Some years ago, there were many complaints that landowners had not been paid their bonus and the lease was filed of record.
To help with that situation, I am developing a clause for my Professional Lease Form that reads as follows:
7. PAYMENTS TO LESSOR. Lessee covenants and agrees to pay Lessor as follows:
(A) SIGNING BONUS: Lessee agrees to pay Lessor a signing bonus in the amount of__________________Dollars ($_________) by company check or in United States Currency. The bonus payment shall be paid to Lessor at the time that Lessor delivers this Lease to Lessee. All bonus payments, rentals and royalty payments made to Lessor under this Lease are non-refundable. Failure by Lessee to pay the bonus payment as set forth above shall render this Lease null and void. Should Lessee file this Oil and Gas Lease of record, or a notice or memorialization of same prior to paying the signing bonus as provided above, Lessee shall pay to Lessor treble the amount of the signing bonus as liquidated damages and the lease shall continue to be null and void and of no further force or effect. Lessee further agrees to release this lease within 10 days of its failure to pay the signing bonus as provided above.
B) DRILLING PENALTY: In the event that Lessee fails
The highlighted area in red can be changed to fit a particular situation, i.e. on or before November 14, 2014, etc.
Best,
Buddy Cotten
https://flipboard.com/section/the-morning-report-bXBz7L
www.cottenoilproperties.com
Buddy: Wish I had read this earlier! I signed a lease with a landman for royalty rights in Gaines County in November. To date I have not received my lease bonus. The story is that the "investor" behind the lease bank is re-thinking his investment and has shut off the funding because of recent oil and gas prices. They have an executed lease - I am trying to find out if they have filed it yet. Could be that the landman is working in good faith, but he is not returning calls these days. He had promised to make the deal good out of his own funds, but that date has long since passed. Any advice out there?
Whew. I am sorry to hear about your situation. You need a search of the Gaines County records to see if your lease was filed. You can do that yourself through http://www.texasfile.com/texas-land-records-coverage/#county-clerk-...
I took a look and the lease might have been filed in December. You either need to be paid or have the acreage released.
After you know whether it has been filed, then you know your next step.
Best
Buddy Cotten
Thanks for the quick reply. I talked to the County Clerk and the lease was in fact filed. I have written to the landman, asking for a reply today to let me know how he is going to proceed. Quick question - what is the procedure to cancel a lease? I don't want the property to appear open, just in case someone else is banking leases in the area.
To cancel a lease, you need to have the lease basically quit claimed back to you. This is generally done by a form entitled "Release of Oil and Gas Lease" or something similar.
While the lease is of record and you have not been paid, nobody else will lease the land (that is, if they have any sense) and your land has a cloud on its title.
Maybe some of the lawyers can chime in here.
Best
Buddy Cotten
I am in the same boat in Roosevelt County MT. Bank draft came back unpaid about 2 1/2 weeks ago. Leasing agent has told me 2x a check would be sent via FED EX. I asked for a tracking number to insure the check was sent, no luck. Leasing agent apologized for inconvenience & states I have not been cold drafted but that the operator is very busy. At what point do I conclude I have in fact been cold drafted? Thanks, Tom
Tom, if it were me, I would contact the operator directly. Ask for the land manager and tell him what is going on and gauge his response.
Buddy, Thanks for the response. The operator is Fort Worth, owner is Brice Phillips. I tried to call him yesterday. I had a couple of numbers from a year or more ago. One went a voicemail but was not personalized so I don’t know if was his. The second had a busy signal-what business does not go to vmail?
That is messed up. Time for a demand letter.
Hello Mr Cotton, I find your "Payments to Lessor Clause" of interest, but I have to wonder, as specific as some contracts can be, doesn't section B) fall short? What exactly is the penalty suggested for lessee failure to pay?
Ava Eadie
Dear Ms Eadie,
As to payments on Section A, the penalty is treble, or 3 times the amount of bonus. Failure to pay is stated in the clause -- the lease is null and void
Section B is not a complete clause, but a tease to illustrate a clause that could be used if the lessee failed to commence a well in a specified period of time. The last "failure to drill" penalty that I negotiated was $450 per acre. As a minor point of interest, the lessee did not spud in the time period and the penalty kicked in to cost them around $200,000.00.
I hope that I answered your question. Clause A is complete and specific. No comment can be made to clause B, because I chose not to include the clause in its entirety.
Thank you Mr. Cotton for your reply and it is reasonable to understand that if this is how you make your living, you would not put all your secrets in one basket.