Paying % of Bonus or Royalty should be illegal

With the public knowledge of the Shale now, NOBODY would lease their property to any Oil and Gas company for the few dollars an acre they were getting last year. You have more information and know better now. In fact there are people so mad about "being taken" only a few years or even months before everybody knew about the Shale they have class action lawsuits against the O & G companies trying to void the lease. Good luck.

Use the same knowledge to understand that if you pay an attorney or anybody else a % of your bonus and especially a % of your royalty to negotiate a lease for you it is the same as turning down an offer for thousands an acre and instead saying you want the hundreds an acre they used to offer. Now that you know how valuable your minerals are you wouldn't take hundreds.

Where are the class action law suits against the CPA's and attorneys that took advantage of everybody early on and got them to sign a lease for a % of their money while also getting the O & G companies to pay them a percentage of that money too. The only other business I can think of that gets paid by both sides like that is a sports bookie.

If you are lucky enough to have a royalty check for 10 or 20 or 30 years, do you really think that somebody that played both sides of the deal at the beginning deserves part of your check?

There just is no way that the guy negotiating can have you AND the Oil and Gas companies best interest in mind at THE SAME TIME when he is negotiating. You want a higher lease bonus and royalty and the Oil and Gas company wants a lower lease bonus and royalty. So who do you think he would be working harder to please? I know who my guess would be.

It just isn't smart people. You have more information and knowledge about all this now. It just isn't good business for you to pay a percentage and I don't know how anybody that charges you 4%-5% can possibly still have a good reputation. Especially the ones that have you sign paperwork that says you have to pay them even if you find a better deal with someone else. How do they get away with this stuff?


I'll step off the soap box now. I just hate to see people throwing away money. One day it will make a big difference to you when it all becomes clear.

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Replies to This Discussion

Permalink Reply by Pat on August 28, 2008 at 8:08
First, I need to make it clear that I believe everyone should join a group. I think somehow I wasn't clear on that.

To answer your question. Of course I suggest you take more given the right situation. What I don't recommend is your spend more to do it when you don't have too. If you want to get rich do what rich people do. They take time, learn, and make smart financial decisions. You are paying a guy 5% while the Oil and Gas company is paying him from the other side "FOR AS LONG AS THE WELL PRODUCES". He has more incentive to keep the Oil and Gas companies interest in mind, not yours.

You are going to do what you want to do and I don't begrudge you for that. This site is to help people looking for answers. In my opinion, you should pay someone a flat rate or hourly rate to do this. Paying a % is just a bad business decision and one I think people will regret the longer things go on.

As for the cutting the grass thing. A fair price for something you don't want to do is great. I'm saying a percentage based fee isn't a fair price. It could turn into 10's of thousands of dollars over the years. If you had to pay that up front there is no way you would agree to it. It just doesn't sound like much right now.
Permalink Reply by Margaret Wren on August 28, 2008 at 4:23
Har C2, you are 100% correct,
"I am not paying a % but I will pay an hourly fee for legal advice. There are ethical lawyers regardless of the lawyer jokes, etc...... FIND A GOOD OIL AND GAS LAWYER AND PAY FOR GOOD ADVICE."
is the way to go group or no group.
Permalink Reply by P.G. on August 28, 2008 at 4:42
Maybe groups should put out a bid for lawyers!
Some of the fees they are getting is like them hitting the lotto!
Maybe, like with the leasing, there should be some thought given letting the lawyers compete for the land owner's business, huh?
Permalink Reply by Grice on August 28, 2008 at 5:05
The group leaders should already be doing this. Just like is is not advised to sign the first lease offer, it is also not advised to accept the terms from the first lawyer the group leader contacts. Contact numerous attorneys, and find the one which best suits the needs of the group.
Permalink Reply by P.G. on August 28, 2008 at 5:44
That would certainly weed out the gold diggers. With percentage deals, they be more interested in just closing the deals rather than necessarily getting the best deals for the groups, huh?
Permalink Reply by shelby on August 28, 2008 at 6:31
What would you say a good hourly rate might be for a "top-notch" attorney to do a detailed lease review?
Permalink Reply by Bobi Carr ("parker") on August 28, 2008 at 8:33
Mr. Krow,

Don't a Mortgage Broker and a Real Estate Agent have to have some educational background in order to qualify for a license to work in their profession?

There is one fellow in Shreveport that I would gladly pay 10% to negotiate for me. He brings many fields of expertise to the bargaining table. (I think he is working for his group for free though). I tried to hire him to do my road negotiation but he was too busy.

There are others who work in fields that have never tackled this type of transaction before. Just because someone is a nice person and trying to help people does not mean that they have the expertise to handle the complexities involved in representing a group or individual for a fee.

THIS IS JUST MY HUMBLE OPINION.
Permalink Reply by Bobi Carr ("parker") on August 28, 2008 at 8:36
I also think that IF someone has consulted an attorney and then uses their lease as a means to "advise" others, that they owe some duty to the attorney. Unless the attorney has given permission for the document to be put out to the public.

An attorney has spent countless hours perfecting their lease clauses and understanding the complexities of how each apply under different circumstances.

I think the money spent on a competent legal advisor is money well spent.
Permalink Reply by Pat on August 28, 2008 at 9:59
Parker said "I think the money spent on a competent legal advisor is money well spent."

I agree. Just not a percentage of the bonus and royalty. That is all I am saying.
Permalink Reply by Bobi Carr ("parker") on August 29, 2008 at 3:21
I AGREE COMPLETELY.
Permalink Reply by Bobi Carr ("parker") on August 28, 2008 at 9:22
I don't think you want O&G paying it.

A buyer's representative works for the buyer.

Or as would be the case here, the Lessor's agent works for the Lessor (isn't that what a landman is anyway).

I sure wouldn't want someone who is supposed to represent me being paid by the entity they are trying to protect me from.
Permalink Reply by Pat on August 28, 2008 at 10:02
Parker you got my point exactly. Well said.

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