Effective January 30, 2014, the third and final step of the statutory oil and gas lease forfeiture process in Ohio will change.
Overview of the Lease Forfeiture Process
Ohio Revised Code 5301.332 sets forth a statutory process whereby a lessor (or the lessor’s successors and assigns) may cancel an inactive lease, freeing up the property for the negotiation of a new lease.
The process currently has three steps for the lessor : (1) providing notice to the lessee, (2) filing an Affidavit of Forfeiture, and (3) instructing the County Recorder to notate the cancellation in the margin of the lease. The lessor may only proceed with the third step if the lessee fails to respond to lessor’s original notice by filing an affidavit averring that the lease is in full force and effect.
The current statute is somewhat vague on how the lessor is to actually proceed with step three. It merely stipulates that the lessor “shall cause the county recorder to note upon the margin of the record of the lease the following: ‘This lease cancelled pursuant to affidavit of forfeiture recorded in Lease Vol. . . ., Page. . . .’”. The statute is silent on the precise form lessors are to use to cause this marginal notation.
The recent changes to the statute replace the obligation of the lessor to cause the recorder to make a marginal notation with a new filing. Beginning January 30, 2014, the third step of the lease forfeiture process will entail the lessor filing a “notice of failure to file” containing the following:
1. A statement that the person filing the notice is the lessor or the lessor's successors or assigns;
2. The document number or volume and page of the lease record where the oil or gas lease is recorded;
3. A general description of the land; and
4. The statement: "This lease cancelled pursuant to affidavit of forfeiture recorded as Document Number ....., or Official Record/Lease Vol. ....., Page ....."