After they have made sure all the "details are right" according to the landman.
Lee:
It is normal for a request that the lessor sign the lease and receive payment at a later date but BEWARE!! Many lessors in the past have become victims of "cold drafting" whereas the lessee records the lease at the County Clerk's office and never pays the lessor their bonus money. Instead of going into detail, you can google "cold draft" in the box at the upper right hand of this site and read the many posts that have been posted regarding this practice. There are ways to protect yourself from this happening and several suggestions are mentioned in these posts.
Thanks. I don't know if we were cold drafted, but we did receive a draft that bounced back after signing.
Well I guess we were cold drafted before.
So what is the normal procedure for signing and being paid?
Basically you place the draft and the executed lease with your bank or lawyer with instructions not to release your lease to the lessee until the draft is paid or a check clears. The lessee will not like this, it's why they always ask you to send them the executed lease and trust them. My brother and I have tried leasing 3 times between us and we have never been paid. We have had them record the lease and then want to renegotiate down because they figured they had us over a barrel. I secured two releases by telling them I would sue them in a convincing manner. The third one is being sued. Far better to not have the aggravation of being cold drafted with your lease in their hands. There is no comparison how much farther ahead you will be if you don't have to sue them unless we are talking at least 50 net acres. If it's for a small number of net acres, you automatically lose financially in a lawsuit, so they must not get their hands on your lease before you are paid.
Being that your minerals are in Oklahoma, you could just wait for the pooling and make an election under the pooling. In your place I would study Ok pooling. Waiting for the pooling may have many benefits such as the state may limit the formations the operator can explore and you could have other formations to lease again. Study up and good luck.
Thanks. I'll have to find out what pooling is.
The best procedure is to exchange the signed lease for a cashier's check or wire transfer. If it is a company check, the lease needs to be held until the check clears.
It must have been a Chesapeake Draft!
Or Continental or KOG, I don't think you could find a single company that has not done it.
Mineral Owner said:
It must have been a Chesapeake Draft!
The safest route for the Lessor (you) would be what Wade said, no signed Lease without "certified funds," as a title company would call them, money that is irrevocably yours, such as a cashier's check, wire transfer, money order, or cold, hard cash.
The next safest route is a company check, you run the risk that it bounces, but at least you can charge them criminally as well as sue them civilly, if they fail to honor the check.
The lease safe route is the bank draft, because the company can always claim, "Hey, not all the 'details' were right with your mineral title, so we're not going to honor the bank draft," even if there was nothing wrong with your title at all and the company just needed an excuse to bail on you. Some mineral owners have sued very successfully when their bank drafts were repudiated for no VALID reason (a title question, bankruptcy, etc.).
Two things I would add. First, if you have just a city lot or anything less than a couple of acres, just go ahead and ask for the company check. My clients never refused a company check when a Lessor asked for one, and the company checks were always honored. If you have more than a couple of acres, I would go Wade's route or at least verify funds in the account if you take a company check instead. No bank draft for more than a couple of acres.
Thanks everyone. Sorry I am late to respond, we left town for a few days. We have 79 acres, so the cashier's check seems the way to go.
We met the landman in town (Stillwater OK) & got the check when we signed the lease for him. This was after all the changes & addendums our lawyer wrote were added to the lease. My brother in SW Oklahoma got a draft......and his lease was recorded & he never could collect on the draft. 6 months later they released his lease.