We recently executed a lease with a lessor who is the life tenant. Three of the remaindermen have ratified the lease but the remaining two refuse to do so. Will the lease still be valid if the two remaindermen refuse to execute ratifications? My initial thoughts are that the lease would still be valid, but I was hoping someone could help clear this matter up. The lease is for lands in Cheyenne, County, Colorado. It seems the family is fighting over money.
I have not put a great deal of study into this particular situation but I think your lease expires with the life estate. I have a friend in the position of the disagreeing remaindermen [ the other remaindermen signed leases] and the operator is offering to lease them or demanding their participation in the same breath. I think you need to ask a lawyer.
I am not a lawyer but the person executing the lease having a life estate, do they truly own the minerals any more or has ownership passed already thus the lessor has only a life estate. You can't lease what you don't own. Put another way, if I leased an apartment, I could sublet it as long as I had a lease, but when I lose my lease my lessee is out in the cold and of course I would have no right to alienate/convey any of the owners property.
I'm sure someone will say if I got this wrong.
My opinion is that if a life tenant executes a Lease and all of the Remaindermen fail to sign it as well and fail to ratify it, then the Lease would become invalid upon the death of the Life Tenant, which could prove very costly for the Operator as my guess is that if production had commenced before the death of the Life Tenant and the Subject Property was a drillsite tract then the Operator just drilled a free well for the Remaindermen, and if the Subject Property was a non-drillsite tract then the Operator would have to pay the Remaindermen all of their pro rata royalties after payout.
Now what if some, but not all, Remaindermen sign a Lease or Ratify the Life Tenant's Lease and then the Life Tenant dies? My guess would be that the Life Tenant's Lease would still be valid, but only as to the ownership interests pertaining to the Remaindermen who did sign or ratify, but I frankly am not sure. Interesting scenario.
Worse yet Pete, this is Colorado and not Texas so I don't believe that it would have to be drillsite or wellbore tract.
Pete Wrench said:
My opinion is that if a life tenant executes a Lease and all of the Remaindermen fail to sign it as well and fail to ratify it, then the Lease would become invalid upon the death of the Life Tenant, which could prove very costly for the Operator as my guess is that if production had commenced before the death of the Life Tenant and the Subject Property was a drillsite tract then the Operator just drilled a free well for the Remaindermen, and if the Subject Property was a non-drillsite tract then the Operator would have to pay the Remaindermen all of their pro rata royalties after payout.
Now what if some, but not all, Remaindermen sign a Lease or Ratify the Life Tenant's Lease and then the Life Tenant dies? My guess would be that the Life Tenant's Lease would still be valid, but only as to the ownership interests pertaining to the Remaindermen who did sign or ratify, but I frankly am not sure. Interesting scenario.
Jeremy,
I have dealt with the situation before. Find out who is the trustee of the estate. If it is the lessor, you should get a copy of the Trust Document. The Trustee may be a bank Trust department or it could be the Lessor. Once you have that information you can better determine the rights of the lessor to exclusively lease to you. To do otherwise would be a guess on your part.
Gary, do you mean the Trustee of the Testamentary Trust? For an Estate, I know of only an Administrator or an Executor. It is possible, of course, that there is no Trustee involved here. The Life Tenant could have received the life estate from a deed, or as a devisee, not as the beneficiary of a Testamentary Trust, in a Will.
Anyway, I did some research on this matter last night. Everywhere that I consulted said that a Lease signed by a Life Tenant without ratification or contemporaneous lease by ANY of the Remaindermen would become null and void upon the death of the Life Tenant. There seems to be consensus on that. What is still unclear, and what is the topic of this thread, obviously, is what happens if some, but not all, of the Remainderman ratify or lease.
It could possibly depend on the language used in the creation of the Life Estate. It could, and often does, specify that the Life Tenant would have the power to execute and enjoy the benefits of an Oil and Gas Lease during their natural life. Like Pete said, the problem would be the Life Tenant dying while the lease is still in force and effect.
Pete,
I bow to your superior and broader knowledge of the subject. When I knew there was a Remainderman, It indicated to me that there was a Trust since I've never heard of a remainderman named in a will. Guess it could happen. In the hypothetical death of lessor making a lease invalid, I wouldn't pay a nickel for a lease that the ramaindermen didn't sign. That is what forced pooling is for.
Pete Wrench said:
Gary, do you mean the Trustee of the Testamentary Trust? For an Estate, I know of only an Administrator or an Executor. It is possible, of course, that there is no Trustee involved here. The Life Tenant could have received the life estate from a deed, or as a devisee, not as the beneficiary of a Testamentary Trust, in a Will.
Anyway, I did some research on this matter last night. Everywhere that I consulted said that a Lease signed by a Life Tenant without ratification or contemporaneous lease by ANY of the Remaindermen would become null and void upon the death of the Life Tenant. There seems to be consensus on that. What is still unclear, and what is the topic of this thread, obviously, is what happens if some, but not all, of the Remainderman ratify or lease.
Well, my knowledge is not broad enough to know the answer to the original question ("What happens if the Life Tenant dies and not all the Remaindermen signed the Lease"). I'm not sure about that. But my initial hunch, and all the research that I did the other night, did lead me to conclude that the Lease definitely WOULD be invalid if NONE of the Remaindermen had signed it. I agree with Gary that I would not pay a nickel for a Lease not signed or ratified by all the Remaindermen.
Yes, I have seen a Will that left Blackacre to A for A's lifetime and then upon A's death Blackacre would vest in B, C, and D. More commonly, I have seen a Life Estate conveyed in a Deed of some sort, with Remainder to whoever is specified. Often, this happens when A marries B, remarries to C, and wants to leave the property that A and B and their kids grew up on to their kids but not cut out the stepmother (C).
Dear Gary,
It is generally accepted that there are two types of life estates. A conventional life estate and a legal life estate.
The conventional LE is a Life Estate that was created on purpose. For example, I transfer mineral properties to my wife for her lifetime and upon her death, to my children. Keeps it in the family, so to speak.
A legal life estate is one that is created by operation of law. An example would be a probate code for intestate descent and distribution that read something like this: "As to separate property, the surviving spouse has a 1/3 life estate and the heirs at law have a remainerman in 1/3 and fee in 2/3rds"
Gary L. Hutchinson said:Pete,
I bow to your superior and broader knowledge of the subject. When I knew there was a Remainderman, It indicated to me that there was a Trust since I've never heard of a remainderman named in a will. Guess it could happen. In the hypothetical death of lessor making a lease invalid, I wouldn't pay a nickel for a lease that the ramaindermen didn't sign. That is what forced pooling is for.
Pete Wrench said:Gary, do you mean the Trustee of the Testamentary Trust? For an Estate, I know of only an Administrator or an Executor. It is possible, of course, that there is no Trustee involved here. The Life Tenant could have received the life estate from a deed, or as a devisee, not as the beneficiary of a Testamentary Trust, in a Will.
Anyway, I did some research on this matter last night. Everywhere that I consulted said that a Lease signed by a Life Tenant without ratification or contemporaneous lease by ANY of the Remaindermen would become null and void upon the death of the Life Tenant. There seems to be consensus on that. What is still unclear, and what is the topic of this thread, obviously, is what happens if some, but not all, of the Remainderman ratify or lease.
Buddy, do you have an opinion on the poster's original question? Does the Lease remain in effect if some, but not ALL, Remaindermen have leased or ratified at the time of death of the Life Tenant?
From my experience, and from the research I did for this thread, the Lease definitely does not continue in effect if NONE of them signed or ratified, but I'm not sure about if SOME have signed or ratified.
Buddy,
Thanks for the fine explanation. It turns out that I have inherited both situations to manage mineral right for but never knew the legal pitfalls for either. I personally liked the Legally produced Remainderman concept for management. We created an LLC and my job was with the LLC and much easier to realize big income. The Conventional life estate with Remaindermen fee ownership was more difficult. The surviving spouse with the entire right was fearful of doing the wrong thing for the children and the future owner's (5) didn't want to make decisions for the other siblings or Mom so nothing got done and hundreds of thousands of dollars of value that could be realized just sits in the ground. Life estates are a wonderful idea but, in my experience, the Remainderman should me limited to one or two and the authority to make decisions should be specified in the Life Estate transfer. But you already know that.
Gary H
Buddy Cotten said:
Dear Gary,
It is generally accepted that there are two types of life estates. A conventional life estate and a legal life estate.
The conventional LE is a Life Estate that was created on purpose. For example, I transfer mineral properties to my wife for her lifetime and upon her death, to my children. Keeps it in the family, so to speak.
A legal life estate is one that is created by operation of law. An example would be a probate code for intestate descent and distribution that read something like this: "As to separate property, the surviving spouse has a 1/3 life estate and the heirs at law have a remainerman in 1/3 and fee in 2/3rds"
Buddy Cotten
Mineral Manager
Gary L. Hutchinson said:Pete,
I bow to your superior and broader knowledge of the subject. When I knew there was a Remainderman, It indicated to me that there was a Trust since I've never heard of a remainderman named in a will. Guess it could happen. In the hypothetical death of lessor making a lease invalid, I wouldn't pay a nickel for a lease that the ramaindermen didn't sign. That is what forced pooling is for.
Pete Wrench said:Gary, do you mean the Trustee of the Testamentary Trust? For an Estate, I know of only an Administrator or an Executor. It is possible, of course, that there is no Trustee involved here. The Life Tenant could have received the life estate from a deed, or as a devisee, not as the beneficiary of a Testamentary Trust, in a Will.
Anyway, I did some research on this matter last night. Everywhere that I consulted said that a Lease signed by a Life Tenant without ratification or contemporaneous lease by ANY of the Remaindermen would become null and void upon the death of the Life Tenant. There seems to be consensus on that. What is still unclear, and what is the topic of this thread, obviously, is what happens if some, but not all, of the Remainderman ratify or lease.
Pete, this is all I have:
http://www.mineralrightsforum.com/profiles/blogs/the-life-estate-in-texas-a
From sad personal experience for a company that I know well, when the life ceases and the lease is not ratified, then the lease ceases, except where the open mine doctrine applies. There are some tricky things that can be done with homestead, but too elaborate to delve into here.
Pete Wrench said:Buddy, do you have an opinion on the poster's original question? Does the Lease remain in effect if some, but not ALL, Remaindermen have leased or ratified at the time of death of the Life Tenant?
From my experience, and from the research I did for this thread, the Lease definitely does not continue in effect if NONE of them signed or ratified, but I'm not sure about if SOME have signed or ratified.
I forgot to mention "open mine doctrine," you are exactly right. If there was a Lease executed before the Life Estate was created, then the Life Estate was created, and there was production under that Lease at any time before the expiration of the Primary Term, then regardless of when the Life Tenant died the Lease would not expire, even if none of the Remaindermen leased/ratified. I think I worded that correctly, we need a flowchart for this discussion thread!
Mr. Gautreaux, the life tenant leased his tenancy and remaindermen's signatures could only agree to his doing so. The ones left up in the air are the lessee, if he hoped to obtain more time than his lessor had to lease, and whoever was relying on whatever provisions the lease provided for dealing with remainder men.
Thanks Gary. I have done all the title work on this and the Executrix of the Estate conveyed the interest to the Estate's son as Life Tenant and the son's children and wife as the remaindermen in 1973. The Life Tenant has executed a number of leases in the past with the remaindermen ratifying all of them until now. There currently no production in this section as it appears a well was drilled in 1969 and 1983. Both are DA. I am under the impression that if there is production on this tract, the royalties for the ones who ratified would be put in an account with the interest accrued available to the Life Tenant and the royalties for the non-ratifying remaindermen would be put in suspense. Upon the death of the Life Tenant the royalties would be distributed to the remaindermen who ratified. Assuming that this is correct, and this is just from reading up and talking to colleagues in the business, at which point would the non-ratifyers have access to their royalties? Does the well have to pay out twice as in a force pooling case and then they would have the option to participate in the well? I am not quite sure how that would work concerning the remaindermen who did not ratify. This assuming that the Life Tenant is no longer with us. It is a pretty ugly situation and I am hearing it from both sides of the family. Not very pleaseant conversations to say the least. Any help would be appreciated. Thank You.
Gary L. Hutchinson said:
Jeremy,
I have dealt with the situation before. Find out who is the trustee of the estate. If it is the lessor, you should get a copy of the Trust Document. The Trustee may be a bank Trust department or it could be the Lessor. Once you have that information you can better determine the rights of the lessor to exclusively lease to you. To do otherwise would be a guess on your part.
Gary L Hutchinson
Minerals Management
I will reply with same answer I replied to Mr. Hutchinson:
I have done all the title work on this and the Executrix of the Estate conveyed the interest to the Estate's son as Life Tenant and the son's children and wife as the remaindermen in 1973. The Life Tenant has executed a number of leases in the past with the remaindermen ratifying all of them until now. There currently no production in this section as it appears a well was drilled in 1969 and 1983. Both are DA. I am under the impression that if there is production on this tract, the royalties for the ones who ratified would be put in an account with the interest accrued available to the Life Tenant and the royalties for the non-ratifying remaindermen would be put in suspense. Upon the death of the Life Tenant the royalties would be distributed to the remaindermen who ratified. Assuming that this is correct, and this is just from reading up and talking to colleagues in the business, at which point would the non-ratifiers have access to their royalties? Does the well have to pay out twice as in a force pooling case and then they would have the option to participate in the well? I am not quite sure how that would work concerning the remaindermen who did not ratify. This assuming that the Life Tenant is no longer with us. It is a pretty ugly situation and I am hearing it from both sides of the family. Not very pleasant conversations to say the least. Any help would be appreciated. Thank You
r w kennedy said:
Worse yet Pete, this is Colorado and not Texas so I don't believe that it would have to be drillsite or wellbore tract.
Pete Wrench said:My opinion is that if a life tenant executes a Lease and all of the Remaindermen fail to sign it as well and fail to ratify it, then the Lease would become invalid upon the death of the Life Tenant, which could prove very costly for the Operator as my guess is that if production had commenced before the death of the Life Tenant and the Subject Property was a drillsite tract then the Operator just drilled a free well for the Remaindermen, and if the Subject Property was a non-drillsite tract then the Operator would have to pay the Remaindermen all of their pro rata royalties after payout.
Now what if some, but not all, Remaindermen sign a Lease or Ratify the Life Tenant's Lease and then the Life Tenant dies? My guess would be that the Life Tenant's Lease would still be valid, but only as to the ownership interests pertaining to the Remaindermen who did sign or ratify, but I frankly am not sure. Interesting scenario.
If there is production and the person with the life estate passes, as to the remaindermen who did not ratify, I would expect their situation to be the same as someone whose lease terminated while production was ongoing.
On what legal basis would they be in the position of the force pooled? Have you offered to lease the remaindermen or sent them the AFE to participate as I believe are required in Colorado? If those acres are legitimately pooled under a lease, how would they magically become unpooled just because the lease terminated? It sounds like wishful thinking to me, without any basis in law. There was a lease then it ended, what usually happens then? I truly believe that if you drill a well on leased acres and then lose your lease, that the owners of the acres will not owe for the drilling of the well.
I would suggest that you spread some money to get ratifications from all, before there is a producing well because at that point it could be too late. Probably not the answer you want to hear but the best most helpful answer I have to give and the course of action I would follow in your position.
Thanks for the reply. I wasn't implying that they would be force pooled. I was told that the ones who did not ratify would have the chance to participate upon the death of the life tenant only after the well has paid out. But until that point and the death of the Life Tenant their royalties would be put in suspense. We are in the process of getting the agreements from the remaindermen who are working with us. The other remaindermen have told me they will not sign anything. We have tried to offer a bonus for the ratifications but they want much more than was offered as a lease bonus and we have offered quite a bit more than what other bonuses are in that area to secure the leases. They are actually wanting four times what the bonus is for the Life Tenant. I have never dealt with a situation like this and neither has anyone else I have talked with about this so my questions may not be justified based on the fact that I am not sure about the process. We have talked to two title attorneys and received a different opinion from each. One has told us that if the Life Tenant dies during production, the lease would remain in effect for those who ratified and those who didn't would not be bound by the lease. The other has told us that the lease would remain in effect for all parties regardless. They also disagree about the distribution of royalties and that process upon the death of the Life Tenant.
I don't see the legal reasoning behind the payout status of the well having any effect on the remaindermen who will not sign ratifications. The acres were leased when the well was drilled, in this scenario, because the lease terminated to portions whether the well paid out or not, what would the legal basis be to charge the uncooperative remaindermen for the well? Just asking this question for your consideration. In my opinion the first TO attorney has the best grip on the situation.
I will tell you what my favorite attorney tells me, you do not want to make law, it's expensive. As I mentioned before, I would use what happens by law if you lose a lease and production is still ongoing as a guide. Lets all hope the life tenant lives a long happy life.