Oil/Gas/TITLE RESEARCH TIMEFRAME
QUESTION: Mr. Scott,
You provided some valuable advise a couple of months ago. My mother has 80 acres of mineral rights and two companies have offered to lease. I authorized the highest bidder to proceed. That was six weeks ago. When I check the status , I am told it just takes that long to do the research to verify the title information. Is six weeks reasonable? I am afraid the other bidder may have lost interest. Any suggestions how I should proceed with the highest bidder? Thank you.
ANSWER: It can take six weeks or more sometimes. It's not that your title is complicated, it's that they are busy with other things. This is exactly why I don't accept bank drafts or "payment orders' for leases in most cases. I also don't send the signed lease back to the lessee until I have a check in-hand. This tends to "speed them up" somewhat and get me paid in a timely manner. Many of those "drafts" or "orders for payment" are nothing more than options to lease, rather than an actual commitment. Therefore, the lessee can change their mind for any reason basically, and if you read the draft/payment order it states that right on the document in many cases.
Moral of this story is always better to get a check, and not give up the original lease until you have one in hand. Since (I assume) you've already sent the lease back to the "high" bidder you really can't lease to anyone else now. Best thing to do is just wait for them to pay you. Their "draft" or "payment order" likely includes a "due by" date on it. Often these dates can be 60 WORKING days after THEIR bank receives your draft back. Another good reason not to agree to such terms without any down payment.
---------- FOLLOW-UP ----------
QUESTION: Thank you for your prompt response. I was unclear in my previous question. I am still awaiting for the lease. We have authorized the firm to move forward, but have not received the lease to sign.
My understanding is they are doing the title search prior to submitting the leas to my mother for execution.
Should I contact the competing firm. Would I have any liability with the authorization I provided to the winning bidder?
Any guidance is greatly appreciated.
Most leasing companies will send you a lease to sign and THEN begin checking your title, not the other way around. That's why most lessees send "drafts" or "payment orders" to the mineral owner along with a lease to sign and return to them. I don't like drafts or payment orders because in many cases (even when the title checks out perfectly) they are nothing more than an "option" to lease, not a promise. If you read the wording on those things they can basically change their mind for any reason, while at the same time tying up your minerals rights for 30 days or more. For this reason I prefer they just send me a check immediately upon receipt of my executed lease, and if I don't trust them to pay promptly I'll only agree to send them a COPY of my executed lease and then send the original once payment is received.
In YOUR case however, it appears you are still waiting on the lease, and they apparently haven't checked title yet either after six weeks. This indicates to me they are likely trying to "flip" your mother's lease to someone prior to even having her sign it (in other words they are not the actual buyer.) Not good for her really. My suggestion here would be to contact them and explain that you will give them one more week to check the title and send you a lease to sign, and that you expect your mother to be paid promptly once the lease is signed. If they won't send someone over in person to deliver the lease and check at the same time then I would agree only to send them a COPY of your mother's signed lease, and include a note with the copy stating that if a check is not received within five business days after their receipt of the lease then you will keep the original and be free to lease to someone else.
Frankly, at this point I really don't think you have an obligation to them anyway unless you signed something to that effect giving them all this time. You could really just contact the other bidder and see if they are still interested and if so ask how soon they could get your mother paid. I would also suggest NOT accepting a draft or payment order from them (or anyone) but rather try to get them to come by in person with a check and lease to your mother's place (or her bank, attorney's office etc.) and do the deal all at once. In lieu of that use the "copy" method above along with the note.
Hope this helps you out.
Frederick M. "Mick" Scott CMM RPL
The Mineral Hub