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Selling or Leasing Your Mineral Rights – 3 Things To Know

While the lure of big money encourages some people to sell their mineral rights, some other cautious ones may wait and watch in the hope of fetching better prices over a period of time with leasing. While acting in a hurry can make you lose out on a better price in the future, waiting for too long may be disastrous too since the offer at present may not come your way again, especially if the prices go downhill or the mineral boom vanishes. Whether you decide to sell or lease your mineral rights, here are three things that you should know:

  1. What do you own: Though most mineral rights run with the land and get transferred to the new owner automatically when the land is sold, you should ensure that you own all the mineral rights before you try to lease or sell it. Ideally, you should hire a title examiner to confirm the ownership of mineral rights. Sometimes, you may just hold the surface rights (which mean you own the property’s surface or to be precise, any inorganic or organic substance that’s present atop the surface like gravel, water etc), while the mineral rights (right to minerals lying under the land you own) belong to someone else. So, it becomes important to know what really belongs to you.

 

  1. Know the payment options for leasing and selling: While selling your mineral rights will give you a lump sum of money right at the beginning and no other payment, leasing would usually give you a smaller upfront payment with royalty checks over the agreed lease period based on as and when the minerals are extracted and sold. Apart from knowing this basic difference between selling and leasing, you should also have clear understanding of other aspects of mineral rights such as the right to

 

  • delay rentals or bonus considerations
  • extend, renew, or terminate the lease
  • get reasonable access to the surface
  • royalties

 

  1. Know what your minerals are worth: Selling or leasing mineral rights demand due diligence and homework on your part. You shouldn’t blindly accept any offer that comes your way. Instead, you should try to find the value of your mineral rights. Since it’s usually determined by the market value, seeking the selling price of mineral rights nearby or asking for additional bids on your mineral rights would help you decide. You should also consider some additional factors that influence the worth of your mineral rights like the size of your property as well as the mineral deposits underneath, the extent of non-producing or producing wells/mines in the area, commodity prices at present, present-day exploration and those likely to happen in the future.

Both selling and leasing have their fair share of benefits and risks, which is why it’s not possible to give a clear verdict about which one is a better option. Whether you decide to hold onto your mineral rights, lease or sell it, you should ideally know about your mineral rights and the factors associated with it. Apart from educating yourself on these matters, it would be prudent to consult an attorney or a knowledgeable advisor before you sign any contract since the process of leasing or selling mineral rights is a complex one.

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