Subordination Question for unleased property owner
It seems that Subordination Agreements are being required by O&G companies before they will lease a mortgaged property. Will they (or can they) require a subordination agreement for unleased property that is force pooled? Will they (or can they) withhold revenue payments if you are unleased and don't get a subordination from your mortgage company?
Thanks!
Thanks!
Views: 193
Replies to This Discussion
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Permalink Reply by Bobi Carr ("parker") on
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I can't see where a mortgage would hinder the operator in a force pooled situation.
If the property were foreclosed, the new owner would be entitled to the revenue. IMHO.
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Permalink Reply by The_Baron on -
if a tract is unitized, and is unleased, there is no lease to subordinate.
The money (revenue-expenses) will be sent to the mineral owner.
That is not to say that the landowner will not be violating terms of the mortgage. This will be a matter between the lendor and lendee.
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Permalink Reply by Bandit, UMO on
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I had not thought of it like that... there is no lease to subordinate. Thanks.
But I don't understand the part about violating terms of mortgage. If one is unleased and force pooled, then he would be forced to participate unvoluntarily.... how could he be held responsible for that?
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Permalink Reply by The_Baron on
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If the property is encumbered by a mortgage...And revenue is derived from the property...The lendor could make claim to this revenue and require it be applied to the loan principle.
All this would depend on the loans terms.
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Permalink Reply by Bandit, UMO on
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That's interesting.... So, Are you saying they can get the revenue in addition to my mortgage payment??? Or only if one default's on their mortgage???
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Permalink Reply by The_Baron on
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It would depend on the terms of your loan...
I am not a lawyer..I am not a mortgage expert. I am just saying that taking mineral revenue from a mortgaged property could involve the mortgae co.
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Permalink Reply by The_Baron on
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I agree with you KB, but could a lendor make a claim on revenue derived from production on an unleased tract?
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Permalink Reply by The_Baron on
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A lendor can make demands on a property owner that rents a home, usually in the form of increased insurance. I am not saying that every lendor could make a claim on mineral proceeds, but in todays finacial world with complex mortgage documents it could be possible that they could make a claim on that money. Personally, If I was a lenderI would not, I would rather the loan be paid over its natural length so i could make my interest money, but today many banks need cash.
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Permalink Reply by The_Baron on
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Not always true Jim. Many times a lendor will require the owner to carry additional liability insurance.
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Permalink Reply by Bandit, UMO on
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I think I'm beginning to understand. :) The O&G companies don't want to be forced to renegotiate terms for a leased property that they previously negotiated.... which could potentially result in substantially different terms than the original lease. Thanks!
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Permalink Reply by Spring Branch,mineral owner on
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So the subordination is for the benefit of the oil company lessee, not the mineral owner?
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