Mon 21 Oct 2013

Can new development breach the rights of the minerals owner?

Picture the scene - you've obtained planning permission, taken title to the land, got a watertight contract with a prospective tenant and your contractor has just begun excavating to create the foundations for your fabulous new development. You're feeling good… that is until an official looking person turns up on site with what he says is an interdict (which you might term an injunction) granted by the courts to the owner of the minerals, which stops your development in its tracks. Any delay, even temporary, in the progress of a development can be a very serious problem. So is this scenario just a nightmare, or could it happen?

The answer is that it could happen, if you don't own the minerals - and in most cases the owner of the land does not also own the minerals under the surface. Often mineral rights are reserved to someone else, who has power to work and extract the minerals (albeit usually subject to various restrictions and obligations to compensate the owner of the surface for any damage caused).

How can development prejudice the rights of the owner of the minerals?

Of course, most developers have no intention of taking or profiting from the minerals under the surface of their land. However the fact is that any new excavation on site (e.g to create foundations or drainage) could intrude into the minerals owner's property rights, particularly if any of the minerals are located close to the surface. The legal term for this is wrongful extraction of minerals.

Even if the extracted material remains on site and is e.g used to infill other parts of the site, any minerals caught up within the material will have been moved around - with the possible consequence that any future working or extraction of them by the owner of the minerals will have been made more difficult or even impossible (especially if the minerals are put within the building's sub surface footprint).

Further, if the land owner removes excess excavated material from the site, and that contains any minerals, then this is a clear breach of the rights of the minerals owner - and is arguably theft of the minerals.

Is an interdict likely to be sought or granted?

It is always theoretically possible that a minerals owner will seek an interdict to prevent wrongful extraction of his property during the development of a site. In practice the risk will increase if the minerals are particularly valuable and there is a good chance of getting planning consent for mineral development and/or the owner of the minerals is aware of the site owner's plans for the site - and is either hostile to the proposed development or is simply seeking to use his title rights as a way to extract a windfall ransom from the developer.

Generally, the later in the process that an interdict is sought by the minerals owner, the lower the chances are that it will be granted - the logic being that the longer the minerals owner leaves it before objecting to a development, the more the balance of convenience shifts to the developer. Interdict is a discretionary remedy which the courts can grant or refuse depending on their assessment of the situation. Judges have to look at where the balance of convenience lies and their decisions are difficult to predict as so many factors will be taken into account.

What to do if minerals are reserved to someone else?

The only failsafe way to avoid the risk of either interim interdict or the inability to develop at all (if an interim interdict is made permanent), is to get title to the minerals before development commences. In many cases this is either not practical or is thought to be too risky (e.g alerting a minerals owner to a situation about which he would otherwise have been in the dark) or is simply not necessary.

Many developers will choose instead to do one or a combination of the following:-

  • Just take the risk of having to pay damages (and hope that the worst case scenario would be payment of damages and not a permanent ban on development). This route might be adopted if the minerals owner cannot be found or it is thought extremely unlikely that such owner would object or it can be established that any minerals are located sufficiently far below the surface that they won't be disturbed by the development works; or
  • Lay aside any extracted minerals, so that they are available to the minerals owner should he raise the issue. This could be a sensible course if it is expected that there will be some disruption to minerals but that it is unlikely that the minerals owner will object; or
  • Get title indemnity insurance (against the risk of delay or outright inability to develop) either as a back up or as the sole solution - although many insurers will not provide the cover unless it is impossible to trace the owner of the minerals.

This issue should always be considered when it's proposed to develop a site where minerals are reserved from the title - as just because the developer does not intend to extract minerals which he does not own, such extraction might occur as a by product of the development process.

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