North Dakota Mineral Leases Title Warranty Clause

North Dakota Mineral Leases
Title Warranty Clause

Mineral leases often contain – at least initially – a warranty clause which requires the mineral owner to warrant and agree to defend his or her title against any adverse claims.

Sometimes, the lessee is authorized by the terms of the lease to unilaterally discharge any mortgage, lien, or other encumbrance on the property at the mineral owner’s expense.

Nevertheless, since lessees generally:

• perform preliminary title examinations regarding the ownership of mineral interests prior to entering into lease negotiations,
  and
• perform complete title examinations before paying any lease bonuses,

a title warranty clause:

• is not necessary to protect the lessee,
  and
• could lead to significant liability for the lessor.

Therefore, in order to avoid any liability which may result from such a legal action, lessors should delete any title warranty clause from the lease.

However, the lessors may be required to agree to return any bonus payment in the event that their title interest turns out to be deficient.

North Dakota Mineral Leases Title Warranty Clause – Modern Lease

An oil and gas lease proposed to be used in North Dakota in the last few years by one oil company contained the following “Title Warranty Clause“:

Lessor hereby

• warrants and agrees to defend the title to the lands herein described,
  and
• agrees that the Lessee shall have the right at any time
  • to redeem for Lessor, by payment, any mortgages, taxes or other liens on the above described lands, in the event of default of payment by Lessor,
    and
  • be subrogated to the rights of the holder thereof,
• and the undersigned Lessors, for themselves and their heirs, successors and assigns, hereby surrender and release all right of dower and homestead in the premises described herein, insofar as said right of dower and homestead may in any way affect the purposes for which this lease is made, as recited herein.

North Dakota Mineral Leases Title Warranty Clause – 1981 Lease

For comparison purposes, an oil and gas lease actually used in Ward County, North Dakota in 1981 by an oil company in the business of oil exploration contained the following “Title Warranty Clause“:

Lessor hereby

• warrants and agrees to defend the title to the lands herein described,
  and
• agrees that the lessee shall have the right at any time
  • to redeem for Lessor, by payment, any mortgage, taxes or other liens on the above described lands in the event of default of payment by lessor,
    and
  • be subrogated to the rights of the holder thereof.

North Dakota Mineral Leases Title Warranty Clause – 1977 Lease

For further comparison purposes, an oil and gas lease actually used in Ward County, North Dakota in 1977 by an oil company in the business of oil exploration contained the following “Title Warranty Clause“:

Lessor hereby

• warrants and agrees to defend the title to said land,
  and
• agrees that lessee, at its option,
  • may discharge any tax, mortgage or other lien upon said land,
    and
  • in the event lessee does so, it shall be subrogated to such lien with the right to enforce same and apply rental, and royalties accruing hereunder toward satisfying same.

North Dakota Mineral Leases Title Warranty Clause – Comparison of Lease Terms

There are no significant differences between the terms of the three Granting Clauses identified above.

Topics of Interest – North Dakota Ancillary Probate

Topics of Interest – North Dakota Mineral Rights.

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Topics of Interest – North Dakota Affidavits of Heirship

Topics of Interest – North Dakota Intestate Succession.

Topics of Interest – North Dakota Informal Probate

Topics of Interest – North Dakota Intestate Succession.