"Property Taxes deducted from Bonus Checks"

Bonus checks seem to be coming in with property taxes deducted and paid to county coffers.  The problem with some landowners are that some of the tax assessments include improvements (houses in this case) that were demolished years ago, now the landowners have to argue the the taxes with the county.  I am having trouble with this act by the energy concern to take it upon themselves to become the tax collector.  As a layperson, my understanding is that the minerals are never encumbered by mortgages, property taxes or judgements, unless specifically attached.  Again, property taxes must be paid, albeit by the landowner.

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Permalink Reply by Clinton44 on June 21, 2012 at 11:09pm

Maybe the landowners in these cases owed back property taxes many leases have a clause in stating as follows;

Lesee shall have the right at any time to redeem  for lessor or otherwise aquire for payment any mortgage or any other liens or encumbrances upon the premises that may in any manner affect the lessee's interest therein, and deduct amount paid from future royalties.

 

 

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Permalink Reply by Ron Eiselstein on June 22, 2012 at 12:00am

Eric, my experience is that an energy company only needs  clear mineral rights, unless they have their eye on the surface.  Mineral rights are traded and surface rights are secondary.  However, I am not saying that surface rights are neglected.

Permalink Reply by Clinton44 on June 22, 2012 at 12:10am

Never the less, I would think it would be easier for the gas companies to operate on parcels with clear titles where they know to whom the royalties are to be dispersed. Can you imagine the headaches for the division order analysts in say a 640 acre unit with maybe 80+ royalty interest owners when 10 of the the landowners are in forcloser because they spent all their bonus money on a yacht in the islands and did not pay taxes or mortages?? where do they send the money to the bank hold it in escrow??

I can understand why they would pay the liens and deduct it from future payments or hold the mortages themselves... 

 

Permalink Reply by Ron Eiselstein on June 22, 2012 at 7:21am

Eric,

Royalties are dispersed to whomever owns the mineral rights.  Foreclosing on a mortgage never negates the lease of mineral rights and the legal discription thereof.

Maybe this question will make it easier:  If I have a lease for five years on a house I am possessing and within the five year lease, the title holder loses the property in foreclosure, does the judge evict me and furthermore disallows me the quiet enjoyment of what I possess by the articles of the lease?

Permalink Reply by Marcus Grayson on June 22, 2012 at 12:18am

Your experience deceives you.  Mortgage subordinations, liens, back taxes, et al are all something that the operator has to deal with.  

Permalink Reply by Ron Eiselstein on June 22, 2012 at 7:11am

Wrong.  mortgage subordinations are not final. 

1.  Please show us a typical mortgage on a house that secures mineral rights?

2.  Please provide documents showing property taxes liening mineral rights?

3.  If mineral rights are severed from property, are they subject to encumbrances of property severed from?

Permalink Reply by Jim Shoos on June 22, 2012 at 10:13am

You are arrogantly misinformed... the following article is posted online from Douglas Clark Esq...FYI... Ohio law functions in exactly the same manner:

Natural Gas Companies are approaching Landowners currently under lease across the Marcellus Shale region and are requesting that the landowner sign a "Subordination Agreement" or similar document(s).  When a landowner is approached to sign a "Subordination Agreement" or similar documentation, they should immediately consult with a knowledgeable attorney to ascertain their rights and to explain the content of the subrogation documents.  

Subordination Agreements are typically sought by natural gas companies who intend on developing the resources from a leasehold where there exists a current mortgage or other lien.  The concern for the gas company is that Pennsylvania is called a "race to the courthouse" state.  This means that if there is a mortgage or lien on the property that was filed at the courthouse before the gas lease or gas lease memorandum was filed, the mortgage or lien will take precedence.  In other words, if a landowner already had a mortgage or lien recorded on the property before they entered their gas lease and they failed to pay their mortgage and a foreclosure occurred, the party taking over the property would do so as it existed on the date the mortgage or lien was filed.  Accordingly, the purchaser would take over the property without the oil and gas lease encumbering the property.  Clearly natural gas companies do not want to risk their often significant investment or future stake in development and natural gas production because the leasehold was sold in foreclosure.

Many Oil and Gas Lease Agreements contain language within the Lease that provides for the assignment of royalty or other payments from the landowner to the creditor.  This is designed to make sure that the creditor is paid and that foreclosure proceedings may be avoided.  By including this language in the Oil and Gas Lease, the natural gas company is seeking to increase the security of their investment.  The gas company may then look to the bank (or other creditor) to reach an agreement to "subordinate" the mortgage or debt to the Oil and Gas Lease.  Remember, the primary concern for the gas company is to not lose the Oil and Gas Lease because a creditor purchased the property pursuant to a lien that pre-existed the Oil and Gas Lease.

Permalink Reply by Jim Shoos on June 22, 2012 at 10:23am

...and by the way Ron, your original post dealt with a specific set of facts.  Those facts were that the lessor was getting his taxes paid by the oil and gas company who then deducted that amount from the remaining bonus check that he received.  Since mineral rights are not separately taxed that would obviously mean that the lessor owned BOTH the surface and the mineral rights.  Bringing up a hypothetical situation involving severed mineral rights and implying that this would produce the result you were trying to justify with your faulted logic is egregious.  Does Jasper provide you with your legal advice?

There is nothing more dangerous than an individual that doesn't know they don't know it all. 

Permalink Reply by Ron Eiselstein on June 22, 2012 at 11:17am
Show us the law and not an article.written by an atty
Permalink Reply by Jim Shoos on June 22, 2012 at 11:25am

I know what the law is and I am comfortable in my knowledge of what it is... if it is so important for your edification, go look it up yourself. 

Permalink Reply by Ron Eiselstein on June 22, 2012 at 11:30am
Good go away then until you produce the law or cases. Jasper can smell your bias.
Permalink Reply by Matthew Santiago on June 22, 2012 at 11:51am

Just received a division order last month with a subordination of mortgage attached.  According to the paperwork CHK won't pay royalties until the bank signs off.  My understanding is that as long as your in good standing with the bank it should not be an issue.

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