I was reading online and certain commentators say that they don't want bank drafts. Another website concurred that this isn't a good idea. Is there a reason why someone leasing their land should not get a bank draft? If not, what are some other options?
It takes longer to process a bank draft. They normally don't even start the process until the lease is recorded and everything verified. Then you're charged a bank draft fee of about $20. It took over two months for me to get my money when I did that a couple of years ago. I won't do it again.
Look at it like this. You give them the signature on the lease today and they promise to pay you the money in 90 days. Does that seem fair to you? I do not know if it has ever happened but a concern I have heard some people mention is the potential for them to file the lease with the clerk of court then pull the draft and leave you with having to sue to get the money. My thought is, if the company employees get paid by check, and their vendors and other business partners get paid by check, then I as a business partner should be paid by check as well. It is a business deal and what other business deal would you sign off on a promise of payment later?
The bank draft is a promise to pay once the o/g company checks your title, records the lease, verifies everything, etc. This all takes time and once the o/g company gets you to sign your lease, they are no longer in a hurry. It is no big deal at all for you to ask that this be done during the time that you are negotiating the terms of your lease. Believe me, the company has the resources to get it done prior to you signing your lease. It is just something that you need to ask for. Why sign away your rights on a lease without being able to access your money the same day? Also, if you get your money when you sign the lease, you do not have to worry that your paperwork got lost in the mail or if the company goes bankrupt.
If you give your signed lease to the o/g and in return you are given a bank draft (there is usually a let say a "30 day" hold on the draft----that is it can not be cashed for a period of time). It is my understanding that during this "hold period" the o/g can instruct the bank not to negotiate the draft.
The o/g has a lease, you do not have your money, but you did buy yourself a lawsuit because you are probably going to have to sue the o/g for breach of contract, specific performance, etc......, (need to ask a lawyer).
Who knows the outcome you may win your lawsuit but it is going to cost you, time, money and peace of mind. You only have so many life units (time). How many life units do you want to expend on a lawsuit.
Example: The game with money is "the stall" and there is no better way to put off paying a debt then to start a lawsuit, wear the other side down, settle during the lawsuit because everyone just wants relief and peace of mind. (wait for trial then appeal). Cash flow is king the longer the o/g can hold on to your money the more deals they can do with your money. If they stall paying you and ten other people then they have retained a lot of cash.
I am not saying there is never a time to accept a bank draft, what I am saying is be careful get legal advice.
If you are going to get paid do not deliver a signed lease until your check is cashed and money is in your account.
NO DEAL IS COMPLETE UNTIL THE FUNDS ARE DEPOSITED IN YOUR ACCOUNT AND THE CHECK CLEARS.
WIRES: You do know that if money is wired there is a window of time after that money (wire) hits your account at the receiving bank that the wire can be withdrawn and the money is returned to the sending bank.
I, and everybody I know who has leased, got a draft. My lawyer did put in that they had two weeks. That was two weeks from the time they received it. I got my check deposited to my account in fourteen business days. That was almost three weeks from the day I went to the bank with it. I know someone else whose lawyer forgot to change the time. It might be a while before they get their money. But they leased with Petrohawk.
Possibly some companies could be more trouble than others. We leased to Audubon.
Of the handfull of people that I know personally that have signed leases, the only problems that have come about have been at the hands of middlemen/flipers.I know PetroHawk customers and Pin Oak customers that got their money in a very fast time.They were given a draft to hold and then paid with check I believe.Deals done through m/men ,about 2 months and climbing.Draft given and held unpaid while bigger offers were sought.Draft is only as good as the company you are dealing with.Most of the deals I know of were better deals for O & G/Landman so payment was lightning fast to close out deal!
I have heard that people that leased a few months back for a small amount that they are unhapy with might actually be able to have their contracts voided and cancelled if the bank draft is not being paid within the stated time. Like if the draft states "payable in 14 days" and it is not, then the landowner might be able to successfully sue to have the lease voided because the terms of the contract were not kept.
As exciting as this is, we know that we have a responsibility to do this thing correctly. After all, we want the farm to remain a place where the family can gather for another 80 years and beyond. This site was born out of these desires. Before we started this site, googling "shale' brought up little information. Certainly nothing that was useful as we negotiated a lease. Read More