- A deed of trust protects the mineral asset. For instance, oil wells produce a marketable commodity, generating royalty payments to the holder of the mineral rights. Due-at-sale refers to the total repayment of a loan including outstanding principal and earned interest due. Through a mineral deed in trust, royalties are not part of the due-at-sale payment.
- In the United States, the mineral estate can be, and often is, separated from the surface property estate. As such, the owner of the mineral estate is entitled to all rights to the mineral resource, including access via the surface property. During a property sale, a seller can retain mineral rights through a deed of trust after the property is released from any mortgage lien. The mineral deed of trust, recording mineral ownership, is filed in the county clerk's office along with the surface property title deed. The trustee can then enter into any transactions concerning the mineral estate.
- A mineral deed of trust is also used for lease subordination to creditors, another method of asset protection. A lease subordination allows subsequent loans to have a higher claim than the current loan. The deed of trust secures the asset and royalty payments between the specified borrower and lender, insuring that royalty payments continue to flow, regardless of debt obligations.
- Both the lender and the borrower want to protect the mineral resource as an asset, considering declining property values. Profitable commodities generate cash flow and royalty payments. A deed in trust allows a third party to negotiate contracts and agreements to develop and produce oil, gas and other minerals without complexities of foreclosures or short-sale delays. Under these conditions, deeds of trusts can ensure real properties remain profitable.
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