Option Lease
I own approximately 100 acres in Allegheny Co., Pa. and signed a 5 + 5 year lease with a company in 2010. The first 5 years of the lease will expire the beginning of next year. I am being approached by a competing company to negotiate a 5+5 year option lease. They are willing to pay me 5% of the per/acre signing bonus now with the hope that the initial company will not renew their lease for the 2nd 5 years. If they do renew then this 2nd company will loose the 5% bonus which I'll get to keep and their lease will be null & void.
Has anyone else been approached with such an offer? What do you think of it? Their initial per/acre signing bonus is considerably higher than my initial lease.
I'd appreciate any comments you all might have.
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Replies to This Discussion
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Permalink Reply by 0i7okn54zwbdo on
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It's not exactly an option agreement as much as it is a top lease. Their lease goes on top and only kicks in when the bottom expires. Look at your original lease and see what the extension language says. Make sure you don't get yourself into any trouble by taking someone else's money while your original lease is still capable of being renewed. I'd say spend the money and have a lawyer review everything first. CYA.
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Permalink Reply by Mitchell R Holliday on
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Jon ... not at liberty to state that just yet.
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Permalink Reply by Mitchell R Holliday on
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Jon, it's a major driller. I'm just at a loss why a company would want to do this when it is probably the current Lessee will exercise the 2nd 5 yrs. of the current lease.
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Permalink Reply by Mark McGrail on
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Mitchell,
It's more efficient to top lease than to try and catch leases as they expire.
The loss of the 5% is a cost of doing business for them.
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