Mines and minerals: key considerations

In case you missed it, we previously looked at the key considerations for developers purchasing land affected by restrictive covenants and by rights of light.

What are mines and minerals rights?

Ownership of the surface of land and ownership of the mines and minerals beneath it can be separate.

Historically, landowners sometimes sold the surface while retaining the mines and minerals beneath it. As a result, rights created many decades ago can still affect development sites today.

A mines and minerals entry on title does not necessarily prevent development. However, the nature and extent of the rights should be understood at an early stage as any works or disturbance below the surface could constitute a trespass.

What should developers consider?

There are five key questions.

1) Who owns the minerals?

There may be a separate registered mines and minerals title, but not always. Where a claim is made, the party asserting the mineral rights will need to prove that it owns the relevant mineral interest and that it is entitled to bring the claim.

2) What was reserved?

Historic conveyances may refer generally to “mines and minerals” or identify particular substances. There is no single universal definition of a mineral for these purposes, so the wording and circumstances of the reservation will need careful consideration.

3) Are the minerals actually there?

Geological evidence and existing ground investigations will be needed to determine whether the relevant minerals are present beneath the surface of the land being developed.

4) Has the development interfered with them?

The existence of a mineral interest does not of itself establish a trespass. The location and depth of foundations, piling, drainage and services will need to be considered to determine whether the development interferes with the mineral estate.

5) What rights does the mineral owner have?

Ownership of minerals does not necessarily include a right to enter the land and extract them. The relevant documents will need to be reviewed to see if there are rights of entry, extraction and support.

However, a mines and minerals owner could still threaten an injunction or make a claim for damages (financial compensation) which will be a key concern for a developer.

What is a claim worth?

Even where ownership and an actionable interference are established, placing a value on a claim may be far from straightforward.

There are a number of bases on which damages can be calculated. The appropriate assessment will depend on the nature and extent of the rights and the circumstances of the specific development but any sum claimed will need to be carefully scrutinised against the underlying legal and factual position.

A claim by a party claiming to own the mineral title can cause significant problems for a developer. The commercial drivers and levers of the respective parties are an important factor in settlement negotiations.

Resolving the issue

Where a mineral owner establishes a relevant interest, early investigation can help the parties understand the extent of the issue and whether there is a proportionate commercial solution.

Where settlement is appropriate, this will commonly be documented by the developer acquiring the relevant mines and minerals title or interest, providing greater certainty for the affected development.

Avoiding pitfalls

For developers and their advisers, early consideration of mines and minerals can help avoid the issue becoming more difficult once construction is underway.

The key is to understand the historic title documents, establish ownership of the mineral interest, consider the geological evidence and assess the proposed works. For insurers and brokers, the same information can be important to understanding the nature and extent of the risk.

Conclusion

A mines and minerals entry does not necessarily prevent development, but it should not be overlooked. Early investigation can help identify the real risk and the appropriate solution, avoiding unnecessary delay and cost.

If you would like to discuss in more detail the contents of this piece, please contact our specialty claims team at professionalandfinancial.lines.newclaims@uk.zurich.com or Alex Erdmanis at DAC Beachcroft LLP. If you would like to hear how our legal indemnities team can support you, please contact Legal Indemnities at zurichli@uk.zurich.com - who would be delighted to hear from you.