Member Article

Ownership of mines and minerals separately to surface land poses a risk for developers that must be assessed and mitigated as appropriate.

It is not uncommon for mines and minerals to be owned separately to the land at the surface and in certain areas of the country, particularly the north, it is frequently encountered. This poses a potential risk to developers who wish to develop land unencumbered by the subterranean interest, key amongst them being the risk that the developer trespasses into the mines and minerals through construction of foundations.

The risk can be mitigated by assessing the depth at which the mines and minerals are located. This is a simple process where the depth of the mines and minerals is expressed on the title, but frequently such detail is absent and intrusive (and expensive) exploratory works may not clarify the position with sufficient certainty.

Developers, therefore, find themselves needing to consider whether it is necessary to do a deal that would acquire the subterranean interest. With increased frequency, we are seeing the owner of the mines and minerals offering to grant a developer an easement to develop into the mines and minerals as an alternative to selling its title to those them outright. This approach should be considered with caution and may be unsatisfactory for developers (particularly developers of residential housing) for several reasons. These include the following:

• It is unclear whether an easement to build will be satisfactory to lenders, and in particular whether it satisfies the requirements that title be ‘good and marketable’ for the purposes of the CML handbook, without extensive qualification. Certainly. this may be raised by future plot purchasers and indemnity insurance may also be required by them. This could lead to delays with development/onward sales, and, at worst, the frustration of future sales altogether.
• It is uncertain whether Councils and water companies etc will insist on the mines and minerals owner being party to section agreements both for the purposes of authorising the works and their subsequent adoption. Certainly that would be logical in relation to any subterranean works, given that the relevant authority would ordinarily insist on every relevant freeholder being party to the agreement. A similar concern applies to easements that services operators – telecoms, electricity, gas – might require to be granted as part of any development.
• The terms of the easement would need to be very carefully drafted to ensure that it is sufficiently wide to permit all development envisaged. What happens if development proposals change over time? Is the easement still sufficient? A particular consideration here is what reservations the mines and minerals holder retains and what effect they could have on the adequacy of the easement terms. For example, is the mines and minerals owner permitted to undertake mining activities in the land benefitting from the easement? Whilst planning permission would be required for any mining activities, an outright transfer of the mines and minerals would avoid this risk altogether.
• The nature of an easement is capable of changing over time, either through modification or outright discharge, if various requirements are met. Whilst this may be low risk (and the developer long gone by the time this could be relevant) it is not possible to state definitively that an easement will endure for all time.

In order to avoid these potential problems, developers should press for title to the mines and minerals to be sold to them, either completely, or to a certain depth that will comfortably accommodate current development proposals together with sufficient leeway for future alternative plans.

Where an easement is insisted upon by a mines and minerals owner, developers need to consider what interest the mines and minerals owner is expecting to retain that they would otherwise lose through an outright transfer, and the negative impact that any retained interest could have on any future development.

 

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