Horton Hears a “What??”

If I were really good, I’d write this blog in Seussian rhyme!  Except, it’s not funny.

I first heard of this a couple of weeks ago from another agent; today an article in the Raleigh News and Observer provided more information.  Here’s the deal:  New home builder D.R. Horton has been deeding homes to the new owners while keeping the mineral rights for themselves. This may be routine Out West (Horton hails from Texas), but it’s unprecedented in North Carolina, and no one knows quite what to make of it. 

In North Carolina, and I assume in other states, property ownership comes with a “bundle of rights.”  One of those rights is ownership of what lies below the surface.  However, in verbiage buried deep in the builder’s contract, D.R. Horton is severing mineral rights from the bundle, and then transferring those rights to its subsidiary, DRH Energy.  It began doing this in 2010, soon after geologists announced the discovery of large natural gas deposits in North Carolina.

NC state government historically has taken a NIMBY approach to energy exploration off its shores, and so far hasn’t looked with favor on hydraulic fracturing (fracking) either. The process involves pumping millions of gallons of water and chemicals deep underground to break up rock that traps natural gas.  Fracking is currently illegal in North Carolina because of environmental concerns, but that could change.

The presumption is that if it ever did change, Horton’s mineral rights would allow natural gas drilling under people’s homes. Even though restrictive covenants prohibit industrial activity inside a subdivision,  drilling could be done horizontally from an operation hundreds of feet away.

Some homeowners aren’t worried, but others are concerned that not owning their own mineral rights may be an issue when it comes to resale.  Indeed, it may be. One lender, State Employees Credit Union, has already said it will decline to mortgage a residential property without mineral rights.

Now that this issue has hit the newspaper, I’m sure Horton is going to be hearing from a lot of people, saying — “What?”  As in, “What’s going on?” and  “What can we do about it?”  

My own question would be, “What kind of disclosure was done?”  If unhappy homeowners take Horton to court, disclosure will likely be one of the cental issues.

Read  the complete N&O article by John Murawski.