Many purchasers of real estate find themselves searching for answers to these very questions. Virtually all title commitments and insurance policies exclude coverage of oil, gas, and other minerals as a matter of ordinary course. Anyone who’s reviewed an industry-standard ALTA title commitment has noticed that minerals are a standard exception from coverage. But why?
The reason is the Kansas Marketable Record Title Act, found at Chapter 58, Article 34 of the Kansas Statutes, K.S.A. 58-3401, et seq. Originally passed and signed into law in 1973, the Act’s purpose is to “attack the curse of the hidden ancient interests in land,” according to the Uniform Law Commission that drafted the uniform law that Kansas’s Act is modeled from. In Kansas real property law, interests in land can continue to exist for long periods of time—even permanently. Some property interests are disclosed in public land records, but some are not. Before the Marketable Record Title Act, this fact of life posed quite a quandary for buyers of land—how far back should a title search go to identify any possible interest that may exist in the land that might affect marketable title?
Under the Act, ancient interests in land that nobody presently asserts are extinguished so as not to create a cloud on title to the land. The word “ancient” may be a bit misleading; the Act really extinguishes interests that are older than 25 years from the date the purchaser takes title. So when you hire a title company to write a title commitment on a parcel of land you want to buy, the title company searches title records going back only 25 years, rather than all the way back to the beginning of the records. This saves the title company—and ultimately the buyer—a bundle of time and money.
Nothing in life is free, not even the conveniences provided by the Marketable Record Title Act. The Act doesn’t apply to all types of ancient property interests. One type of property interest than can’t be extinguished by the Act are severed mineral interests. No matter how old a severed mineral interest is, or how long ago anybody presently asserted ownership of it, a present-day buyer of the land will take subject to the interest. That’s why title companies don’t insure title to minerals—because to do so would require them to search title going all the way back to the grant from the United States federal government.
Most buyers of land have no idea whether they are truly buying all of the minerals in, on, or under the land because their title policy won’t cover them. It’s not uncommon to encounter landowners who are dismayed to later learn their interest is subject to a third-party mineral owner. There is a solution, however. Title companies will usually remove the standard exception from coverage for minerals if the buyer provides a title opinion from a licensed Kansas real estate attorney covering the mineral estate in the land. Obtaining a mineral title opinion prior to closing on the purchase of a piece of real estate is the only way to truly ensure that you are buying all of the mineral interests in the property.
Getting a lawyer’s title opinion on a piece of property has other benefits, too. For instance, it can cover other types of property interests that aren’t covered by the Marketable Record Title Act, such as easements (or right-of-way) as well as remainder and reversionary interests. The only way to know about these kinds of interests is to look for them in the public land records, which typically stretch back to the late 1800’s in Kansas. By examining only the last 25 years of records, as title companies do, it’s possible to miss ancient interests that the Act won’t take care of.
Buyers of land in Kansas should consider hiring a licensed and qualified Kansas real estate lawyer to examine title to the land as a supplement to the title insurance commitment.
Joseph A. Schremmer
joe@depewgillen.com
May 2017
Depew Gillen Rathbun & McInteer, LC
This article is based on hypothetical facts and is issued for general informational purposes only. It is not intended to be construed or used as legal advice.
Title to real estate includes title to the surface of the land as well as to the oil, gas, and other minerals located under the surface, often called the “mineral estate.” Title to the minerals may be separated from or “severed from” title to the surface, so that, for example, John Smith may own 100% of the surface of Blackacre but transfer, or convey, to his brother, Bob Smith, 100% of the minerals under Blackacre. Both John and Bob may possess, convey, and pass to their heirs or devisees under a will all or a portion of their interest in Blackacre to other persons. The result, which is not uncommon in Kansas, may be that title to the mineral interest in Blackacre is owned by numerous individuals with each owning a relatively small fractional amount of the total minerals.