Life Estate/mineral rights.

Ok , you lawyers, or folks with experience in the matter.  What happens to the bonus payment and royalty $$$ in a life estate?  Can the "life Tenant" lease the mineral rights on his/her own, without the signatures of the remaindermen?  Would an oil company risk leasing with the life tenant  and extracting the minerals without the ratification from the remaindermen?

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Permalink Reply by Philip Thackray on September 5, 2014 at 12:59am

Bo,

A friend of mine's mother had created a life estate.  She leased her property to Rex and it is now in a production unit.  A few months ago she died and my friend showed me her lease.  The "life estate" and the remaindermen (by name) were mentioned in the lease but she signed the lease.  My friend and his wife were the remaindermen.  They sent proof of her death to Rex and the lease was moved into their name.

Butler County, PA

Phil

Permalink Reply by cmorris on September 5, 2014 at 4:17am

The Life Tenant can lease the mineral rights on their own, but the Remaindermen would be required to sign a Ratification. The Life Tenant receives all bonus and royalty money during their lifetime, which would then pass to the Remaindermen upon the LT's death. It is usually a title requirement to have a Ratification signed by the Remaindermen (they can hold your royalty payments in suspense until this is done, or possibly not lease you if the Remaindermen refuse to sign). 

Permalink Reply by Philip Thackray on September 5, 2014 at 4:49am

Bo, cmorris,

I checked with my Remaindermen friends, they did have to sign the lease.

Phil

Permalink Reply by bo boboski on September 8, 2014 at 8:15am

CMorris:What IF?  The life tenant signed a lowball $$$ lease that the remaindermen refuse to sign?

Permalink Reply by cmorris on September 8, 2014 at 8:58am

Well, first things first....I can't see why the remaindermen would refuse to sign because the royalties (if the well is producing) won't go to them until the death of the Life Tenant, and they would never get any lease bonus on it.  But to answer your question, if they don't sign, this creates a cloud on the title and a lot of companies won't want to take that risk so they could declare the lease invalid or just leave it out of the unit altogether.

Permalink Reply by Kathi Albertson on September 5, 2014 at 5:53am
Here is a similar but different situation. The previous owner of a parcel retained a life estate in the royalties of a producing Clinton well on the parcel. Do any of you see a complication with the new owner getting royalties if the current producer decides to drill a horizontal Clinton well on the same parcel? The new owner has advised the producer of the change in ownership.
Permalink Reply by bo boboski on September 5, 2014 at 11:08pm

I really am disappointed at this point. I thought there were numerous lawyers visiting this site that could give some advice on this subject. But then again,it stands to reason, most of them want to get PAID for that. I also thought that there nay have been plenty of folks that have dealt with a Life Estate concerning oil&gas leases. There are a lot more onlookers on this site ,than people who want to help others learn things they need to know in order to deal with these landmen ,who are trying to make $$$ for the O&G co.s. not the landowners.  I'd say it breaks down about 95% vs. 5%.    I guess I;m a little guilty of myself. I check this site daily, and sometimes can answer someones question,but decide to leave it to someone else,then discover a couple days later that no-one answered.  

Permalink Reply by evan on September 5, 2014 at 11:19pm
I'm actually in the process of checking into this next month with my CPA. Will let you know how it comes out
Permalink Reply by Utica Watcher on September 6, 2014 at 5:12am

Bob,

No O&G company would risk putting a lease in a unit that has only the Life Estate's signature.  A ratification by the Remainderman interests would be required.  So the answer to your question is yes, a Life Estate can lease his/her land.  However, in order for the lease to be fully valid and be utilized by an O&G company, the O&G company would either have the Remainderman interests sign a lease as well, or have them ratify the lease the Life Estate has already signed.

Bonus money and royalties would go to the Life Estate interest until the life estate interest remains no more, or if the life estate designates that they want the bonus money/royalties to be split in some other fashion other than 100% to the life estate holder.

Permalink Reply by cmorris on September 8, 2014 at 7:19am

Actually, Bo, I am a Lease and Title Analyst in real life and I deal with these things every day. 

Permalink Reply by bo boboski on September 5, 2014 at 11:40pm

THX, Evan. You ,and a few others, have been very helpful for others needing to know things pertaining to Oil & gas & pipeline issues. It makes it a little easier dealing with these conmen from the E&Ps who know all the laws AND the loopholes that you don't have to go it alone.

Permalink Reply by evan on September 6, 2014 at 12:57am

Thanks. I've learned ALOT these past few years ,almost obsessed some say so I try to pass on what I'm pretty sure is correct info because I know I was lost for a long time and left alot of money and other things on the table 

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