What does the wording 'Paid-up" on a Leese offer mean?
The term "Paid-up" means that no rentals are due for failing to drill a well during the primary term of the lease. The lessee can sit on the lease until the lease expires.
Thank you Charles. Is that a bad thing to have in a Leese? or is it common? Does it matter what the net min ac is?
The paid up lease is I think the most common form of lease these days. In the old days with yearly rentals the lessee could lease acres for 2 or 3 years and be late with the lease payment by days in one year and lose the lease and have to lease it again, if they can, possibly at higher rates. With a paid up lease, the lessee can't lose the lease in the primary term of however many years, it's already paid for, paid up. If a well is drilled and production obtained both types of leases move into the secondary term of as long thereafter as oil, gas or both are produced. Pay careful attention to shut in clauses and payments, which can maintain a lease in force without production, sometimes for as little as $1 per net acre per year for decades.
private said:
Thank you Charles. Is that a bad thing to have in a Leese? or is it common? Does it matter what the net min ac is?