At the leasing stage, title requirements tend to be less strict than at the royalty stage. For families of deceased mineral owners, you may find this to be a nice windfall in that the company may opt to pay you the lease bonus without having to conduct a probate in that may be willing to pay you upon your signature on an affidavit of heirship or similar rather conducting an entire probate. In some instances, they may take your signature on the lease, but they don’t pay you any bonus money until you correct the title which seemingly leaves you ‘stuck’ with that company without any bonus money. Even at the leasing stage, you should be cautious and consider your options when a deceased family member’s interest is involved. This earlier blog may also be helpful on curative and what you should avoid when curative issues come up - http://www.mineralrightsforum.com/profiles/blogs/mineral-title-curative-in-colorado. The lesson here is - be sure and address any curative issues, costs, and similar BEFORE you sign a lease.
Why the Difference at Leasing vs. Royalties
You may ask why they’re willing to give you the leasing bonus but not the royalties? First, lease bonuses are often smaller and the company may be more concerned about tying up the acreage and making sure it’s under lease such that they may be willing to take a chance with the bonus funds even though they don’t know the ramifications of the probate yet. Second, if the lease contains a warranty clause then the company has less risk in paying you in that if you don’t actually end up being the title owner that they can come back and ask you to refund the erroneously paid funds.
What do I do with a lease offer when the minerals are in the deceased name?
If you have a lease offer, but the minerals are the name of the deceased family member, then consider asking the company to contribute funds toward your fees and costs to update title. This protects against spending more on fees to update title than would be paid in bonus funds. Be sure you do this ahead of time and before you sign any lease. Next, if you decide to proceed with leasing, be sure you strike the warranty clause—remember you aren’t even in title yet and making promises that you own the minerals when you don’t even have them in your name and can sure cause some problems down the road. Also, before you sign, be sure you ask for and obtain any information the company may have about who is in title to cut down your costs and fees to update that title.
Jenna H. Keller, Esq.
Attorney at Keller Law, LLC. (www.kellerlawllc.com)
Jenna H. Keller provides legal services to farmers, ranchers, rural property owners, and severed mineral interest owners in the areas of estate planning, natural resources (oil, gas, wind), real estate, and water in Nebraska and Colorado.
The information is for general information purposes only. This should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided.