I have heard from several others on various county forums, mostly in Oklahoma, (however, I have dealt with it in Texas) about companies that run title and take a lease from a mineral owner, but then will not pay royalties to the owner until the owner provides them with curative title items. I fully understand the need for title curative because I was a landman for 8 years. I also understand that a landowner should be willing to help cure the title to an extent, but the fact is that many times they are unable to do anything, because they don't know how and don't have the resources. Besides I have heard of an operator suspending payments because an Affidavit of Heirship drawn up by their own land department was rejected in the title opinion.
I was thinking about drawing some language up stating that the lessee/assigns etc. are responsible for providing title opinions and that the operator is obligated to pay lessor based on X interest within 180 days of 1st production unless proof of an adverse claim is found.
I’m not a lawyer, I’m just thinking out loud here. I’d really love to know if anyone else has seen anything that would help with this situation. Would love to have some advice.
I’m also considering that the operator will want to be protected from fraudulent documents and people claiming to be mineral owners when they are not, so thoughts from that side are welcome as well.
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An Affidavit of Heirship drawn up by their own land department was rejected in the title opinion. For what specific reason? Who exactly was the affiant? Was it properly notarized?
Most of the time, or from what I have seen through vast experience, is that curative requirements are generally farmed out to brokers and sub-brokers, as opposed to in-house land departments taking on those types of tasks.
Don't leave us hanging. Could you be more a little more specific? You have heard of an operator suspending payments because an Affidavit of Heirship drawn up by their own land department was rejected in the title opinion. How did it fail, and why did the attorney reject it? What additional or supplemental requirement did the the examining lawyer set forth in that regard? In other words, since the Affidavit of Heirship failed that was drafted by the land department of the oil company, what did the attorney suggest in lieu of the defective affidavit to satisfy the original requirement in the original title opinion?
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Dave,
Thanks for the reply. The mineral owner is a friend of a friend. The affidavit of heirship in question was signed only by the heir, no death certificate or obit was filed with it and it had several typos. I'm sure it was a contractor that did it, however, as an in-house landman; it is your job to catch that type of thing. When I picked up the case, I was negotiating with in-house staff.
The company told the mineral owner, a widow that lives out of state that she would have to have an attorney fix it and dropped it. I looked at everything, drew up an affidavit, had it signed by 2 disinterested parties, found an obituary in the library archives, had a very hard time with the death certificate, but got it, filed it of record and the title attorney approved it months later. Everything turned out fine in the end, but I can't do that kind of work for free for everyone and it seems like something to prevent this on the front end would be better.
I know that I have seen stories like these on the Grady, Stevens and maybe Logan Co., OK forums. I'm hearing about this more and more often and I'd like to find a way to fix it easier.
I won't tell you the specific company, but the name doesn't matter because the problem is wide spread and not isolated to one operator.
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Myranda,
The easy way to fix it is for the family to take care of business. In Oklahoma, the correct way for property to pass without issues is with a conveyance while alive, or judicial action. Anything less will cloud the title either permanently or for many years. Using the AoH is a temporary band-aid. What I think the land owner should be telling them is you and your siblings have the rights to 2 acres each. The three of you should get together and spend this $1500 per NMA the AoH provided on the lease to probate mom and dads estate. Then when (or if) it is drilled there will be no questions as to the ownership.
Mom and Dad did not seem to think it was necessary to file a Transfer on Death Deed, roll it into an entity like a trust or LLC, or more than likely even create a will. That is where the true fault should be placed. Then after death, in many cases the kids are too busy dividing things up or fighting over the assets.
Sadly it happens too often. I place only a small amount of blame on the oil companies, and that would be not seeing that heirs are provided a minimal amount of information on correctly probating, or Quite Title action of the property.
I have recommended that properties be probated several times. Many times they blow it off, and the next thing I know they are crying about being placed in suspense.
Rick, I absolutely agree with you and I am a very big advocate for taking care of the affairs properly. AOH’s aren’t the only problem here though.
I can’t disclose much, but I’ve had this problem in situations where trusts were created properly, estates were probated, conveyances were solid etc. In fact an issue with a title attorney over a deed that is clearly filed and indexed properly in the clerks office is what sparked this post. The deed was plain as day, clear as a bell, searchable on the clerk’s computer index by grantor or grantee. (This was in Texas, in a county that does not provide Section indices, so grantor and grantee are your only options in the clerk’s office.)
Should MO's (or anyone who owns any type of property) take the initiative to paper everything up right? Yes.
Is it unethical to put the title ball back into the Lessee's court when they are in the middle of schmoozing for a lease in order to avoid future problems?
They have lawyers and landmen on salary, so it doesn't cost them as much money as it does for most MO's, so as long as we are clear about the lease terms, why not?
Do operators do the same thing to one another when they buy, sell, farmout etc.? --You bet!
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I generally would take the initiative and do an advanced curative requirement and get it executed when I took the lease, if I thought it would help build my title and eliminate any questions about why I leased the party or parties, or corporation, that I did. I also thought it would look good included in the lease package.
If for some reason I didn't think that I had time to get it, I would always put some type of footnote in the L.P.R., advising of the need.
I have also worked for people who said to do things as sloppy as possible. When I asked why, they replied that it would mean more work down the line, and that they preferred to bill for more time, not less.
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Dave, I did things similar to you when I was still in the field. I never liked turning a package over that wasn't buttoned down solid, which is why I'm shocked by the behavior of some of the land/DO departments that I'm dealing with these days. I'll continue to work on drafting a lease provision to fight this kind of behavior. Thanks for your comments.
Dave Quincy said:
I generally would take the initiative and do an advanced curative requirement and get it executed when I took the lease, if I thought it would help build my title and eliminate any questions about why I leased the party or parties, or corporation, that I did. I also thought it would look good included in the lease package.
If for some reason I didn't think that I had time to get it, I would always put some type of footnote in the L.P.R., advising of the need.
I have also worked for people who said to do things as sloppy as possible. When I asked why, they replied that it would mean more work down the line, and that they preferred to bill for more time, not less.
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Just wondering about the other side of the coin - the Lessee. In the situation where the lessor needs title curative, are the Lessor's payments put in suspense, but NOT the Lessee's?
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JW, I'm not sure I completely understand the question, but it hits on something that irritates me about this situation. The Lessee is producing a well and making their money, the land is leased, so they legally have it HBP, while the mineral owner is getting nothing.
In this situation what motivation is there for the lessee/operator to let you know what the problem is, what you need to do to cure the issue or return phone calls?
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I think you have answered my question. However, oftentimes there are multiple companies that lease land in a unit. Some of those companies will elect to participate with the operator. I was just wondering if the companies who are participating, that are not the operator, also have their payments put in suspense, or only the poor royalty owner.
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Only the person with a cloud on their title isn't paid (the money is held in suspense, so after things are cleared, they get %100 of what they are owed). If a working interest owner (one of the "multiple companies" you mentioned above) has a title cloud, they are in the same situation, they are obligated to clear their own title issues.
Maybe Rick Howell is correct and we should all become educated enough to handle our own affairs. With this forum, NARO & the other groups out there, there isn't a good reason not to...
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I have a situation and any advice or comments would be very appreciated! I was given a trust when I was 8 by my grandfather which held the deed to acreage with producing wells. He made my mother the trustee and that is when all the problems began. When my grandfather died, she and my step-father used the trust ( leases, farmout agreements, etc.) and never told me that I had one. Now they have the deed, under my name, the name of the trust, but they contested his will for three years against his widow and forced her to quit claim my acreage to my mother but not as she appears as trustee (Mrs. XXXX XXX) but as just her name so now she looks like a different MO. I have asked for my documents because I just found 50 years later, through public records. My name existed even as recent as 2010 in the tax appraisal books. Had to get an atty. and she and my sister claim that no such trust ever existed and they had a very nasty atty. fight me so far out of $5000 and still they are ignoring me. Somehow in 2011 I am completely off the well that she placed the name of the trust in (which is the least producer) and her name is on it. Her name should not have appeared at all, but because she used a quit claim, either it was over looked or treated sloppy or who knows ????. My lawyers went to the oil company to ask for documentation to support the change and they sent us a transfer order that is dated 2003 and the document looks like someone cut and pasted. It shows me at .00000000. Yet, tax appraisal shows me all the way up to 2010. She was depositing all the checks in her personal account. Now, I just found out, again through public records that 3 months ago she and my sister created a deed off the quit claim and placed my sister's name on the deed with no title. their lawyer actually added a paragraph at the bottom of the deed stating that they understand and acknowledge that he is not liable nor represents the lack of title vesting nor any other encumbrance that may arise due to the waiving of title. I want to call the oil company and tell them that that document is fraudulent but don't know the steps. I know copies of my documents are somewhere and possibly many companies because the leases have been sold several times. I don't know how long they keep files of documents after selling but when it comes to trusts, I believe they cannot remove them without a dissolution of trust doc.
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Wow, Carmen! Sounds like you have quite a family, there.
Where are all these properties? What State?
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
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