Just wondering; is there really a bullet proof leasing contract/deal?

I understand the perils of leasing; I mean having a lease agreement heavily weighted to the gasco (Lessee). But assuming a person has done their due diligence and even used an attorney, there are still pitfalls and a lease deal can fall apart.

Many recommend (myself included) to provide the signed lease only after being paid the sign bonus by company check or cashiers check. In fact, using an escrow arrangement to only release the lease upon the clearing of the checks to be sure the deal is properly closed and payment received.

However, is it possible for a paid (sign bonus) lease deal to unravel and a gasco to rescind the agreement and request return of the sign bonus. Seems I have read posts that have alluded to this possibility, but I haven't heard it conclusively. If possible for this to occur, how would it be prevented.

Personally, I was burned by an Order For Payment (OFP) lease arrangement where I wasn't paid, so I know now that in the future I would consummate the deal only by immediate payment. However, as of late I have begun to doubt the strength of even that deal. So could a gasco get out of a lease and require the signing bonus returned?




You can always include a "Bonus Agreement" in your lease whereas a date is set to have money in hand or the lease will be null and void. Of course, you would want this in legal wording but this would be one weapon that you, the lessor, would have against the lessee in the event the deal went bad. Of course, such statement would have wording to protect the lessee in the event of a title failure.


Thanks for your thoughts, I responded to your similar reply to Kaye. However, the idea of giving the Lessee an out for title failure is a dangerous condition; that is, what constitutes a title failure. Generally speaking you would assume and be misled by the gasco/landman, that title failure would be something like; minerals already leased or don't own minerals, amount of acreage incorrect, etc. But this isn't the case and there are many reasons that a gasco may use to extract themselves from a lease that they decide they don't want.

I have since learned to solve the "lack of bonus payment" by agreeing to a lease only when I am paid immediately for that lease and paid only with a company check or a cashiers checks. I strongly advise all mineral owners to NEVER accept a Bank Draft, Sight Draft, Order For Payment or any other such lease payment agreement where money is not delivered immediately. If they are interested and serious they MUST perform the due diligence in advance and verify the title and make the deal.

I understand why in the "old days" this technique was used and is still used (that is sight drafts and similar) - a gasco/landman would quietly deploy into an area and begin leasing quietly and for cheap; their focus is to lock up mineral rights and as much of it as possible - of course it gets heated, terms improve competition joins the excitement. The gascos just lock up the land as fast as they can, they then go back and verify title and make payment - well in the old days.

But now there are companies that come into an area with their land machine (chesapeake's own term) and lock up land. In the meantime, the drill exploration wells, they are acting fast to learn what they can about the play. In MI, they decided they wanted out of the play and didn't want to honor the leases so they found bogus reasons to "void" the leases - 1000s of leases were canceled. Now there are many lawsuits in process. This didn't just happen in MI, it is happening now in ND and it has happened in other areas.

So I have learned you can't trust the process and money must change hands to enable a signed lease to be provided. However, and the root of my question in my original post - I thought that I have read that gascos (after a signed and paid lease was executed) have identified some "problem" and cancelled a contract after it was signed and demanded the return of a sign bonus. Is that possible? and how to protect against it?


Yes there are ways to sign a lease and bulletproof yourself.

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