I am located in southern Saline county Kansas. In 2007, I purchased an 80 acre tract with a history of oil production but no wells currently. The tract was under a lease initiated by the previous owner. The lease began April 6, 2006 and was to run for 5 years. The lessee paid $10./acre and promised a 1/8 royalty. No activity occured and I never heard from the previous owner or the lessee, until this month (June 2011) when my wife received a call that the lessee wanted to renew the lease for 3 years at the same terms as an option of the original lease. My wife told them to send us a copy of the lease. A day later I received a letter from a different firm offering $50/acre and a 1/8 royalty. A couple days later the copy of the lease and option arrived from the first company and a check for $830. The lease was initiated on April 6, 2006 and was a 5 year lease. The lease was signed by the previous owner and noterized. An additional page was stapled to the lease titled: Rider, Option To Extend. The option was signed by the previous owner and the entire lease and option appears to have been recorded by the Saline County Kansas Registered of Deeds. I also have learned that the previous owner died in August of 2009. The lease is between an oil company in Wichita, KS and the previous owner, but the letter about the extension is from a firm in Ohio. So, here is the question: Do I have to go along with this Option to extend even though they contacted us 2 months after the original lease expired? How do I go about cancelling this lease and lease option? They say the reason they were late was because they did not know that the land changed hands or that the previous owner had died. The oil that has been pumped from the 80 (over 30 years ago) came from the Mississippian Shale about 2600 feet deep. 3 wells accross the road from the 80 produced about 1000 barrels each last year. The firm that offered $50/acre say they have oil companies that want to come into the area and do horizontal drilling.
John,
I assume you purchased the mineral rights to the tract from the previous owner. If so, the land was under a valid lease until the expiration of that lease. WIthout reading the lease and the rider, it is hard to answer your question, but you should be able to do so pretty easily. The deadline the company has in order to extend the lease should be clearly spelled out. Check to see if the previous owner (or his heirs) had an obligation to notify the lessee of his death and if this somehow gives the company a reason to extend the time by which they can extend the lease. You should also make sure that the lease and is in fact recorded with the county. This can be done by simply checking the recording information of the copy you have and verifying that those same pages are recorded. If you received their offer and check after the date they had to exercise their rights, you should be free to lease to whoever you wish.
The first sentence of the Option To Extend: “Lessee is hereby granted the option, but not the obligation, at any time prior to the expiration of the primary term of this lease, to extend the primary term of this lease for 3 years by the tender of the sum of $10.00 per net mineral acre owned by Lessor in the lands covered by this lease. This option may be exercised by Lessee by tender of said sum by check or draft payable to Lessor, delivered to Lessor or deposited in the United States mail, postage prepaid, addressed to Lessor. Upon such tender, the primary term of this lease shall be automatically extended by said years, to the tenor and effect as if said extended term had been originally expressed in this lease; subject, however, in all other respects, to the provisions and conditions of this lease.” In the lease itself, it states: “If the estate of either party is assigned, and the privilege of assigning in whole or in part is expressly allowed, the covenants hereof shall extend to their heirs, executors,administrators, successors or assigns, but no change in the ownership of the land or assignement of rentals or royalties shall be binding on the lessee until after the lessee has been furnished with a written transfer or assignment or a true copy thereof.” Yes, we did buy the mineral rights.
I would say that this language is fairly typical in a lease and rider to extend. You, when you purchased the land, were required to notify the lessor that you were now the legal owner. This isn't usually a big deal and is commonly overlooked. The only downside to you is that you wouldn't have received delay rental payments or other notices from the lessee during the term of the lease. The important issue for you is if the lessee attempted to notify the former lessor of their intent to extend the lease. What you now need to verify is that the notice and check provided to you were not previously sent to the former (now deceased) mineral owner. Since this will be difficult for you to determine, I would simply put the onus on the company that is trying to extend the lease. I would write back to them, return the lease (unexecuted) and the check and state that you do not accept their right to extend the lease since their notice was recieved after the date required by the terms of the lease, ie, the expiration date of the lease and that the lease has in fact terminated. If they cannot prove that they attempted to extend the lease by written notice to the prior lessor, and/or they cant prove notice was sent to you prior to expiration of the lease, then the lease has expired and you are free to lease to whoever you desire.
Good luck
What would be an acceptable way for them to “prove that they attempted to extend the lease by written notice to the prior lessor”? On the check stub, it states previous owner’s name, lease rental Saline Co. Kansas…pmt date: 04/06/2011…$830. The check is made out to me and dated 6/6/2011. In the letter it states: “We apologize for the delay in your receiving this extension check as we were just made aware of the change in ownership 6/6/2011.” Would 04/06/2011 be considered a day too late if the lease was dated 4/6/2006 and stated to last for 5 years?
SInce by their own correspondence, they were not aware of the change in ownership until 6/6/11, why did they include the prior date and name of lessor on the check stub? I think they are trying to convince you notice was sent to the prior lessor but they don’t have the proof that they did so. It seems to me the check stub information made out to the previous lessor, and conveniently dated exactly 5 years after the lease was executed is a little too coincidental. The fact that they made the check out to you shows that they did this after 6/6/11 and more than likely made out the check stub at the same time. I would ask them to provide proof, (ie a certified mail receipt, or some written acknowledgement of receipt by the former owners heirs) that the previous lessor or his heirs actually received that notice before the expiration date. I doubt that they would wait until the last day of their option period to exercise their right to extend the lease and I doubt they have any proof of receipt by the prior lessor. It only costs you a stamp to find out and it will be very difficult for them to prove they have a valid lease unless you sign it.
Makes sense. I will return the check and send them a letter telling them the lease expired before they contacted me, so there is no longer a lease. It was so cheap that I don't know why the previous land owner ever signed it anyway. Thank you for your help.
John
The other thing you should check is if this company actually filed an affidavit of extension prior to the expiration of lease. I'm guessing this was a BOP lease? I've heard they have been paying for extensions late then filing Aff of Extension well after the expiration date. There is a statute on this:
55-205: Record of lease as notice for definite term; extension upon contingency, affidavit. When an oil, gas or mineral lease is hereafter given on land situated within the state of Kansas, the recording thereof in the office of the register of deeds of the county in which the land is located shall impart notice to the public of the validity and continuance of said lease for the definite term therein expressed, but no longer: Provided, That, if such lease contains the statement of any contingency upon the happening of which the term of any such lease may be extended (such as "and as much longer as oil and gas or either are produced in paying quantities"), the owner of said lease may at any time before the expiration of the definite term of said lease file with the said register of deeds an affidavit setting forth the description of the lease, that the affiant is the owner thereof and the facts showing that the required contingency has happened. This affidavit shall be recorded in full by the register of deeds, and such record together with that of the lease shall be due notice to the public of the existence and continuing validity of said lease, until the same shall be forfeited, canceled, set aside or surrendered according to law.
John S. Alexander said:
Makes sense. I will return the check and send them a letter telling them the lease expired before they contacted me, so there is no longer a lease. It was so cheap that I don't know why the previous land owner ever signed it anyway. Thank you for your help.
John
They did file an affidavit with the county on April 23, 2011. The lease expired on April 6, 2011. How do I get the affidavit canceled or removed from the deed?
Mr. Alexander, it sounds to me, as though they were late. I think the affidavit should have been filed on or before April 6 2011.
If you all are interested for other Kansas topics we would love to see you all join the Kansas group on here! Been reading your discussions, hope all is working out.
John,
what ever became of your situation? I am in a similar situation in Oklahoma and was curious what happen.