UNDERSTANDING TITLE SEARCHES:
UNDERSURFACE RIGHTS
October 2012
Number 293
— Ryan Howe. Reprinted with permission. © Alexander Holburn Beaudin + Lang LLP.
During the due diligence period, legal counsel will usually be asked to provide their
opinion on title to a property. This requires diligent review of the various legal notations,
charges and encumbrances displayed on a title search from the Land Title Office (the
“LTO”). One of the most confusing charges found on title are undersurface rights relating
to natural resources found beneath a property’s surface.
Recent Cases
Assessment
Authority’s Finding
Regarding Value of
Property Upheld . . . .
3
Order For Sale of
Condominium Unit
Rescinded . . . . . . . . . . .
3
Purchaser’s
Allegations of
Misrepresentations
Were Dismissed . . . .
Land Fronting On
Lake Was
Unsurveyed Crown
Foreshore . . . . . . . . . . .
Land Registrar’s
Decision Upheld . . . .
Residential Tenant
Granted Relief
From Forfeiture . . . . .
Each undersurface right is different in scope and governed by different statutes. It is
important for real estate professionals and lawyers to be familiar with the various types
of undersurface rights and their potential impact on the rights of property owners.
The Three Types of Undersurface Rights
1. Freehold: absolute mineral rights which were granted outright or as part of another
tenure. These undersurface rights are rare.
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●
Subterranean titles in fee simple
●
Governed by the Land Act, RSBC 1996, c. 245. May be ordered/viewed through the
LTO.
●
Not governed by the Mineral Tenure Act, RSBC 1996, c.292 (“MTA”).
●
Not registered and maintained under the Mineral Tenures registry system.
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2. Crown Grant: tenures administered under the Land Act originally staked as mineral
claims which were subsequently surveyed and issued as Crown granted tenures. These
undersurface rights are uncommon.
●
The last Crown granted mineral claims were issued in 1957.1
●
A Crown granted mineral claim conveys such mineral rights to the holder as is
specified in the actual grant, which may be found in the LTO; or where the grant is
silent, such rights as were defined by the existing Mineral Act in force at the time the
grant was issued
●
All assessment work carried out on a Crown grant is subject to the provisions of the
Mines Act, RSBC 1996, c. 293 and related statutes, e.g. the Land Act, as applicable
●
Crown grants are not within the jurisdiction of the MTA.
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Petitioner in
Foreclosure Action
Not Entitled To
Keep Deposit . . . . . . .
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Legislative Update
9
3. Mineral Title: claims or leases acquired and maintained under the MTA. Mineral titles
are by far the most common form of undersurface right found on title.
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BRITISH COLUMBIA REAL ESTATE LAW DEVELOPMENTS
●
These rights may be acquired and viewed using the Mineral Titles Online (“MTO”) BC interface.
●
A claim is the exploration and development of a particular parcel of undersurface land, also known as a tenure. A
recorded tenure holder may then convert a claim to a lease in order to carry out production of the underlying
natural resource(s) to which the lease extends.
But What Does it Mean?
1. If the right is a Freehold right:
Technically freehold rights are an absolute right, i.e. they are not subject to restrictions on use, and extend to any
minerals or resources located within the physical metes and bounds of the freehold right as described on title.
While a Freehold right to undersurface minerals or other materials is the greatest form of undersurface right, they are
extremely rare and require compliance with provincial and municipal bylaws and legislation before any work can be
undertaken to extract the underground mineral or resource by the right holder.
The general position of the Mineral Tenures Branch is that such rights may not be exercised in developed areas, or
areas that have been zoned for agricultural purposes. However, because these rights are absolute, locating a freehold
right on title should raise the alarm and trigger further due diligence involving at a bare minimum contact with the
relevant government authorities.
2. If the right is a Crown grant:
The extent of the rights conveyed by a Crown grant is determined by the date on which the grant was issued. This is
because over time the Crown has modified the reservation clauses (limitations) it has attached to such grants.
Historically, the Crown would reserve any rights to gold and silver. However, over time the Crown has gradually
increased the scope of its reservation clauses to the extent that modern Crown reservation clauses often will reserve all
minerals including oil and gas.
Similarly to the freehold mineral rights, making use of a Crown grant, regardless of its date of issue, is difficult, if not
outright impossible, if the grant relates to undersurface minerals located beneath developed or agricultural land.
However, as with freehold rights, Crown grants convey broad rights and should trigger further due diligence in order to
ascertain the relative risk of the crown grant holder enforcing their rights against the surface titleholder
3. If the right is a Mineral Title:
Mineral titles are governed under a single act and contained in a single registry, therefore determining where such
charges encumber the land is relatively simple. Mineral titles are administered under the MTA and must be registered
and kept up to date with the MTO registry. The MTA specifically sets out the restrictions and requirements for
exercising rights under a mineral title.
In order to exercise a mineral title, the titleholder must obtain a Free Miner’s Certificate (“FMC”). However, even with
an FMC, section 11 of the MTA specifically denies the right of entry otherwise granted to an FMC holder where the
surface land is:
1. occupied by a building;
2. the curtilage of a dwelling house;
3. orchard land;
4. under cultivation
5. lawfully occupied for mining purposes, except for the purposes of exploring and locating for minerals or placer
minerals as permitted by this Act;
6. protected heritage property, except as authorized by the local government or minister responsible for the protection
of the protected heritage property; or
7. land in a park, except as permitted by section 21 of the MTA.
There are numerous bars against using FMCs under s. 11 of the MTA, hence the potential risk to a surface titleholder posed
by a mineral title right is relatively insignificant, as compared to the risk posed by Crown grants or freehold rights. As such,
the degree of due diligence recommended for freehold rights and Crown grants is not as high or as critical for mineral titles,
except where the property in question is located outside of developed or agricultural lands.
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BRITISH COLUMBIA REAL ESTATE LAW DEVELOPMENTS
Ryan Howe is an Associate in the firm’s Business Law Group. He is a member of the firm’s Wealth Preservation + Estate
Litigation, Insolvency + Bankruptcy, Corporate Commercial, Banking + Lending and Real Estate Practices.
Notes:
1 Mineral Titles Information Update: No. 7– A Guide to Surface and Subsurface Rights and Responsibilities in British Columbia. Revision Date: June 29, 2012. http:/
/www.empr.gov.bc.ca/Titles/MineralTitles/Notices/InformationUpdates/Documents/InfoUpdate7.pdf.
RECENT CASES
Assessment Authority’s Finding Regarding Value of Property Upheld
Supreme Court of British Columbia, July 16, 2012
The applicant owned a seven-story co-operative housing complex in fee simple (the “Property”). The applicant’s purpose
was to maintain and operate the Property for the sole use and benefit of its members without rent, profit, or gain
accruing to the applicant. Each shareholder of the co-operative owned shares in the applicant, and had a lease on his
or her suite until the expiration of the life of the applicant. An owner of shares could not transfer or sell them without
the approval of the Board of Directors. The shareholders occupied the suites pursuant to long-term leases granted to
the occupiers that were incidental to the ownership of their shares.
For the purposes of property assessment, the respondent valued the Property based on the aggregate value of the
market sales of the tenants’ share-lease agreements. The applicant appealed to the Property Assessment Appeal Board
(the “Board”) on the basis that the Property should have been assessed as a single rental apartment building, with
similar valuation parameters to those used in assessing similar rental apartment properties in the immediate area,
which were valued as a single entity using the income approach. The Board dismissed the appeal, holding that the
rental comparables submitted by the applicant were not comparable to the Property for equity purposes because they
had different Highest and Best Uses (“H&BUs”). The Board further held that the respondent’s methodology of valuing
the Property based on the aggregate fair market value of the share/lease sales was the correct way to value market
co-operative apartments.
The applicant brought a further appeal, by way of stated case under section 65 of the Assessment Act (the “Act”). The
applicant’s principal grounds of appeal were that the Board had erred in choosing the valuation method that it had, and
that the Board’s conclusion was inequitable and inconsistent with the valuation of “similar properties”.
The appeal was dismissed. Regarding the issue of the evaluation method, the parties agreed that identifying the H&BUs
was a critical step in the assessment process and provided the context for the selection of comparable properties.
Based on the evidence before it, the Board concluded that the H&BUs of the Property as a market co-operative was
different from its H&BUs as a rental apartment building. The Court stated that using an assessment method that was
wrong in principle was an error of law. At the same time, it was generally accepted that the Board’s selection of a
particular valuation technique or method was a question of fact for the Board. In this case, the Board’s rejection of the
income approach to valuation was a decision that properly fell within its jurisdiction, that was based on a reasonable
assessment of the evidence, and that was not the product of an error in principle.
Regarding the issue of similar properties, the Court found that there was evidence before the Board that the Property
was not “similar” to a rental apartment building and that the market did not view such properties as “similar”. In
addition, the Board found that the Property was being used for its H&BU, while the comparable properties put forward
by the applicant had different H&BUs. The applicant did not argue that these conclusions of the Board were either
unreasonable or otherwise not properly grounded in evidence before the Board.
Beach Town House Apartments Ltd. v. British Columbia (Assessor #09), 2012 BREG ¶50,673
Order For Sale of Condominium Unit Rescinded On Appeal
British Columbia Court of Appeal, July 19, 2012
See trial decision digested at ¶50,645.
The female appellant owned a strata unit in the respondent’s strata corporation, where she lived with her adult son, the
male appellant. The evidence showed that the appellants’ conduct, including their use of obscene language, their
interference with the activities of other owners and occupants, their spitting at other residents, and the unacceptably
loud level of noise emanating from their unit unreasonably interfered with the rights of others. The trial judge found
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