Forfeiture of Mineral Leases
When a landowner performs a title search on his property, he or she may discover that someone else has leased the oil or gas rights on the property, even though the landowner has never received royalties or even seen any drilling equipment. Under Ohio law, an owner or lessor cannot lease the property if another person or company holds an existing mineral lease, even if the conditions in that lease have not been fulfilled. Ohio Revised Code § 5301.332 provides the statutory procedure for forfeiting a mineral lease if the lessee has not kept specific covenants in the lease.
First, after the lease is discovered, further research must be done to determine the current lessee. Particularly in the case of old leases, the original lessee may have transferred the lease to another person or company.
Once the current lessee is identified, Ohio law requires that the lessor notify the lessee in writing that the lease has been forfeited, describing the specific ways that the lease has been violated. This requires careful examination of the lease document. For example, a lease may state that it remains in effect as long as oil or gas is produced from the land; or as long as lessor is paid royalties.
After thirty days of providing notice, the lessor can file an affidavit of forfeiture with the county recorder’s office reciting, among other things, the failures to abide by the lease. In response to this notice of forfeiture, the current lessee may release the lease or respond with an affidavit detailing why the lease may still be in effect. If there is no response within sixty days, the lease can be canceled by the county recorder.
This process is similar to the procedure under the Ohio Dormant Mineral Act, discussed in a previous blog post, which allows a property owner to claim another individual’s abandoned rights to the minerals located beneath the landowner’s property.