Definition breakdown of a Lease

When someone receives a lease lets say for surface rights (for example $4200 per acre and theres 5 acres), is that paid monthly or quarterly? Just curious how the lease would be paid out.

Thanks In advance!

There are different types of surface-use contracts. There’s the Right-of-Way (ROW), that the Lessor (landowner) grants to allow the Lessee (company wanting to get the ROW) to go into and out of the property, but the Lessee isn’t allowed to leave any equipment or other permanent fixtures on the land. A ROW can be either a contract for a specified length of time, or it can be long term. Either kind will specify in the contract if a monthly, annual, or periodic payment (like every 5 years, for example) to keep the ROW Agreement alive. The ROW Agreement will state all of that directly in the document.

Then there is the Easement Agreement, which the Grantor (landowner) can give to a Grantee (company) that will allow the Grantee to go into and out of the property, but also will allow the Grantee to install fixtures (like a pipeline, for example). An Easement Agreement typically is long term, any many of them have language in them allowing for automatic renewal at the end of the first term (and subsequent terms). An Easement Agreement typically calls for one payment, up front, to cover the entire term of the agreement (5, 10, 20 years typically).

The third common type of surface contracts I’ve worked with routinely in my work as a division order analyst in the oil industry is the Surface Lease. A Surface Lease usually is taken for the drillsite tract, but also to place storage tanks, or to allow an equipment storage yard. Again, the term can be short (like 1-5 years), or longer, such as 10 or even 20 years. And like the other two types of surface agreements, I’ve seen them call for monthly, annual, or periodic payments less often than every year.

So, take a look at the agreement the Grantee/Lessee is offering. What does it say about payments? Or, if you are in the negotiation process, the “payment plan” is something that needs to be negotiated between the Grantor/Lessor and Grantee/Lessee.

2 Likes

Thank You Marsha_Breazeale! I greatly appreciate your thorough knowledge and sharing this with me! I am a fairly new land owner in Reeves County and Iam fairly new to this forum and I want to be educated in case I have an opportunity to lease my land. I ve been told Iam in a pretty good area so Iam trying to educate myself in case an opportunity presents itself.

Dear Keith_Jack,

When and if you are approached about a contract concerning your land, the terms and conditions should be clearly defined.

If they are not, you should certainly get some representation to protect your interests and ensure that you be a good steward of the property.

Best regards,

Buddy Cotten

Thanks Mr Cotten! Its a good deal to know there’s a forum like this that can help a new landowner like me get up to speed on the happenings in and around my area.

Greatly appreciated!

My question disappeared. I have looked into getting legal assistance in regard two issues I have. One with a person who I shairs ownership of a section of land and one with future negotiations of mineral leasing and division of taxes. I am told it will cost $5000 right off the bat, before anything actually happens. No drilling so far, so no revenue. Unless I win the lottery. I would like to stave off potential problems and not have to deal with them after the fact. Any advice?

I ment, to retain legal assistance will cost me $5000 just to start with, before anything is done/ or court costs.

Attorneys are in business, just like other service providers. Most likely the $5,000 is a retainer to be applied against time and costs incurred in reviewing documents, contacting owners, providing advice, etc. Unused funds would be reimbursed. If you are looking at a court case, then the costs will certainly escalate quickly. Almost all attorneys require a retainer from new clients.

So any involvement with an attorny is quit costly for the client. This being the case, getting legal assistance is a sizable investment for the property owner. Most individual people don’t have thousands of dollars discressinary money. Attorney fees, court costs, Not to mention travel and hotel costs for those of us out of state.The kind of investment required to retain Legal assistance requires a lot of planning and saving for most people, at worst having to sell there car, use there children’s college fund or sell their primary residance. For me, my mother signed paperwork 45 years ago without consulting an attorney with incorrect information. Now, I am faced with trying to prove she was tricked out of 27 acers of ground, minerals not involved. No wells yet on the jointly owned property. Reeves tax bill still includes those 27 acres.

1 Like