The real estate industry is built upon a strong legal foundation that relies heavily on a clear chain of ownership. While it's not difficult to establish the chain of ownership for a newly subdivided parcel, lands that have frequently changed hands often have highly convoluted ownership histories. The presence of potentially lucrative mineral deposits adds urgency to the need for landowners to establish clear chains of ownership as well. Title opinions offer a cost-effective, legally sound means of doing so.
What Is the Purpose of a Title Examination/Opinion?
Title opinions determine whether the title to a given piece of property is "marketable." Although this term has had a variety of different connotations, its present meaning pertains to the "defensibility" of the title in question. Marketable titles must be free from encumbrances, defects, liens and competing claims. Since any of these issues can disenfranchise the present owner of a particular parcel and reduce or eliminate his or her interest in its sub-surface resources, title opinions serve as crucial safeguards in energy-rich regions.
What Is the Difference Between a Title Abstract and Title Opinion?
Landowners who conduct their own research on this subject often come across legal documents that appear to equate "title abstracts" with "title opinions." While title abstracts and title opinions share many useful attributes in common, they're far from functionally equivalent. In the past, title abstracts were prepared by specially trained "abstractors" who produced chain-of-title summaries from pertinent legal documents. Although they merely presented facts without bias, these abstracts could be used as the basis for future title opinions. Over time, real estate lawyers have reduced their reliance on title abstracts and increased their dependence on so-called "stand-up" title searches. The advent of computerized record-keeping has made it far easier and cheaper to produce reliable title opinions from stand-up searches.
What Are the Most Common Types of Title Opinions?
Landowners and exploration companies rely on four principal types of title opinions. Each variation has a specific role to play in the transfer, processing and exploitation of mineral rights and resources.
- Original title opinions are commissioned by exploration companies that wish to exploit specific parcels of land. Also known as "drilling opinions," these documents determine whether a given title is marketable enough to justify substantial investment.
- Division orders are written subsequently to original opinions and determine the means and proportions by which the proceeds from a given property's oil and gas resources will be divided among multiple part-owners. These are designed to catch potential liens and defects that could make certain part-owners ineligible to receive such benefits.
- Lender opinions are written in the event that a mineral-rich property is used as loan collateral. These opinions are specific to the borrowing party's interests.
- Acquisition opinions are due diligence vehicles that exploration companies commission before purchasing a specific mineral-rich parcel outright.
What Is a Supplemental Opinion?
Although they're not as common as the four above-mentioned types of title opinions, supplemental opinions may come into play in more complex situations. Specifically, supplemental opinions replace missing, unclear or antiquated title opinions with more robust, relevant and legally sound analyses that account for new encumbrances and divisions of ownership. They're often used after long postponements of drilling activity or to account for the emergence of new property owners and interest-holders.
Are Title Opinions Worthwhile?
Most real estate and legal professionals argue that title opinions are essential for any landowners who wish to exercise the mineral rights that attach to their properties. These documents protect their holders from competing claims and ensure fair compensation for rights transfers and mineral leases. Since it's relatively easy to commission a title opinion through a licensed attorney or landman, property owners who wish to develop their mineral resources have few excuses for not doing so.
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