Anyone involved in most typical real estate transactions quickly becomes familiar with the sheer number of documents that have to be reviewed and approved before "closing" or finalizing the transfer of the property. Two of the most important documents are the sales contract (typically an earnest money contract) and the deed to the property. Now, for example, let’s say you are the seller of a property, and you also own minerals rights associated with that property. You want to sell the property to a buyer, but reserve your mineral rights. So, you work up a sales contract with your buyer, and in that sales contract, the parties agree that you retain your interests in the mineral rights. However, you didn’t read the deed carefully before signing and realize after closing that the language in the deed did not retain your mineral rights. Do you still retain those mineral rights?
This question is answered by the common law doctrine known as the Merger Doctrine. The Merger Doctrine is accurately described by the case of Baker v. Baker, 207 S.W.2d 244 (Tex. Civ. App.—San Antonio 1947, writ ref’d n.r.e.) as follows:
“The Rule applicable in all contracts, that prior stipulations are merged in the final and formal contract executed by the parties, applies, of course, to a deed based upon a contract to convey. When a deed is delivered and accepted as performance of a contract to convey, the contract is merged in the deed. Though the terms of the deed may vary from those contained in the contract, still the deed must be looked to alone to determine the rights of the parties. No rule of law is better settled than that where a deed has been executed and accepted as performance of an executory contract to convey real estate, the contract is functus officio and the rights of the parties rest thereafter solely in the deed.”
In other words, the Merger Doctrine means that when the performance of a contract is accepted by delivering a deed to convey property, the contract is merged into the deed. The deed, alone, is looked upon to determine the rights of the parties. Alvarado v. Bolton, 749 S.W.2d 47, 48 (Tex. 1988).
Now, there is a way to combat the Merger Doctrine, and that is by checking your sales contract for survival language. This language points to exactly which provisions in the sales contract will survive past closing and after delivery of the deed. Some contracts only designate certain provisions which survive past closing, while other sales contracts have survival clauses that state all covenants, representations and warranties in the contract will survive closing.
So, in the case of our above hypothetical, if the sales contract did not contain any survival language or the survival language did not specifically point to the provision discussing mineral rights, by the Merger Doctrine, you would not retain them.
It is important for any real estate transaction that you seek the advice of an experienced real estate attorney if you are concerned about specific rights, covenants or warranties regarding the property.
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