Ive leased some mineral rights already not knowing alot about it. I did some reading about things not to do when leasing mineral rights. I have recieved another lease but reluctant to sighn. I dont understand alot about this and in reading the lease it does say lessor hereby warrants and agrees to defend the title to the lands described ect. does anyone with more experince know what the hell this means? We own quite a bit of minerals and feel like weve been took on first lease by not knowing alot about how these lease things work. We dont want to get took on the next one we sighn. Thanx
Dear Mr. Shove,
To warrant means to guarantee. So, to warrant title, you are guaranteeing possession of clear title to the lessee, sufficient to convey marketable title in the document.
If title fails, the lessee would have a cause of action against you as a civil action seeking damages for a breach of title.
Defending title means that you will rebuke all adverse claims to your interest. Most people would want to vigorously defend title to what they own.
It is not a horrible thing to warrant title, IMHO. As a practice, we do not warrant title. If the lessee needs some assurance, we will warrant title by, through and under lessor, but not otherwise.
Buddy (or anybody),
If I warrant title, is the worst case scenario in the event of title failure ...
1. The payments I'm owed by the lessor will be reduced by any mortgages, back taxes, etc.
OR
2. I'm liable for any mortgages, back taxes etc. even if they exceed what the lessor owes me (in other words, I could LOSE money by leasing)?
Thank you!
Buddy Cotten said:
Dear Mr. Shove,
To warrant means to guarantee. So, to warrant title, you are guaranteeing possession of clear title to the lessee, sufficient to convey marketable title in the document.
If title fails, the lessee would have a cause of action against you as a civil action seeking damages for a breach of title.
Defending title means that you will rebuke all adverse claims to your interest. Most people would want to vigorously defend title to what they own.
It is not a horrible thing to warrant title, IMHO. As a practice, we do not warrant title. If the lessee needs some assurance, we will warrant title by, through and under lessor, but not otherwise.
Best,
Buddy Cotten
You are guaranteeing to the Lessee that you own what the Lease says you own. As a general rule, it is not wise to guarantee something that you are uncertain about. Are you absolutely certain that you own your minerals? If so, why? Because the deed when you bought the property said so? Because your title company said so? Because you got the land from a relative and they said so? What if all of those people are wrong and there was a mineral reservation decades ago that nobody knew about and it turns out that you own NONE of the minerals? So I repeat, are you absolutely certain that you own the minerals? If not, then as a general rule you should not guarantee (warranty) that you do in a legal document.
If it turns out that you do NOT own that mineral interest, or own only a portion of it instead of the whole, then, depending upon the exact wording, you could be liable to reimburse the Lessee for any bonus consideration that you were paid to sign the lease, or royalties received if the well has produced. Having said that, there have been two cases in which I leased persons who did not own minerals, once because my broker gave me bad information and once because I was told to lease a tract that somebody else had run title on, and I did review her work but she was wrong and I just didn't catch the error in her Title Runsheet. Anyway, there was about $1,500 at stake on the first one and $3,000 on the second one. In both cases, our base client refused to press the matter and just let them keep the money. Of course, they would probably have a different viewpoint if the amount of money were $15,000 or $150,000 or more.
I initially refused to Warranty title to my minerals, but went ahead and did so because I was just leasing 1/4 of an acre city lot and the Lessee insisted on it. If it turns out that I do not own my minerals, I'm on the hook for only about $400 so far. However, you say that "we own quite a bit of minerals," so I would be extremely hesitant if I were you to agree to warrant title going all the way back to patent. Like Buddy said, you could warrant that YOU have not done anything to alienate whatever minerals you acquired by using his wording, but I would sure not want to warrant what anybody else had done if I had alot of minerals.