Why is it inadvisable to warrant title to mineral rights?
Not an attorney and would be interested in their opinion. The State you’re in might also make a difference. General thought is, warranting title in a lease rather than requiring the lessee to accept that responsibility and do their own title research could, if future title issues come up, expose the lessor to the expense of resolving them and possibly loss of the lease bonus they received.
From the internet: Warranty of title can give the buyer of a property legal recourse to sue the seller if there is a claim or issue attached to the property. For example, an heir of a prior owner may have an unresolved claim to the property that was not made known by the seller. The buyer could pursue litigation to recoup the money they put toward the purchase along with damages.
Thank you for such a clearly stated explanation, it helps.
Thank you very much. This sheds more light than what my internet search turned up.
No, you should never warrant title. The risk is that you might get say $1,500 in bonus money and then theoretically be on the hook for $150,000.00+ in attorneys’ fees and costs to defend title. Why would you ever take that risk? The oil companies have the resources to research title, so let them bear the risk.
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Thank you very much, especially for the example. Makes the decision to ever warrant very clear.
I agree with John. I never warrant title, I always strike that.
You never want to be liable for all the myriad damages if it turns out that you don’t have title. If there is some type of warranty required, it should have a damages limitation to the amounts of bonuses or royalties you received. Also, time limits would be a good item.
This post is not legal, investment or tax advice, it is for discussion purposes only. Reading or responding to this post does not create an attorney-client relationship.
Thank you for the comment. Will bear the damages limitation in mind if company if warranty is required.
Thank you for the comment. Everyone seems to agree on this particular issue.
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