LAND JOURNAL

Who owns minerals?

To avoid litigation, surveyors should always be cautious, clarifying ownership and mineral rights before contracts to sell or lease land are finalised

Author: Richard Lashmore

13 August 2021

Entrance to the Rolls Building, Royal Courts of Justice, Business and Property Courts

Summer 2020 saw two reported cases on the ownership of minerals, each relating in different ways to trespass against minerals belonging to parties other than those who owned, used or developed the land above.

In ARC Aggregates Ltd v Branston Properties Ltd [2020] EWHC 1976 (Ch), the land in question had formerly been gravel pits that had been backfilled and restored. The land had been sold by transfers that excepted and reserved the ownership of minerals but expressly excluding working rights for the mineral owner. The defendant was a housebuilder that had begun developing the site, and court proceedings had commenced on the basis that piled foundations were trespassing on the claimant's minerals.

Excepting and reserving

Anyone reading conveyance leases and transfers will routinely come across the term 'excepting and reserving' rights to the seller or the lessor. Such rights benefit retained land in a conveyance or transfer, or the freehold reversion in the lease. The phrase is such a commonly used piece of drafting that I doubt much thought is given in most cases to the precise legal meaning and effect of these terms.

An exception is a keeping back or retention of part of what the seller or the lessor owns on the transfer of land or the grant of the lease. A reservation is the creation of a new right for the benefit of the seller or the lessor over the land sold or leased.

Where on the sale of land the minerals are excluded and retained by the seller, this is an exception of freehold ownership rather than a reservation, notwithstanding that surveyors, lawyers and even judges routinely refer to 'minerals reservations'.

An exception expressly excluding the right to work minerals is not uncommon, particularly in circumstances where a commercial operator that has been extracting the minerals sells a site where, by reason of planning constraints, geological conditions, working methods or even the lack of foreseeable commercial value in extraction, quantities of minerals remain unworked.

In ARC Aggregates, the housebuilder claimed that the absence of working rights meant that the claimant had not excepted freehold ownership of the minerals but merely reserved some form of incorporeal right over them, and therefore no trespass was occurring.

The court rejected this argument and, in a comprehensive judgment, confirmed that minerals retained without working rights are physical freeholds. The law is clear – but lawyers and surveyors can always make matters clearer by remembering that exceptions and reservations are not the same, and the words are not interchangeable.

'Lawyers and surveyors can always make matters clearer by remembering that exceptions and reservations are not the same'
Minerals trespass

Wynne-Finch v Natural Resources Body for Wales [2020] EWHC 1924 (Ch) regarded the ownership of mudstone and possible trespass to minerals by the surface owner's forestry operations over a wide area including the creation of borrow pits, tracks and cuttings.

Applying the tests and pointers in interpreting mineral exceptions established in Earl of Lonsdale v Attorney General [1982] 1 WLR 887 to a complex legal situation, it was held that the mudstone was not a mineral where ownership was retained pursuant to various historic exceptions. However, the judgment also held that if the mudstone had been a mineral the defendant had established title to it by adverse possession and acquired legal ownership based on continuous possession or occupation.

Recent comparable case law is not abundant, though. In the last comprehensive legal text on mineral ownership, the fifth edition of McSwinney on minerals, published in 1923, the author states: 'there can be no more emphatic act of ownership than the working of a mine or a quarry'. McSwinney also discusses how taking minerals under part of a single parcel of land may be evidence of taking title to the whole.

Both aspects of the judgment in Wynne-Finch have prompted comment from lawyers and surveyors. It might be thought that the basis of the adverse possession in the case is short of the emphatic act of ownership described by McSwinney, and the area where it applied is extremely wide.

Quite what impact this element of the judgment may have on future cases remains to be seen, and the decision is subject to appeal. However, the case highlights for the surveyor and lawyer the importance of managing and monitoring mineral ownership for trespass and challenging adverse possession.

The relevant timescales for doing so are 12 years for unregistered and ten for registered land. If an action for trespass to minerals is contemplated, we are looking at a limitation period of six years. But if an injunction is a possibility then far swifter action will be required.

Minerals transparency

Land registration should offer transparency about ownership and rights, but there are issues when it comes to minerals. Minerals owned separately from the surface are not subject to compulsory registration, and HM Land Registry's guarantee of title for the surface owner does not extend to any third-party ownership of minerals, whether or not they separately registered themselves or a note of that arrangement appears on the surface title.

The property register of the surface title may contain a note of an exception. However, this often gives little more than an indication that an exception exists. It may be more informative were it to give details of the relevant document containing the exception or set out its terms; but what it will not do is tell you who owns those excepted minerals now.

ARC Aggregates and similar cases show the potential problems a surface developer may encounter with a third-party mineral owner, although in that case it was apparent from the title that there was third-party mineral ownership. If the existence of such an ownership is not evident, the issue cannot even be dealt with or managed until the mineral owner appears.

The Law Commission's 2018 report Updating the Land Registration Act 2002 dealt with the issues of transparency in mineral ownership. It considered the compulsory registration of all freehold minerals, with possible inclusion of a twilight period similar to the ten years given for registration of manorial rights in the Land Registration Act 2002.

In the end, the report proposed a compromise, namely that when minerals separate from the surface are transferred for value or as a gift they become subject to compulsory registration. That seemed sensible and workable, and would have covered transactions where some value is attributed to the minerals, while avoiding the burden on mineral owners and the Land Registry that would be imposed by requiring registration of all mineral interests.

Unfortunately, this proposal – which would have helped all surface owners and removed no rights from mineral owners – has been kicked some way into the long grass. When the government responded to the report in March this year, it indicated that although it acknowledged the issue should be explored, it did not accept the recommendation.

It made the decision on the basis that such registrations are not part of specific commitments in the Land Registry's business strategy, so the registry will consider whether mines and minerals ownership should be brought within compulsory registration requirements as part of its wider policy development.

It is difficult to think that a hard-pressed and under-resourced Land Registry is going to be dealing with these issues any time soon if it has to do so on its own initiative. In the meantime, third-party mineral ownership remains more problematic and obscure than it needs to be for surface owners.

As mentioned, the 2002 Act provided for the registration of manorial rights by October 2013, and many surveyors would have been involved in the work required. Before that date, manorial rights such as the lord of the manor's property in minerals had been overriding interests that affected land, whether or not it was mentioned in the register of the surface title. From October 2013, they should be protected by a notice on the register or cautions against first registration for unregistered land. If not, a buyer for the value of the surface title would acquire the land free from the lord of the manor's interests.

There was much publicity at the time, and it is now common to see these notices registered against rural and urban properties. But what do such notices mean? The Land Registry Practice guide 19: Notices, restrictions and the protection of third-party interests in the register states that: 'The effect of a notice is very limited. The entry of a notice does not guarantee that the interest that it protects is valid or even that it exists. A notice will only ensure that the priority of the interest protected will not be automatically postponed on the registration of a subsequent registrable disposition for value, if the interest is valid.'

The Land Registry does not investigate any aspect of the rights claimed in the notice, and its existence is an indication of no more than the applicant having filled in the form correctly. The applicant may or may not be the lord of the manor themselves, and the manorial rights claimed may not affect the minerals or even exist at all.

Experience has shown that, while most of these registrations protect valid interests, some do not. All is not necessarily what it seems, and significant payments to acquire or release rights to enable development may be at stake.

Provided that it will not prejudice the possibility of obtaining defective title insurance to cover loss arising from possible action by the lord of the manor to enforce his or her rights if they are valid as an economic way of managing the situation, the party asking the questions should require proper evidence of the existence of the rights and that the person registering them has the right to do so.

'It is difficult to think that a hard-pressed and under-resourced Land Registry is going to be dealing with these issues any time soon'

Richard Lashmore is partner at Knights plc
Contact Richard: Email

Related competencies include: Access and rights over land, Minerals management

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