Not everyone is aware that the ownership of property rights does not necessarily convey the ownership of all rights associated with a particular piece of property as covered in another blog post, which we go into more detail here. There are additional rights that can be included or excluded from the sale of a property. It is also possible to buy or lease just some of the rights associated with a property, without actually have to buy the land parcel itself. In some cases, these rights are more valuable than the land. People have made a fortune trading in certain rights associated with land.
It is important to know what is included in the sale of a property. These rights are researched by the title company for the purpose of insuring the free and clear title transfer with title insurance. The title company will discover any liens against these rights when doing a title search and such liens (also called encumbrances) will be specifically identified in the title report, which you should read very carefully.
Do not rely on any assurances from the owner, real estate agent, or broker. Use the title report as your guide instead. If the title company misses something when doing a title search, this is what title insurance is for, to cover any damages from not receiving clear title.
Please note that some rights do not have any document recorded against a specific piece of property and may be granted by the laws that affect a wide area. This means in addition to having the title company do a title search, you need to do more research to see if there are any laws that might affect your full use and enjoyment of any property and all its potential rights.
Here are the potential rights for a property to look for, conduct due diligence research to determine the actual status, and to understand when buying a property, especially raw land:
Most Texans know that there may be very valuable minerals, which includes oil, below a property. Property can be sold with or without the minerals rights included. If the sale of the land does not also include the mineral rights, another third-party has the right to come on the land to extract the minerals. If you don’t want an oil pump in your backyard sometime in the future after buying land, be sure to also buy the associated mineral rights.
Water in many of the drier parts of the United States is a scarce commodity. In the desert, having access to water by drilling a well is a critical need. If the property happens to be adjacent to a water source, such as a river, it is important to investigate the rights to withdraw water from the source that passes across or next to the property. It is possible to buy a property that includes the water rights and still not be able to draw water or have water use restrictions from sources passing by the property due to state and federal laws.
Mineral rights are the rights to what is below the surface of the land. Air rights are the rights to what is above the surface of the land. Air rights become important in congested city areas, where skyscrapers and other tall buildings compete for sunlight and for views of the cityscape from the windows. If for example, you buy a vacant lot in downtown Houston, you may not be able to build on it or be restricted in the height of the building you can build, if you do not have the air rights to build a structure of a certain height.
An example of a place where air rights become very important is when there is a need for sunlight to be able to reach an outdoor swimming pool at ground level. The shadows of nearby buildings may block this sunlight due to the air rights that they have.
An easement is the right to pass across another piece of land for a particular purpose, such as having an entry road or access for utilities. A parcel that is “land-locked,” which means there is no way to get to it because it is surrounded by land owned by others, without an easement to pass over the others’ land, is virtually worthless.
Another thing to check for, are any use restrictions that can be part of the deed conveyed upon sale or due to the county, city, state, or federal laws that prohibit certain uses of a property. Common use restrictions include the need for drilling a well before building a home, having an on-site septic system, limitations on raising animals, and a prohibition against placing mobile homes on a property.
The best thing to do, if you are not familiar with a specific area and considering buying land there, is to consult with a highly-qualified real estate attorney who has significant years of experience in the area to learn about any potential restrictions you may encounter when buying the land.