Mines and Minerals Insurance
It is common for the title of a property to contain a reference to the mines and minerals being excepted and/or reserved to another party. This simply means that at some point in the past when the land was conveyed the owner at the time either kept the title to the minerals or reserved the right to mine these in the future. Often these exceptions and reservations are redundant because mining is no longer feasible (e.g. because the land itself or the surrounding area has been heavily developed in the meantime) or because they were never intended to be exercised but simply protect the seller’s infrastructure on an adjoining piece of land by preventing any excavation on the affected property.
In addition to explicit references to exceptions of mines and minerals on the property title, section 117(2) of the Land Registration Act 2002 allows parties with the benefit of certain overriding interests to lodge a caution against first registration of the land affected (in respect of unregistered land) or to enter a notice on the register (in respect of registered land) without payment of a charge, in order to protect their overriding interests. Failure to lodge a caution or enter a notice by midnight on 12 October 2013 will lead to loss of the overriding interest against anyone purchasing land for valuable consideration after this date.
With the risk of the loss of such rights on 12 October 2013, it would appear that there has recently been an increase in applications by a number of bodies (including the Church Commissioners and certain landed estates) either to register manorial rights in respect of sub-surfaces of potential development sites or alternatively to register complete ownership of the freehold of sub-surfaces.
If the relevant party can demonstrate to the Land Registry that it is the legal owner of the sub-surface to a site (whether as a contractual right or an overriding interest), it can register a separate freehold sub-surface title. This means that the relevant party would become the proprietor of the freehold of such land below the surface (i.e. the land which is the subject of its application to the Land Registry).
Why take out Mines and Minerals Insurance?
Recent cases have highlighted the risks of carrying out development where the site is affected by mines and minerals risks:
- an injunction may be granted in order to prevent a trespass into the mineral strata.
- substantial damages may have to be paid where a trespass has occurred.
- the owner of the mineral title could seek a sizeable compensation payment which may reflect a portion of the profit to be derived from the scheme or a percentage of the rent that has been agreed between the developer and the owner of the surface of the site.
Mines and Minerals Insurance Benefits
Often it will not be feasible to approach the owner of the mines and minerals to negotiate the purchase of these or obtain the necessary rights to sink the foundations of any new buildings into the mineral strata. The owner of the mines and minerals may not be ascertainable if the title entry is historic or there may simply not be enough time to time to undertake the necessary discussions and legal work.
Mines and Minerals Insurance should be considered as part of a comprehensive risk management strategy.
- Damages and compensation
- Settlement monies and costs
- Loss in market value
- Demolition costs
- Abortive and increased costs
- Defence costs
- All other costs agreed by the insurer