Lease Options and Split Payments

With what people are saying about the outrageous times to run title in some parts of the county with accompanying out of bounds lease drafts, perhaps it is time to think in a new direction.

From the landowners perspective, anything over a 21 day draft is a lease option, in my opinion. A lease option in which he is not paid.

If someone want to give you an extended draft, make it a 10% down payment for a 30 day draft, 20% down payment for a 60 day draft and a 30% down payment for a 90 day draft. You get the idea. Now the company/broker has made an investment and you have received value for taking your minerals off the market. You grant the option on what you believe you own and do not warrant title and the company has no recourse in the event of failure of title.

That is the option.

Now the split payment. A real lease, not an option. 50% down payment and 50% payable XX days in the future. If the future payment is made and title is good, then the transaction ends with the second payment. If title fails to a portion, then the second payment is adjusted to reflect the proper bonus payment. Except in the event of complete title failure, the second payment must be made. Perhaps a bond to that effect if you are talking hundreds of thousands of dollars.

If you are not sure in how to craft such provisions, contact a qualified land professional for advice and guidance.

I think this is excellent thinking and advice. The split-payment would require an iron-clad contract though.

Dear Mr. Johnson,

Thanks for the nice words.

ALL contracts should be iron clad, do not you think?

Buddy,

I didn't know whether you were leaving that message for me or someone else. So, I trapsed myself over here on the off chance it was for me. I love your "take control" thinking when dealing with landmen. They can be overbearing, and when you think you have a lease it's easy to forget who works for whom. Thanks for the excellent advice. Want a laugh? I'm going to take my 1/3 and head for help. : )

Dear Wes,

It was a general post on a different subject matter - tho related to your situation.

Buddy,

Well, it worked nonetheless. I made it over here. Did you find the humor in my message? I'm so excited! I'm on the leaderboard. I assume someone here plays golf? : )

Wes

Poorly said on my part, what I was thinking was the split-payment option might be a very tough sell.

Wes Luke said:

Buddy,

Well, it worked nonetheless. I made it over here. Did you find the humor in my message? I'm so excited! I'm on the leaderboard. I assume someone here plays golf? : )

Wes