Avoid this common oil and gas real property misstep

By definition, a life estate interest in real property is an ownership interest in real estate with the right of the life tenant to live at and use the property during his or her lifetime. Upon death of the life tenant, the property then reverts to the life tenant’s designated person, also known as a “remainderman.” A life estate interest can be leased or sold, but will always terminate when the life tenant dies.

A commonly encountered oil and gas real property issue occurs when the remainderman signs and executes an oil and gas lease, but omits the signature of the life tenant. An example of this would be where A conveys the property to B, but A reserves a life estate in and to the property. B then signs and executes an oil and gas lease for the property to Y Energy Company. At the time of the execution of the lease, and assuming that A is still alive, B only possesses a future right to the property. B’s right to the property becomes a fee simple interest only upon the death of A. Therefore, the oil and gas lease signed by B is not a presently valid lease.

The solution

To cure this issue, you should obtain and file for record a Ratification Agreement, with present words of grant and conveyance, executed by A, which ratifies, adopts and confirms the lease to Y Energy Company.