During the due diligence period, legal counsel will usually be asked to provide their opinion on title to a property. This requires diligent review of the various legal notations, charges and encumbrances displayed on a title search from the Land Title Office (the "LTO"). One of the most confusing charges found on title are undersurface rights relating to natural resources found beneath a property's surface.
Each undersurface right is different in scope and governed by different statutes. It is important for real estate professionals and lawyers to be familiar with the various types of undersurface rights and their potential impact on the rights of property owners.
The 3 Types of Undersurface Rights
1. Freehold: absolute mineral rights which were granted outright or as part of another tenure. These undersurface rights are rare.
- Subterranean titles in fee simple.
- Governed by the Land Act, RSBC 1996, c.245. May be ordered/viewed through the LTO.
- Not governed by the Mineral Tenure Act, RSBC 1996, c.292 ("MTA").
- Not registered and maintained under the Mineral Tenures registry system.
2. Crown Grant: tenures administered under the Land Act originally staked as mineral claims which were subsequently surveyed and issued as Crown granted tenures. These undersurface rights are uncommon.
- The last Crown granted mineral claims were issued in 1957. 1
- A Crown granted mineral claim conveys such mineral rights to the holder as is specified in the actual grant, which may be found in the LTO; or where the grant is silent, such rights as were defined by the existing Mineral Act in force at the time the grant was issued.
- All assessment work carried out on a Crown grant is subject to the provisions of the Mines Act, RSBC 1996, c. 293 and related statutes, e.g. the Land Act, as applicable.
- Crown grants are not within the jurisdiction of the MTA.
3. Mineral Title: claims or leases acquired and maintained under the MTA. Mineral titles are by far the most common form of undersurface right found on title.
- These rights may be acquired and viewed using the Mineral Titles Online ("MTO") BC interface.
- A claim is the exploration and development of a particular parcel of undersurface land, also known as a tenure. A recorded tenure holder may then convert a claim to a lease in order to carry out production of the underlying natural resource(s) to which the lease extends.
But What Does It Mean?
1. If the right is a Freehold right:
Technically freehold rights are an absolute right, i.e. they are not subject to restrictions on use, and extend to any minerals or resources located within the physical metes and bounds of the freehold right as described on title.
While a Freehold right to undersurface minerals or other materials is the greatest form of undersurface right, they are extremely rare and require compliance with provincial and municipal bylaws and legislation before any work can be undertaken to extract the underground mineral or resource by the right holder.
The general position of the Mineral Tenures Branch is that such rights may not be exercised in developed areas, or areas that have been zoned for agricultural purposes. However, because these rights are absolute, locating a freehold right on title should raise the alarm and trigger further due diligence involving at a bare minimum contact with the relevant government authorities.
2. If the right is a Crown grant:
The extent of the rights conveyed by a Crown grant is determined by the date on which the grant was issued. This is because over time the Crown has modified the reservation clauses (limitations) it has attached to such grants. Historically, the Crown would reserve any rights to gold and silver. However, over time the Crown has gradually increased the scope of its reservation clauses to the extent that modern Crown reservation clauses often will reserve all minerals including oil and gas.
Similarly to the freehold mineral rights, making use of a Crown grant, regardless of its date of issue, is difficult, if not outright impossible, if the grant relates to undersurface minerals located beneath developed or agricultural land. However, as with freehold rights, Crown grants convey broad rights and should trigger further due diligence in order to ascertain the relative risk of the crown grant holder enforcing their rights against the surface titleholder.
3. If the right is a Mineral Title:
Mineral titles are governed under a single act and contained in a single registry, therefore determining where such charges encumber the land is relatively simple. Mineral titles are administered under the MTA and must be registered and kept up to date with the MTO registry. The MTA specifically sets out the restrictions and requirements for exercising rights under a mineral title.
In order to exercise a mineral title, the titleholder must obtain a Free Miner's Certificate ("FMC"). However, even with an FMC, section 11 of the MTA specifically denies the right of entry otherwise granted to an FMC holder where the surface land is:
- occupied by a building;
- the curtilage of a dwelling house;
- orchard land;
- under cultivation;
- lawfully occupied for mining purposes, except for the purposes of exploring and locating for minerals or placer minerals as permitted by this Act;
- protected heritage property, except as authorized by the local government or minister responsible for the protection of the protected heritage property; or
- land in a park, except as permitted by section 21 of the MTA.
There are numerous bars against using FMCs under s. 11 of the MTA, hence the potential risk to a surface titleholder posed by a mineral title right is relatively insignificant, as compared to the risk posed by Crown grants or freehold rights. As such, the degree of due diligence recommended for freehold rights and Crown grants is not as high or as critical for mineral titles, except where the property in question is located outside of developed or agricultural lands.
1 Mineral Titles Information Update: No. 7 – A Guide to Surface and Subsurface Rights and Responsibilities in British Columbia. Revision Date: June 29, 2012
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.