When buying or selling land in Alberta, it is always beneficial to have a good understanding of how mineral and surface rights work, and the specific bearing they can have on property use, value, and potential future development. Here we will explore what these rights are and what you need to know as a landowner to avoid unforeseen and costly issues that may arise.

What Are Surface Rights?

Surface rights refer to the legal rights to use and control the surface of the land for various purposes such as agriculture, residential development, or commercial use. The person who holds surface rights has the right to build structures, cultivate crops, and otherwise use the land for activities that occur on top of it. They also own the substances of the surface such as sand, soil, and gravel.

What Are Mineral Rights?

Mineral rights, on the other hand, give ownership of all mineral substances found on and under the property. The person or organization that owns mineral rights also has the legal authority to extract and sell these resources, regardless of who owns the land above, but must do so in such a way as to not significantly affect the use of the surface.

Mineral ownership is defined in detail by the Mines and Mineral Act and mineral rights are registered in accordance with the Land Titles Act.

How Mineral and Surface Rights Impact Landowners

In Alberta, approx. 81% of mineral rights are owned by the Crown, roughly 10% are federal lands, and the remaining 9% are mainly held by companies. Less than 1% of mineral rights in Alberta are owned by private individuals. As most often is the case, the landowner holds surface rights and the Crown owns mineral rights, but it always recommended that a potential buyer of a property performs a land title search to confirm.

 As a landowner, you may have little or no say if the province chooses to explore or extract oil, gas, or other minerals from your land. However, you will always be compensated for disturbance, and paid rent for surface land use when initial development is completed.

 Most commonly the process would go something like this:

1.        The province (Crown) will lease the mineral rights to an operator (company or individual), commonly through a closed auction.

 2.        Since the operator now requires access to the land, they will employ a land agent to negotiate a surface lease and/or pipeline easement with the property owner, which would subsequently be registered on the land title. It is always recommended that a landowner hires an experienced surface rights consultant or lawyer to assist in negotiating with a land agent. A detailed survey plan should be presented by the operator during the negotiation process to illustrate clearly how the exploration and extraction process will take place.

 3.        Going forward, the landowner will receive compensation based on the agreement. With a surface lease, operators generally make annual payments until the lease is terminated. A pipeline right-of-way is most often a one-time payment. The Surface Rights Act requires a review of compensation every 5 years, and operators must continue to make payments until the lease is terminated and reclamation certificate is issued.

 Since compensation is negotiable, if the landowner and operator can’t agree on an amount, the property owner can appeal to the Land and Property Rights Tribunal for assistance. The Tribunal will hold a hearing and assess certain local factors like land value and recent crop sales to determine reasonable compensation.

How to Protect Yourself in Real Estate Transactions Involving Mineral and Surface Rights

For both buyers and sellers, it’s essential to do thorough research and due diligence when mineral and surface rights are involved in a real estate transaction. Here are some basic guidelines to protect yourself:

 Always Pull Title: A title search will reveal who owns the surface and mineral rights and if any leases or rights of entry are associated with the property. This is a critical step before proceeding with a real estate transaction. Problems can arise when an oil company or utility provider have already paid the seller an entry fee for access to the land but have not yet begun construction.

Consult with Legal and Real Estate Professionals: Whether you are buying or selling property, it’s always a good idea to consult with a real estate lawyer or agent who understands mineral and surface rights. They can help you navigate the legal aspects and ensure all relevant agreements are in place. If there are existing mineral leases on the land, make sure you understand the terms and whether they will continue after the sale. This includes any royalty arrangements, timeframes, or access provisions.

Water Testing: Property owners should have their well water tested for quality and flow rate before any operator drilling begins. These test results could be very helpful should water issues arise in the drilling process.

Conclusion

Surface and mineral rights are important considerations for landowners in Alberta. Considering most landowners only have surface rights, it’s important to understand how the holder of mineral rights can affect your land’s use, value, and potential income opportunities. By conducting due diligence, working with legal experts, and staying informed, you can make better decisions that will protect and enhance your property investment in the long term.

 As a landowner, or buyer or seller of land, knowledge is power. Understanding the complexities of surface and mineral rights will help you manage your land effectively and avoid unexpected surprises down the road.

When buying property in smaller communities and rural areas, understanding the difference between a Real Property Report (RPR) and Title Insurance is essential for making informed decisions. Both are tools that protect your investment, but they serve distinct purposes and offer different kinds of protection. Here we will explore those differences and their common standing within a real estate transaction in the Lakeland area.

What is a Real Property Report (RPR)?

A Real Property Report is a detailed survey of a property that shows its boundaries, structures, and any potential issues, such as encroachments. Essentially, it provides a clear snapshot of the property’s legal description and layout at a specific point in time. The key elements of an RPR include:

• Property Boundaries: The RPR clearly defines where a property begins and ends, ensuring that there are no misunderstandings with neighboring landowners.

• Structures: The RPR identifies the location of buildings, fences, driveways, and other structures to ensure they are positioned correctly within the property’s boundaries.

• Encroachments: The report can reveal if any part of the property or neighboring property crosses over into someone else's land, which can prevent future disputes.

What is Title Insurance?

Title insurance protects against legal issues related to the ownership of a property. It is generally a one-time premium paid that covers risks that could affect the validity of the title, including:

• Unpaid Liens or Debts: If the previous owner left unpaid property taxes or debts tied to the property, title insurance ensures you're not held responsible for them.

• Fraud or Forgery: Title insurance also protects against any fraud or forgery in past property transactions that could affect your ownership.

• Unresolved Ownership Disputes: In rural areas, properties might have complex histories or ownership disputes, and title insurance can protect you from legal challenges or claims on the property.

What’s best for you?

While neither a Real Property Report nor title insurance are legally required for a real estate transaction in Alberta, both are commonly used, and it’s generally recommended that a buyer obtains at least one of these two options to protect themselves from unforeseen Land Title issues.

In rural and small community settings like we have in the Lakeland, where properties may have been in the same family for generations or developed over time without modern surveys, it is very common for a property to not have an up-to-date RPR, if there’s one at all. In addition, because of limited access to professional surveyors, an RPR can be costly and time-consuming to obtain. For this reason, it has become common practice for a seller to include a term in a purchase contract where they pay for title insurance on the property in lieu of the RPR. This is often a much more convenient and cost-effective way to guarantee protection for the seller.

While an RPR addresses physical and boundary issues, title insurance ensures that the buyer is legally protected in the event of a dispute over ownership, which can be particularly valuable in areas where property transactions may not always be well-documented or where old records might be missing or unclear.

A buyer may see it in their best interest to obtain both an RPR and title insurance from the seller to have a clear understanding of what they’re buying coupled with the protection against title discrepancies, but in practice, it is most commonly a one or the other scenario. Regardless, it is a great benefit to have a clear understanding of the two options and the role they play in a successful real estate transaction.