2015

Is this form required for new construction ?

Beth Matkin on 03/05/2015

On the Addendum for Oil, Gas, and Other Minerals- is it required for use on a resale of a home with a lot and block for legals in a subdivision?

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