This week I received a lease offer that contained a typo. Instead of "Section 16 SW1/4" it said "Section 16 SE1/4".
Will I need to contact the landman to get a corrected lease sent, or is it generally OK to cross out and correct with black ink typos in the original lease?
Thanks!
I would want a new corrected lease.
If it is just an offer, crossing it out is okay as long as you initial the change and get them to initial it. If it is the actual lease document, get it corrected.
Jean:
Both Mr. Kennedy and Mr. Caldwell are correct in their responses. This has occurred to me several times over the years and they always submit a corrected copy and I initial the change.
Safe bet is getting a corrected lease. They would just file a correction later if not.
Wade Caldwell said:
<If it is just an offer, crossing it out is okay as long as you initial the change and get them to initial it. If it is the actual lease document, get it corrected.>Thanks all for your responses.Mr Caldwell,The document in question is a lease which I've been asked to sign and get notarized. It has a draft bonus attached, which I will presumably be paid after I mail back the lease. So would this document be the "lease offer' or the actual lease?
Not sure without seeing, but sounds like the actual lease. Also, you do not want to accept a bank draft as payment. It needs to be a cashier's check.
I believe it's the actual lease too, though the landman's letter uses "lease" and "lease offer" interchangeably I believe.
As for the bonus payment, I've been asked to sign a draft (of the bonus amount payable to me) and return it (with the signed and notarized lease) to the landman. The landman will then send the draft to their "collecting bank." Then, after 45 days the collecting bank will pay me (subject to approval of my title). Is this how it's usually done?
Jean, do not send a executed (signed /notorized) lease to the lessee or landman until you have been paid with cash you can spend. Look up COLD DRAFT. You do not want to send the draft to the landman either. The way the draft is supposed to work is you place the draft and the executed lease with your bank and your bank which forwards the draft to the lessees bank and is not supposed to give your lease to the lessee until you are paid. The draft should have a time limit on it. If you send them the executed lease that is all they need. If you send them the draft and they do not forward it to their bank/paying authority, the time limit does not start until they do. I once did exactly as they are asking you to do and the result is a lawsuit and tens of thousands of dollars in legal fees. What the landman is telling you to do gurantees two things, 1 that they will have you bound by your lease without having paid you, and 2, you will have to spend alot of money if they don't pay. If you look up Bank Draft, SIGHT DRAFT, ORDER FOR PAYMENT and BILL of EXCHANGE, COLD DRAFT, I think you will find that you are supposed to give all of them to your bank while your bank holds the lease until they lessee honors/pays them and then YOUR BANK sends them the lease. Do not do as the landman asks, it puts you at great risk.
That's what I was afraid of. Unfortunately, another family member has already mailed in her executed lease for the same gross acres without being paid yet. Does this limit my options/leverage, or would I still be able to do the transaction through my bank as you suggest?
Jean, you might be able to help yourself and your family member by saying you aren't going to send your lease in until your family member gets paid. Even if they do pay your familty member, make sure you get cash before they get YOUR lease. Jean, I was right where you are now on the 1st of June 2010, I have over $10,000 in legal expenses and it still isn't over. I don't know how big a bonus they are offering you but you may never see it and have the legal bills besides. I may sound like a broken record lately but you can't trust their agreement to pay. It's not illegal to owe someone money and all you can do is sue them. It's probably not worth $20,000 to you, but it might cost that much if they try something sneaky. Yes, you can still use the bank method, but I would try to bail out the family member if I could by withholding even my agreement to lease until they are paid, after all, it shouldn't be a problem for them to pay your family member if they expect you to believe that they are going to pay you promptly. Asking you to send the executed lease and draft, when they know that is not the usual way it's done, does not bode well. Safety first and good luck Jean.
And have an attorney review the lease.
Thanks all for your EXTREMELY helpful comments.
Just to clarify, my lease is something they still want and need right? (It's not a situation where, since they have one family member's lease for these gross acres, that's all they really need to drill and make money?)
Also, am I still free to lease with a different oil company, even though some of the gross acres are now leased with this oil company?
Depending on how much they already have leased, they may not need your lese to drill. Other companies are unlikely to be interested if one company already has some or most of the acreage leased.
Jean, you can lease to whomever you please. In theory they could drill without your acres, but I'm not absolutely sure that you are dealing with an actual drilling operator. There are companies out there that lease acres speculatively so they can sell the lease to someone else for a profit or participate in a well to a small percentage. Frequently, or so it seems, it's these companies that try to tie you up in a lease without paying for it. If they can sell your lease to someone else before they ever pay you they have almost no money at risk at all. You haven't named the company and I don't want you to, but they don't sound like well operators to me, excepting possibly Chesapeake. When someone legitimate decides to drill a well you will probably get more offers if whoever you are dealing with right now doesn't pay your family member or wish to deal with you in a way that gives you a modicum of safety.
The lease is from a well known leasing company. And the lease mentions the Oil Company it is working for. This Oil Company is also very large and well known, especially in the Bakken.
All,
My family member's bonus is approx. $25,000. If she doesn't get paid her bonus...
1. Do you know of any lawyers who would not charge her unless she won (i.e. recovered the bonus), in which case they would get a substantial percentage of it?
2. Can the oil co./landman play similar games with royalties? Or are they pretty much bound to pay the royalties?
Jean, how long has it been since your family member sent in their lease? Tine is of the essence in an oil and gas lease. Your family member may need to scrape up a few hundred dollars for a lawyer to write a letter that the bonus be paid or the lease returned. As I said before you could notify them that you will not lease until your family member is paid, and you have had another offer, it might get them off the dime, if they ever intended to pay anyway. They don't have your lease yet and that may be the only leverage your family member has. If you can find other companies near operating nearby you could ask for a competitive bid. Jean, the last thing an operator wants is for you to lease to someone else and have them participate because the operator will make virtually nothing from your mineral acres, Your family member probably needs a lawyer and to spend money. This is a large part of what I find hateful about the oil and gas industry. They took advantage of your family members ignorance and now it will probably cost them money just to get back to square one, unless you can use your lease as leverage to convince them to pay your family member. Jean, I don't know any lawyers that work on contingency and a lawsuit against an oil company would probably cost more than $25,000. 2 oil companies can get away with not paying royalty if payment of royalty is not made a condition of the lease, which it is not in the lease you have in your hands. People go for years without ever receiving the royalty they are owed. It's not against the law to owe someone money. By executing and returning the lease you are going into business with the lessee so that if they owe you money it's a business dispute and all you can do is sue them, which may cost $100,000, so they feel pretty secure if they decide not to pay you.
Jean said:
All,
My family member's bonus is approx. $25,000. If she doesn't get paid her bonus...
1. Do you know of any lawyers who would not charge her unless she won (i.e. recovered the bonus), in which case they would get a substantial percentage of it?
2. Can the oil co./landman play similar games with royalties? Or are they pretty much bound to pay the royalties?
It's been about 2 weeks. I will carefully consider your advice (convincing the family member may be another matter). And I like the idea of not leasing myself until my relative is paid. Thanks again!
r w kennedy said:
Jean, how long has it been since your family member sent in their lease? Tine is of the essence in an oil and gas lease. Your family member may need to scrape up a few hundred dollars for a lawyer to write a letter that the bonus be paid or the lease returned. As I said before you could notify them that you will not lease until your family member is paid, and you have had another offer, it might get them off the dime, if they ever intended to pay anyway. They don't have your lease yet and that may be the only leverage your family member has. If you can find other companies near operating nearby you could ask for a competitive bid. Jean, the last thing an operator wants is for you to lease to someone else and have them participate because the operator will make virtually nothing from your mineral acres, Your family member probably needs a lawyer and to spend money. This is a large part of what I find hateful about the oil and gas industry. They took advantage of your family members ignorance and now it will probably cost them money just to get back to square one, unless you can use your lease as leverage to convince them to pay your family member. Jean, I don't know any lawyers that work on contingency and a lawsuit against an oil company would probably cost more than $25,000. 2 oil companies can get away with not paying royalty if payment of royalty is not made a condition of the lease, which it is not in the lease you have in your hands. People go for years without ever receiving the royalty they are owed. It's not against the law to owe someone money. By executing and returning the lease you are going into business with the lessee so that if they owe you money it's a business dispute and all you can do is sue them, which may cost $100,000, so they feel pretty secure if they decide not to pay you.
Jean said:All,
My family member's bonus is approx. $25,000. If she doesn't get paid her bonus...
1. Do you know of any lawyers who would not charge her unless she won (i.e. recovered the bonus), in which case they would get a substantial percentage of it?
2. Can the oil co./landman play similar games with royalties? Or are they pretty much bound to pay the royalties?
Jean, you may not want to hear this but they may not have even begun to check your family members title, after all, the lessee is in no hurry because they already have the lease. I don't know what state you are in but in many states if more than one potential lessee holds a lease, the one that records the lease first is the winner. If company A holds your executed lease but doesn't record it and company B offers to lease you and you execute their lease and they record it, having already paid you, because you wouldn't want to just trade one non-payer for another, then company A's lease is worthless. You can search online to see if your state is a Race or a Notice state. You would have to check to see if company A who isn't paying now has recorded the lease or not. If you can interest another lessee in the minerals, they could probably easily check to see if the lease was recorded. Texas is a notice state. ND is a race state, which I am most familliar with. The state of ND allows you to lease to another party and the one to record first wins, it's a protection for the mineral owner, to make the lessee commit, so the mineral owner will not be left in limbo with a lease out there that the lessee may have no intention of paying for or is taking too long to run title or pay for. Just a thought. It's really hard to work yourself back to where you have any control after you give the lessee an executed lease without having been paid, and that is why they tell you to send them the executed lease, they know that you are then at a disadvantage, become dependant on them to do the right thing unless it's enough money to sue and you have the means to do so, and the knowledge of what you can do. The lessee may pay your family member, months from now after they complete their title work but there is no gurantee.