Title Toolkit: Understanding title washing in Pennsylvania
Blog Post
This month, in the second installment of our Title Toolkit series, we are taking a look at title washing in Pennsylvania. Title washing, which reunited severed minerals with the surface owner, can have dramatic consequences for oil and gas drillers currently seeking to lease mineral rights. While the concept is fairly straightforward, if not necessarily intuitive, it can be difficult to recognize circumstances where title washing may have occurred.
Title washing was also ripe for abuse. Throughout the late 19th and early 20th centuries, the tanning and timber industries owned vast amounts of land in northern and western Pennsylvania, and frequently used the procedure to avoid paying taxes indefinitely. At some point, an enterprising individual figured out that their company could avoid paying taxes, allow their lands to be sold at a tax sale, direct a “straw purchaser” to buy the lands and avoid recording the deed for two years thus allowing the taxes expire, then sell the land back to the original owner tax free, while at the same time acquiring any severed mineral rights. In fact, a title examiner should be suspicious that title washing may have occurred any time that frequent offenders such as Central Pennsylvania Lumber Company, Elk Tanning Company, Union Tanning Company, Keta Realty Company, Astra Oil and Gas Company, Thomas Proctor and G. W. Childs, appear in the chain of title.
Circumstances where title washing may have occurred are less obvious than many title issues – most of the time there will be no document in the chain of title mentioning title washing. However, paying attention to the parties and the circumstances surrounding a pre-1948 tax sale, and making sure that you have the necessary documentation, can go a long way to ensure that your title examination is accurate.
1. Mineral interests could be taxed separately prior to the 2002 decision of the Pennsylvania Supreme Court in Independent Oil & Gas Association v. Board of Assessment Appeals of Fayette County, 527 Pa. 240, 814 A.2d 180 (2002).
What was title washing?
Title washing was a procedure whereby a tax sale reunited severed mineral estates with the surface estates of certain lands. From 1805 through 1947, Pennsylvania law required owners of severed mineral interests to provide notice of their ownership to the county commissioners or the tax board. The recording of the deed severing the minerals was not enough to satisfy this notice requirement. So, if the mineral owner failed to provide notice, and the surface owner failed to pay property taxes, the land was sold at a tax sale and the purchaser acquired the property free and clear of the mineral owner’s interest.When did title washing happen?
Title washing only occurred prior to 1948 where the land was “unseated,” meaning undeveloped and lacking surface improvements. If you’re unsure as to whether land was seated or unseated, every county in Pennsylvania except Philadelphia and Allegheny maintained land books which will show the land’s historical tax status. There must have been a mineral severance prior to the tax sale where the mineral estate owner did not give notice to the county commissioners or the tax board. Whether the mineral estate owner gave notice can be difficult to nail down with certainty, but if historical tax records indicate that the minerals had been separately assessed, this is evidence that the tax board was notified of the mineral interest.1 Finally, title washing only occurred when the tax sale deed conveyed the entire property, and did not specify that only the minerals or surface were being conveyed.Why did title washing happen?
Title washing was invented by the Pennsylvania General Assembly and codified in 1806 as a way to ensure that property owners paid their taxes, placing the burden of notifying the tax department of their interests on property owners under threat of forfeiting their ownership interests. In 1806, when most of northern and western Pennsylvania were sparsely populated, county governments lacked the resources to proactively ascertain the ownership of every parcel of land. However, by the early 20th century, the policy was obsolete.Title washing was also ripe for abuse. Throughout the late 19th and early 20th centuries, the tanning and timber industries owned vast amounts of land in northern and western Pennsylvania, and frequently used the procedure to avoid paying taxes indefinitely. At some point, an enterprising individual figured out that their company could avoid paying taxes, allow their lands to be sold at a tax sale, direct a “straw purchaser” to buy the lands and avoid recording the deed for two years thus allowing the taxes expire, then sell the land back to the original owner tax free, while at the same time acquiring any severed mineral rights. In fact, a title examiner should be suspicious that title washing may have occurred any time that frequent offenders such as Central Pennsylvania Lumber Company, Elk Tanning Company, Union Tanning Company, Keta Realty Company, Astra Oil and Gas Company, Thomas Proctor and G. W. Childs, appear in the chain of title.
Circumstances where title washing may have occurred are less obvious than many title issues – most of the time there will be no document in the chain of title mentioning title washing. However, paying attention to the parties and the circumstances surrounding a pre-1948 tax sale, and making sure that you have the necessary documentation, can go a long way to ensure that your title examination is accurate.
1. Mineral interests could be taxed separately prior to the 2002 decision of the Pennsylvania Supreme Court in Independent Oil & Gas Association v. Board of Assessment Appeals of Fayette County, 527 Pa. 240, 814 A.2d 180 (2002).