Waiting on Bonus to be paid

Is it a normal business practice to offer a $1500 per Acre Bonus on a Mineral Lease but wait up to 120 days to collect it after a lease is signed ? I currently have an offer for my Union District minerals but I'm unsure of this 4 month wait being legit or beneficial to me. I'd be giving up a signed lease without an up-front bonus and that seems real shady on the Company's part.

Is that part of the lease terms?


He is saying all the Leases they contract have a "120 Day clause in them to pay the Bonus"


You can say you want fewer days, like 60 or 90. They can say yes or no to that. I think 120 is standard for some companies, e.g. EQT.

Would that be standard as well on a "Paid Up" lease ? As the lease I was sent to look over is that type. Doesn't this type of Lease require being paid in advance ?
Nancy Mosley said:

You can say you want fewer days, like 60 or 90. They can say yes or no to that. I think 120 is standard for some companies, e.g. EQT.

Yes. As I understand it, in the olden days the lease would call for a yearly rental, for a term of x number of years. Now the yearly rentals are paid in advance, as a bonus, and the lease is then paid up.

So how can this be a formulated "Paid Up" lease which pays the Bonus Up front ( made by "Antero Resources" ) but on the same note have a 120 Day Waiting Clause to Receive the Bonus,... I am totally lost now ! Also this lease has a Warranty : Stipulating ,. The Lessor warrants and agree's to defend the title to the land and interest described in paragraph 1 (which is of course the property's coordinates) , covenants that Lessee will have quiet enjoyment under this lease. Why would I have to give Warranty , When My Deed States I and my wife have sole and exclusive Mineral & Timber Rights to my property ?

Nancy Mosley said:

Yes. As I understand it, in the olden days the lease would call for a yearly rental, for a term of x number of years. Now the yearly rentals are paid in advance, as a bonus, and the lease is then paid up.

Also, some leases have an "out" clause for the leasee. They have those 120 days to decide whether to lease. I just got one of those from an interested party. The term "Paid Up Lease" doesn't technically apply to the date you get your bonus. It is as Nancy described. Also, a paid up lease gets the leasee out of a lot of standard clauses in older leases. I didn't say that correctly, but the language effects different payments that the leasee use to have to make. To complicated for a blog explanation.

Dave Gaudioso said:

Would that be standard as well on a "Paid Up" lease ? As the lease I was sent to look over is that type. Doesn't this type of Lease require being paid in advance ?
Nancy Mosley said:

You can say you want fewer days, like 60 or 90. They can say yes or no to that. I think 120 is standard for some companies, e.g. EQT.

Thank You Jim,. I do understand more clearly now. So basically 120 days gives the lessee a Buffer to think about whether they actually want to go thru with a lease or not OR just tie up your property, ... assuming other companies may have an interest in the said property and offer for a higher price within that 120 day time frame so they can pass it off for profit. So does that still legally make the lease Valid,.... even though the Bonus is not paid before the 120 day's ?

Jim White said:

Also, some leases have an "out" clause for the leasee. They have those 120 days to decide whether to lease. I just got one of those from an interested party. The term "Paid Up Lease" doesn't technically apply to the date you get your bonus. It is as Nancy described. Also, a paid up lease gets the leasee out of a lot of standard clauses in older leases. I didn't say that correctly, but the language effects different payments that the leasee use to have to make. To complicated for a blog explanation.

Dave Gaudioso said:

Would that be standard as well on a "Paid Up" lease ? As the lease I was sent to look over is that type. Doesn't this type of Lease require being paid in advance ?
Nancy Mosley said:

You can say you want fewer days, like 60 or 90. They can say yes or no to that. I think 120 is standard for some companies, e.g. EQT.

Really depends on the terms of the lease. No one can really answer you unless we saw the lease you signed or were sent. Others probably can answer better, but I believe most leases don't have that buffer clause. I don't believe any of ours from Antero did. I could be wrong. I should know this, but I don't. Need to read one of our leases. I think they just state that they have so many days to do the title work. The flippers will usually always put that in a lease. Something to the effect that they have a right to void the lease at their whim within the time period.

I just read one of our Antero leases and there was no mention of a waiting period. I saw no other paperwork with any mention of time.

EQT's leases have the 120 days terminology. Antero (the one I have) does not. This might be for preliminary title work. Sometimes they are just in a big hurry to get as many people in an area signed as they can quickly without checking too carefully about if these are the correct owners. Or maybe other reasons.

Dave, about validity of the lease even though the bonus is not paid until 120 days: I guess when you sign it it is valid. If they don't pay on time, unless you have a clause saying they have to pay on time or some penalty, I think they can stall for awhile.

Jim was referring to the old leases where there was a yearly (or every 6 months etc) rental payment due, and there was often some language in the lease that the lease was void if they didn't pay on time. That problem is solved with the paid up lease.

The "primary term" of the lease starts when the lease is signed, I think, unless the lease language says something else. It goes for the amount of time (often 5 years) from that date, then terminates unless other things in the lease keep it valid. In the "olden days" that something was usually a well drilled, or maybe several wells drilled, within the primary term. Those were vertical wells, shallow, and relatively inexpensive to drill. There are leases that have pretty firm terms stating when the primary term ends and what keeps it the lease in effect after that, but some have very loose language. EQT's leases typically have something to the effect of searching for oil or gas. That could mean almost anything. This is an important topic.

I'll get to the warranty soon. This is getting too long!

By the way, I am NOT an attorney and believe it is always a good idea to get an attorney to advise when signing any legal document. Not too easy to find a good oil and gas attorney who practices in WV who isn't really busy.

Here are links to 2 documents that are helpful in learning about leases

Links for Oil and Gas Lease Terms and Negotiation

http://www.gdhm.com/images/pdf/jbm-ogleasechecklist.pdf

CHECKLIST FOR NEGOTIATING AN OIL AND GAS LEASE

http://recenter.tamu.edu/pdf/229.pdf

Hints on Negotiating An Oil and Gas Lease

Somebody shared them sometime and I saved the links. Geared toward Texas and Oklahoma but much of it is pertinent to WV.

Warranty

The above papers talk about Warranty. The way you could get in trouble is if someone back in your chain of title, even in the 1800s, reserved some or all of the mineral rights, and subsequent deeds don't mention it. You were deeded what your grantor had to deed, but if somebody 100 years ago had reserved part of the minerals then your grantor didn't have that part to grant to you. Try to trace your title back as far as you can.

Here is a link to a Tyler County discussion that talks about Warranty of title

http://www.mineralrightsforum.com/group/tyler-county-wv-oil-gas?commentId=4401368%3AComment%3A526745&xg_source=msg_com_group

Thank You Very Much for ALL Your Help ! ! !

Nancy Mosley said:

Here are links to 2 documents that are helpful in learning about leases

Links for Oil and Gas Lease Terms and Negotiation

http://www.gdhm.com/images/pdf/jbm-ogleasechecklist.pdf

CHECKLIST FOR NEGOTIATING AN OIL AND GAS LEASE

http://recenter.tamu.edu/pdf/229.pdf

Hints on Negotiating An Oil and Gas Lease

Somebody shared them sometime and I saved the links. Geared toward Texas and Oklahoma but much of it is pertinent to WV.

Warranty

The above papers talk about Warranty. The way you could get in trouble is if someone back in your chain of title, even in the 1800s, reserved some or all of the mineral rights, and subsequent deeds don't mention it. You were deeded what your grantor had to deed, but if somebody 100 years ago had reserved part of the minerals then your grantor didn't have that part to grant to you. Try to trace your title back as far as you can.

Here is a link to a Tyler County discussion that talks about Warranty of title

http://www.mineralrightsforum.com/group/tyler-county-wv-oil-gas?com...

You're welcome Dave. Pass it on.

Also, The Doddridge group has many very useful discussions with lots of good information.

Keep reading, keep learning, and don't be in a hurry to lease. Wait until you are really ready.