Greg, until they actually pay you, payment is optional.
If I were to write a top lease I would leave an escape door in it you could push a truck through, sideways.
Theoretically you could sue them and POSSIBLY make them pay you (if they didn't leave an escape clause) but that will probably be anywhere from 1 year to 2 years of your time and anywhere from $10,000 to $50,000 out of your pocket, according to the fee schedule of your lawyer. Is the lease bonus going to cover that? I know from personal experience that a lawsuit against someone in the oil and gas business is no fun, is not profitable, because you aren't fighting to make more money, just to get the money you should have already have had.
Greg, the payment for the toplease 15 days after the expiration of the bottom lease is an extremely bad sign. Why can't they just wait 15 days after your lease expires and lease you then, if that is the time they feel like paying you? I think top lease is a bad idea, but if you still want to do it, at least find a way to exchange the executed toplease for the cash/cashiers check payment. If you want to lease, I think it would be best to just let your lease expire and lease again, when you are in your best bargaining position, and the lease offer has no extra smoke and mirrors added.
I did not mention that it's strange that your present lessee wants to top lease you. Your present lessee could offer you bonus and terms to sign an extention right now, no need for a top lease. Your present lessee could also just have you sign a totally new lease with new terms, bonus, royalty, years, any clauses that you might want thrown in that they would agree to, and the new lease could supercede the old lease and take effect today. The present lessee has already done the title work, they could pay you today. The only reason they should be wanting a top lease is so that they might possibly be able to AVOID having to pay you and have security that your lease will not hit the open market, unless they allow it to. A free option in effect.
Greg, you may also wonder at the fact that they will pay you 80% of the top lease 15 days after the bottom lease expires? If the bottom lease has expired, why not 100%? If you were just signing a new lease, they would be paying you 100% then, wouldn't they? In your position I would not just think they were trying to talk me into a bad deal, I would think they were trying to be cute about it at the same time. Shell game. There is no other business I know of like the oil business.
Greg Campbell said:
Thank you sir, I really appreciate your advice.
I kind of knew something was up. Obviously my understanding of these issues is low. But just to make sure I understand. I am in a week position because drilling could be started before the end of the bottom lease therefore making any top lease worthless? Additionally, if I have not received payment for the top lease (the terms of the agreement say that I get paid 80% of the top lease 15 days after the bottom lease expires) there is no incentive to pay me.
Given this information maybe I should readdress my question to the Discussion. If my rights are unencumbered by a lease, what is the going rate for leases in these sections?
r w kennedy said:
Greg, outside of never hearing of a fair value for a Top lease because I don't believe there is one. Until your acres are unemcumbered by a lease, free to lease again, you are in a poor bargaining position and your acres can not bring their best price. I hear of alot of top leases where the lessee does not even want to pay the partial down payment up front, they want you to accept payment after your bottom lease expires. How would that be a good deal for you? At that time you would be in your strongest bargaining position but locked into a contract from when you were in a weaker position. If your bottom lessee drills, it's unlikely you will be paid for a toplease. It's 3 card monte or a shell game. I recommend you walk past it and just lease when your lease runs out. Good luck.