While condominium ownership is not often encountered in the realm of oil and gas title examination, when an examiner has a condominium in their chain of title, they may find some unique ownership issues. Texas condominiums built after January 1, 1994 are governed by the Texas Property Code, Chapter 82, known as The Uniform Condominium Act (UCA), while those built prior to that date are governed by Chapter 81.
The examiner should look to the date the Condominium Declaration was filed of record to determine the applicable statute.
As defined in the statute, a condominium is a form of real property with portions of the real property designated for separate ownership or occupancy and the remainder of the real property designated for common ownership or occupancy solely by the owners of those portions. It is important to note that if the common elements are owned by a separate entity, such as a corporation, this is not a condominium.
The Condominium Declaration controls how a condominium development is owned and in what proportions. The examiner should become familiar with the exact ownership scheme before rendering an opinion, as they can vary. The Declaration must include a schedule of ownership of the common elements. This is usually divided on a percentage basis, allocated based on the size of each unit. This is how the Tax Assessor allocates property taxes for the common elements. The examiner should look to this exhibit to determine how to break down ownership.
Under the UCA each individual unit is the physical portion of the condo designated for separate ownership. The specific boundaries are set by the Declaration. This could be the walls, floors or ceilings, though in townhomes and trailer parks the “unit” may include fee ownership in a tract of land. Beware of these mixed fee ownership situtations, as a community lease may arise if the development included fee ownership tracts owned individually, but the lease were to cover the entire development.
Another area where the examiner should use caution is in mineral reservations after the creation of a condominium. The UCA dictates that the common elements are not subject to partition and that any transaction purporting to do so would be void. While there is a dearth of case law on this subject, it does not appear that this language prohibits severing the minerals, so long as they are severed from the entire interest in the condominium, not just the common elements. In any case, best practice would be to put the client on notice of the unsettled nature of mineral severances after the creation of a condominium development.
While there is a lack of case law surrounding oil and gas leasing or mineral ownership of condominiums, much of it can be analogous to issues found elsewhere in title examination and can be examined accordingly. The most important aspect is to have a firm grasp on the Condominium Declaration itself and clear understanding of the ownership scheme.