I was notified that a lease extension was signed on Aug 5 2011 by the seller of my house. I would think this lease would be invalid because I bought the house with no reservations on Sept 9 2008.
I Emailed Chesapeake Energy Corporation and included a scan of the deed of sale as proof of this. This was their response:
John- Please notice that your Deed is “ Subject to any restrictions, easements or servitudes of record and any mineral grants, leases or reservations of record.” Meaning that you have a valid lease. Please forward us certified copy of this Cash Sale Deed, to Chesapeake Energy. The lease places the burden on you to notify us of the transfer of ownership. I’m sure who ever was working with you on purchasing this property didn’t explain this to you, but it is in the lease.
The good news is we are still trying to develop this section. Please let me know if you have any questions. P.S please reference this lease number when you send Deed.
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The Deed states:
100% mineral rights owend by SELLER are to be reserverd by SELLER, but SELLER shall waive any right to use the surface for any such reserved mineral activity or use.
Subject to any restrictions, easements or servitudes of record and any mineral grants, leases or reservations of record.
TO HAVE TO HOLD unto Vendee and Vendee's heirs, successors and assigns forever.
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I would think buying the house with the mineral rights with no reservations would prevent the seller to sign a lease extension on property they no longer own. What should I do?
John,
You said the deed states the seller kept or reserved 100% of the mineral rights in the deed so how do you think you got the mineral rights with the house or that there are no reservations after you say there was?
No, that is not what the deed states. The deed states that the seller had 100% of the mineral rights to sell. Meaning that they are the sole owner of the mineral rights, so they can sell them to the Vendee. That is what this statement is: ( TO HAVE TO HOLD unto Vendee and Vendee's heirs, successors and assigns forever.)
I am the Vende the seller would be the Vender.
Are you guys not reading the entire statement.
It says: ( TO HAVE TO HOLD unto Vendee and Vendee's heirs, successors and assigns forever. )
That was not the way it was explained to me at closing. I guess I'm going to have to look through all of the documents. I was told that there was no reservations on the deed, and I even ask about that statement in question. They explained it to me this way: The deed states that the seller had 100% of the mineral rights to sell. Meaning that they are the sole owner of the mineral rights, so they can sell them to the Vendee.
"are to be reserverd by SELLER"
Just the one word says it all, Reserved.
If you had sent that phrase to Chesapeake they would have told you the same thing, the buyer owns no minerals.
You may not want to take my word for it but I would take Cliff's.
Cliff, you may be overwhelmed with questions now that everyone knows we have an attorney in our midst that does title opinions.
I was starting to get really worried but I went through everything and I was able to find what I was looking for. There was a revised Deed and this one only states:
Subject to any restrictions, easements or servitudes of record and any mineral grants, leases or reservations of record.
TO HAVE TO HOLD unto Vendee and Vendee's heirs, successors and assigns forever.
So now back to my original question, dose that statement allow the seller to sign the lease extension?
Chesapeake was right.
It is your job to manage your minerals.
You do not expect Chesapeake (or any oil company for that matter) to update title to every tract of land that they own every day of the week, so contained in the lease form is language that stipulates how to effect a change of ownership of the lease. Sorry to say, but it was your job to read the lease that you received when you bought your house.
You likely have an action against the seller for return of the extension bonus.
I did notify them of the change after the sale and from their reply it seems that doesn't matter. They had a lease with the seller and they can extend it with the seller. Is this true? You say I may have an action against the seller so dose that mean they are wrong? Thank you for you help.
Thank you, this was very helpful.
Dear Mr.Slaughter,
You said that you notified Chesapeake. I am going to insert the change of ownership provision from the most common lease form in Texas, the Pound (4/76) Paid Up:
"7. The rights of either party hereunder may be assigned in whole or in part, and the provisions hereof shall extend to their heirs, successors and assigns; but no change or division in ownership of the land, or royalties, however accomplished, shall operate to enlarge the obligations or diminish the rights of Lessee; and no change or division in such ownership shall be binding on Lessee until thirty (30) days after Lessee shall have been furnished by registered U.S. mail at Lessee’s principal place of business with a certified copy of recorded instrument or instruments evidencing same. In the event of assignment hereof in whole or in part, liability for breach of any obligation hereunder shall rest exclusively upon the owner of this lease or of a portion thereof who commits such breach. If six or more parties become entitled to royalty hereunder, Lessee may withhold payment thereof unless and until furnished with a recordable instrument executed by all such parties designating an agent to receive payment for all."
If the lease form that your predecessor signed had language identical or similar to this, did you notify Chesapeake in exactly the way that the lease requires you to do? Did you send a letter to their office in OKC, that was registered mail and included copies certified by the County Clerk of both the Deed and the Correction Instrument? If you did that, was the previous owner paid in the 30 day period? Did you do as you said and just e-mailed them a scan of the Deed? Did you e-mail the original Deed or the Correction Deed or both? In any event, a scan of a document is worthless in this case. Only a certified copy has weight. The lease is clear on what to do and e-mailing is not part of your requirements to follow.
As to an action against the previous owner, just give him a call and ask for the money back. He should, since he did not own the minerals at the time of payment.
It sounds as if you are mad at Chesapeake. It is very likely that they are honoring the terms of the lease. If not, then you can as for a release of the lease.
John Slaughter said:
I did notify them of the change after the sale and from their reply it seems that doesn't matter. They had a lease with the seller and they can extend it with the seller. Is this true? You say I may have an action against the seller so dose that mean they are wrong? Thank you for you help.
There were 2 more parts of questions one of which pertains to John and whether it all makes any difference who signed, when they signed and when or if Chesapeake got notice which was about that revised deed.
Dear MJ,
One of the items that I am sure is not accurate is that the previous owner "signed a lease extension."
I will bet a steak dinner that it was a unilateral option on the part of Chesapeake to extend the lease - like a 3 year lease with a 2 year option. There is no negotiation on the part of the previous owner at this point, or the present owner either, for that matter.
What was signed (and I will bet another steak dinner) was a receipt of the extension payment.
As to your second question, see my previous post on notice requirements. As in almost every case, the lease form itself answers the questions.
Here is just a part of what I had written above (about 6 hrs ago) and still question, that I didn't see where anyone addressed:
If a correction or as in John's case a "revised" deed is recorded, does that deed take precedence over the prior recorded deed? Example, If all minerals are reserved unto seller in the first deed and then nothing mentioned as to the minerals or reservation of such in the correction deed would the minerals still be reserved as in the first deed?
Without looking at the correction deed to make sure, that is always the intention - otherwise why have a Correction Deed? The correction deed either completely sets the original document aside, or is an act to correct the original document.
Attached is an example of a Correction Deed that is proper in form and format. Pay special attention to the penultimate paragraph.
We really do not know what we are dealing with at this point, do we? So I am answering your hypothetical.
Sorry, my earlier post was to answer your latest set of questions, which were not identical to the ones that you asked later. This makes my head hurt.
As to question concerning being paid for 1 acre and he having 100 acres, are you talking about a Mother Hubbard clause? If so, that clause is barely enforceable in Texas except as to very small strips. Like I have said 100 times, the mineral owner is responsible for managing or having his minerals managed.
Mineral Joe said:
Here is just a part of what I had written above (about 6 hrs ago) and still question, that I didn't see where anyone addressed:
If a correction or as in John's case a "revised" deed is recorded, does that deed take precedence over the prior recorded deed? Example, If all minerals are reserved unto seller in the first deed and then nothing mentioned as to the minerals or reservation of such in the correction deed would the minerals still be reserved as in the first deed?
2853-CorrectionDeed.pdf (128 KB)
My prior comment "There were 2 more parts of questions one of which pertains to John and whether it all makes any difference who signed, when they signed and when or if Chesapeake got notice which was about that revised deed." was not a question, it referred to my question about John's revised deed. Let me be more specific.
As for John's deed's, John showed us the seller reserved all the minerals in his first deed and failed to correct that in the revised deed and in the revised deed only referred to the minerals in this phrase "Subject to any restrictions, easements or servitudes of record and any mineral grants, leases or reservations of record."
My question was this, since the revised deed supposedly made no mention as to a change in what happens to the minerals as to whether seller stills reserves them or if the revised deed was to instead give those minerals to the buyer then doesn't the original deed still hold and the buyer still received no minerals and there is no reason to even be concerned as to who signed a lease, when they signed and when or if Chesapeake got notice because the seller still reserves them, that was not changed in the revision so it stands?
Intention or not makes no difference except in court, they could have intended anything and one would think the revised deed had some intention but none of that matters if those intentions are not properly, specifically and adequately define that in the revised deed.
I wanted to clear up some things real quick, first the "revised deed" is the actual deed the one I refer to before was just a draft and never filed. I referenced the wrong document because everything here is way over my head and I really don't know what I'm doing. Also after reading your post on the proper way to notify Chesapeake I understand I did not properly notify them. I called Twin Cities the company that handled the lease and notified them. They told me over the phone they will make the changes and I did not need to do anything further. I am not mad at Chesapeake. I understand they were probably not aware of the change and proceeded normally, without Twin Cities. However it would have been nice if they were a little more helpful. I am defiantly upset with the seller who knowingly signed the lease on property that they sold. Mr. Cotten is correct it was a 3 year lease with a 2 year option. If I can just ask to clear up one thing: How can a lease extension be valid if the true owner of the property did not sign it? Is it because the option was allowed from the seller in the beginning and on the deed it states Subject to any restrictions, easements or servitude's?
Thanks Cliff for clarifying that for me and others on corrected deeds, I end up doing them all the time as it never fails but when trust is placed in the unknowing individual or there is urgency there are always mistakes made needing corrected. As it turns out in John's case most was for nothing, John left out very pertinent information which dramatically changed the outcome at least as to who owns the minerals.
Buddy, it never fails to prove the mistakes one can make without the proper knowledge and or experience when it comes to management of ones affairs.