The Federal Deposit Insurance Corporation (FDIC) recently announced a change in the manner in which it sells real property. As of April 1, 2013, most properties owned by the FDIC will be sold with a reservation of mineral rights retained by FDIC unless the buyer specifically negotiates a higher price for the mineral rights to be included. The exceptions to this change in the method of sale of properties by the FDIC are condominium units and properties valued at $50,000 or less. All other properties will be subject to the exception for mineral rights. If the buyer elects to purchase the mineral rights, mineral contractors will provide a valuation of those rights and the buyer will be responsible for all associated expenses in obtaining the valuation.
For properties located in rural areas, the FDIC will also retain rights to use the surface of the property and have surface access to mine upon the property. The FDIC will waive those rights for properties located in incorporated cities, but it may retain the rights for subsurface access to mine from adjacent parcels. All of these reservations must be noted in the deeds of conveyance.
Anyone considering purchasing FDIC-owned property which is not exempt from this new requirement should be aware of the impact on the future value and development potential. First, ordinary property analysis of comparable area properties likely will not be appropriate as mineral rights are not normally excluded from sales. Hence, existing comparables may be higher. In addition, buying the property subject to the mineral rights reservation may impair the ability to sell or develop the property. Any buyer who considers such a purchase from the FDIC must analyze both the risk of the FDIC exercising its rights and the chilling effect on future sales and development.
Another important point is the impact on financing. Lenders do not look favorably on a property which is subject to the rights of a third party to enter and conduct mineral exploration and any number of other detrimental activities. It is not likely that a third party lender would be willing to finance a purchase or provide any type of development or construction funds if these rights are floating out there.
In addition, there is no title insurance coverage available in Florida to protect an owner in this scenario. Title insurance policies would include the standard exception for mineral rights and access rights, if those rights have not been waived by the FDIC.
Since this program is just going into effect, it is possible that the FDIC will change course if there is push back from the purchasing and lending communities. In the meantime, all buyers negotiating purchases from the FDIC should be aware of the risks in purchasing properties subject to the new requirements.
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