Why is accepting a bank draft a "no no"?

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?

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Permalink Reply by Snake Stewart on June 27, 2008 at 0:54
Of the few drafts I have spoken of with people,they aren't real sure of the date part.I do not believe all drafts are created equal,just as all leases aren't either.Most of the folks around here don't have extra money laying around for lawsuits and things of this nature,thus they could be in a rough situation all the way around.By the time case comes up,company offers to pay.Now what.Do you still have a case?This would be a total nightmare for the average individual like myself.The main intent of the draft ,when used in this manner,is to delay payment.Lawsuit delays payment even further.By this time(court date) they know whether or not they still want your property and or want it at the bargained price set forth by the lease!Some of the rumors I have heard actually give companies a way out of signed deal where as you are out luck if you try the same thing.

Be happy with what you are able to get,because that is it! Make sure you recieve payment in a timely manner.Please be cautious with every aspect of this deal.I will be dealing with someone that is a direct rep of the drilling companies,because that removes a lot of the problems that I have been made aware of.
Permalink Reply by Isabel Spencer on June 30, 2008 at 4:46
All bank drafts are not evil. The deal with most bank drafts is like this.

You are signing a lease from Company X. The problem is Company X has nothing to do with your lease at this time. You are really signing a lease for Landman X a seperate outside contractor, who works for Company X. Landman X does not have the hundreds of thousands of dollars to pay for your lease so he gives you a draft. You sign the draft, send it back to Landman X and he uses that to get the money from Company X and then send you a check.

It's not that he doesn't want to pay you, it's that he can't pay you. He has to prove to Company X that he's asking for the money for a reason, that's the purpose of a draft. If you ask early enough in the negotiations, Landman X can talk to Company X and they'll have a check ready for you as soon as you sign, but if you decide on the day you sign the lease that you want a check and not a draft, it's going to be a problem because like I said Landman X doesn't have a hundred thousand dollars lying around.

Also the drafts generally state that they only have thirty days from the time they recieve it to pay you, not that you won't get your money until the thirty days are up. As soon as you sign and return the draft, they have to pay you within thirty days or your lease is null and void, no matter if they have it signed or not, so it's in their best interest to pay it.

I'm not saying everyone should accept a bank draft, I'm not saying you shouldn't. If you would rather a check or to have the money wired to you, that's fine and you should negotiate for it, you'll probably get what you want. All I'm saying is that they aren't trying to mess you over with Bank Drafts.
Permalink Reply by RAY on July 7, 2008 at 8:40
how are the folks in the Dogwood subdivision being paid ?
Permalink Reply by jim neely on October 4, 2008 at 7:50
not quite right . 30 banking days is about six weeks , then they can send it by mail . if they record the lease on signing AND DON'T PAY there is no null and void just a lawsuit that takes two years . in texas neither party is bound until money changes hands . in la only the mineral owner is bound according to the o&g lawyers . we are gonna make some law because we can afford it , if you can't just wait .
Permalink Reply by Two Dogs, Pirate on September 14, 2008 at 10:34
KB, most of the cos don't run the land title before buying the lease. If money doesn't change hands the lease is invalid. I think you are right about the amount being stated on the lease or in a letter of agreement. You need the deal done before you pay or the lessor could lease to someone else. Some of the title are expensive to run.
Permalink Reply by Two Dogs, Pirate on September 14, 2008 at 12:12
I think you are correct. The escrow sounds like a good way to go. Some out there are nothing but snakes lurking to take advantage.
Permalink Reply by Two Dogs, Pirate on September 14, 2008 at 12:28
I can refer you to some snakes that you don't want to get 100 feet from. Some are from my hometown.
Permalink Reply by Snake Stewart on September 14, 2008 at 12:38
Hope you aren't pointing that my direction Two Dogs Sniffing . HA! HA! I really am a garter snake deep down.
Permalink Reply by intrepid on September 14, 2008 at 10:50
You should want your money up front just like the Company wants your signature up front. Ask them if they will let you deposit the 'draft' and wait til it clears until you sign and deliver the lease and see how fast they say "NO".

What people also should be thinking about is how soon after the wells are completed are the companies required to pay? Is there any penalty if they don't pay in a timely manner? Your lease should include language where the company pays you interest at above the going rate if they are late paying. Mine says 5% over the WSJ prime rate.
Permalink Reply by Two Dogs, Pirate on September 14, 2008 at 11:14
Many deals are completed over the phone with the lessor being 1000 miles away from the prospect. These transfers require a mail out of the lease. Would you want to send your check with the lease? I am not saying that all people would cash the check and not send the lease back but a few would.

People need to have in the lease when royalty payments will be paid. Some properties have mineral rights owned by entities that may have a 0.00000001 interest in a one acer tract. Would you like to get a check for 10 cents a month?
Permalink Reply by SPYDERGT on September 25, 2008 at 17:17
I just learned that SJL Energy is leasing mineral rights in the James Community for $5,000/acre. Is that a fair amount? I am so mineral rights challenged!
Permalink Reply by Barry on September 15, 2008 at 3:27
Assuming you are dealing with a reputable O&G company, there is nothing wrong with accepting a bank draft.

Go back to contract law 101. For a contract to be valid, consideration must be given. This means that in order for the lease to be effective, the draft would have to be good.

All the risk is shifted to the O&G company. If they write you a cashiers check, and you don't have title (which happens more than you would imagine), the O&G company gets NOTHING and the non-title bearing person gets the O&G company's money.

If you were the O&G company, why would you do this? Company's may be out for their own interest, but they generally are not INSANE!

When the music stops, and your not holding a chair, those people with bank drafts will be the ones laughing!

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