PROPERTY CODE SECTION AFFECTING SALES OF MINERAL AND ROYALTY INTERESTS

Effective September 1, 1999, the Texas Legislature enacted a new section of the Texas Property Code which affects those who solicit and purchase minerals and royalties by mail, and those who sell their Texas mineral and royalty interests.  The complete text of this Texas Property Code Section is provided below.

This section of the Texas Property Code appears (see section (a)) to only apply to offers by prospective purchasers that are made by mail and are accompanied by a form of deed/conveyance and a bank draft.  Subsection (a) does not appear to apply to “two-step offers” (where a prospective seller are mailed an offer, and after agreeing to accept the offer, is mailed a form of deed/conveyance and bank draft).  The remedies available to a seller of an interest in subsections (c) and (d) may cause the “conspicuous statement” called for in subsection (a), to be included in any letter received from a prospective buyer.

SECTION 5, TEXAS PROPERTY CODE.

SUBCHAPTER F.     Requirements for Conveyances of Mineral or Royalty Interests.

Sec. 5.151.  Disclosure in Offer to Purchase Mineral Interest.

a.   A person who mails to the owner of a mineral or royalty interest an offer to purchase only the mineral or royalty interest, it being understood that for the purpose of this section the taking of an oil, gas, or mineral lease shall not be deemed a purchase of a mineral or royalty interest, and encloses an instrument of conveyance of only the mineral or royalty interest and a draft or other instrument, as defined in Section 3.104, Business & Commerce Code, providing for payment for that interest shall include in the offer a conspicuous statement printed in a type style that is approximately the same size as 14-point type style or larger and is in substantially the following form:  (The following approximates 14-point type.)

By executing and delivering this instrument you are selling all or a portion of your mineral or royalty interest in (followed by a description of the property in which an interest is being conveyed).

b.   A person who conveys a mineral or royalty interest as provided by Subsection (a) may bring suit against the purchaser of the interest if:

1.   the purchaser did not give the notice required by Subsection (a); and,

2.   the person has given 30-days’ written notice to the purchaser that a suit will be filed unless the matter is otherwise resolved.

c.   A plaintiff who prevails in a suit under Subsection (b) may recover from the initial purchaser of the mineral or royalty interest the greater of:

1.   $100.00; or,

2.   an amount up to the difference between the amount paid by the purchaser for the mineral or royalty interest and the fair market value of the mineral or royalty interest at the time of the sale.

d.   The prevailing party in a suit under Subsection (b) may recover:

1.   court costs; and,

2.   reasonable attorney’s fees.

e.   A person must bring a suit under Subsection (b) not later than the second anniversary of the date the person executed the conveyance.

f.    The remedy provided under this section shall be in addition to any other remedies existing under law, excluding rescission or other remedies that would make the conveyance of the mineral or royalty interest void or of no force and effect.

Section 2.  This act took effect September 1, 1999, and applies only to an offer to purchase a mineral or royalty interest mailed on or after that date.  An offer to purchase a mineral or royalty interest mailed before that date is governed by the law in effect on the date the offer was mailed and that law is continued in effect for that purpose.

How this affects an owner of mineral/royalty interests in Texas:

This section of the Texas Property Code provides a seller the means to rescind or renegotiate a transaction with a buyer, that does not comply with its terms.  It does not specify that the remedy it provides is only available to Texas residents.  A seller, wherever located, that sells an interest in Texas property, may avail itself of this law.