Ohio Deed Restrictions – CASE LAW UPDATE

Ohio’s Seventh District Court of Appeals’ recent Opinion in Ohio Pub. Works Comm. v. Village of Barnesville, 2020-Ohio-4034, highlights the repercussions for mineral owners and operators who violate deed restrictions in place to protect the use of the property. 

The relevant restrictions at issue were regarding (1) Use and Development, which provided, in part, that “The Property shall only be used for open space with trails, and for passive recreational appurtenances.”  and (2) Restriction on Transfer of the Property, or Alienation, which required the prior written consent by the Ohio Public Works Commission (“OPWC”) prior to the sale, assignment, transfer, lease, exchange, conveyance or encumbrance of the property by the Village of Barnesville (“the Village”).  The Seventh District held both restrictions were valid and applied to both the surface and subsurface of the property.

Pursuant to the Enforcement Restriction contained in the deed to the Village, OPWC can seek monetary or equitable relief, allowing for any mineral deeds or leases executed by the Village, its successors or assigns, to be declared void. 

What does this mean for oil and gas operators and mineral owners? 

The Village executed an oil and gas lease, and other encumbrances, covering the property at issue without the consent of OPWC.   The Seventh District held an oil and gas lease is “not consistent with open space, trails, or passive recreational appurtenances.”

Compare this to the outcome in Siltstone Resources, L.L.C. v. Ohio Pub. Works Comm, 2019-Ohio-4916.  Siltstone involved almost identical deed restrictions, with the exception of the Use and Development restriction which provided, in part, that “This property will not be developed in any manner that conflicts with the use of the Premises as a green space park area that protects the historical significance of this particular parcel.  Only current structures will be maintained and no new structures will be built on the premises.”  The Seventh District limited the application of the Use and Development provision in Siltstone to the surface of the property, allowing for lateral mining of the subsurface, without any access to the surface, since it does not conflict with the use of the property as a green space. 

So, even with deed restrictions in place that limit the use of the property, subsurface development is still possible, depending on the language of the restriction.  Is it a complete ban on all uses, except those outlined in the restrictions, or just a limitation on uses that conflict with the intended use of the property?

Interpret and address deed restrictions before leasing, selling or buying!

While deed restrictions are nothing new in Ohio, the Ohio Pub. Works Comm. and Siltstone cases serve as reminders to determine if deed restrictions exist, and their impact on the subsurface, prior to leasing, purchasing or selling minerals.   In the event you discover deed restrictions exist in the chain of title to the property at issue, it is important to consult an attorney to determine the effect of these restrictions on the development and/or sale of minerals.   Seeking modification of the restrictions to allow for oil and gas development, and/or obtaining prior written consent, when possible, prior to the lease or sale of minerals and subsurface rights, are all viable options.  Options with much less expense than litigation or having your interest declared void.