As the title says. Can anyone shed light on this? If the company writing the draft chooses to redraft is there any requirement to inform you that they have ? Do they have to send you a new draft ? After the first drafts expiration, they record the lease without so much as notifying you they did so, could they return 6 months later and pick up where they left off as if nothing had happened?
When you execute a lease and the company provides you with a draft, that draft represents the consideration for execution of the lease. The draft has to state any qualifications for non-payment. Usually, the only qualification is a period of time (i.e 30 days), during which time the company can verify title, get approval to pay etc. If you can prove that you haven’t recieved compensation as promised, the executed lease is invalid. The problem is, if they have recorded the lease, the burden of proof is on you to show you never received compensation. If this has happened, you should contact the company demand either the lease to be released, for you to receive a check, not a draft (you might consider re-negotiating the terms) or contact a lawyer.
Thank you, Ed. My own lawyers did give me a bit of a hard time about showing I was not paid, until the lessee tried to explain their actions, and were caught not telling the truth. The lessee provided documents that proved my case. My lawyers did bring up that I could negotiate a new lease with the same lessor for a quick resolve to the situation, but I thought it would be irresponsible to deal again with people I know I can’t trust. Since there is a producing well involved also, not a barn burner, but should pay itself off in 3 more years, I think it would be fairly certain that they would be making money off a lease from me, and I wouldn’t like that considering their actions to date. Besides, if they wanted it they had ample opportunity to pay. They have nobody to blame but themselves.
To prove you have not been paid would you have to force the oil & gas company to show proof of payment to you?
r w kennedy said:
Thank you, Ed. My own lawyers did give me a bit of a hard time about showing I was not paid, until the lessee tried to explain their actions, and were caught not telling the truth. The lessee provided documents that proved my case. My lawyers did bring up that I could negotiate a new lease with the same lessor for a quick resolve to the situation, but I thought it would be irresponsible to deal again with people I know I can't trust. Since there is a producing well involved also, not a barn burner, but should pay itself off in 3 more years, I think it would be fairly certain that they would be making money off a lease from me, and I wouldn't like that considering their actions to date. Besides, if they wanted it they had ample opportunity to pay. They have nobody to blame but themselves.
When the company provided you with the draft, you hopefully kept a copy when it was presented at your bank for collection. If not, your bank would have a record that it was presented for collection, just like if you deposited a third party check in your account. If the draft was not paid, your bank will also have a record of this. The most common reason for non-payment of a draft is if a title defect occurs, but the company should notify you of this and attempt to correct any mistaken documents in the chain of title. A draft is no different than check, except that it can legally not be paid if the terms of the draft for example give the company 30 days to verify title, and that title is defective. Absent a title defect or other permitted valid reason as stated either in the lease or on the draft, non payment of the draft is no different than non-payment of a check. Without paying the agreed upon compensation, they have no claim to the lease and may have violated the law by not paying the draft for a valid reason.
If you do not get satisfaction from the company, I would have an affidavit filed of record stating that you were not paid any compensation for the lease and that you claim the lease is invalid. At a minimum, if the company atttempts to drill the lease, they will have to perform a title opinion prior to spudding. This afidavit will place a serious cloud on their title which should prevent a prudent operator from spending millions of dollars drilling a well on an invalid lease. This proceedure may not get you your promised compensation, but at least you can prevent them from profiting from your mineral interest without paying you the agreed upon compensation.