Title at Work in the Utica ShaleBy: Travis Jeric, Esq.

The State of Ohio

Admitted 1803

Land Records – Ownership of Real Property

• Recorded in a government office for the owner’s protection.

• Under the law, if an individual’s ownership is not made a matter of public record, they may NOT be able to assert title – especially against innocent purchasers from a former owner

Title Examination

• Careful search of public records reveals the status of the legal ownership of any given parcel of land

• Determines the Status of Land Titles

• A typical title examination is a backward search of the records, beginning with the present owner and tracing back through each preceding owner.

• The object of this examination is to establish the chain of title. The present owner’s claim is good if his or her title proves to be part of an unbroken chain of ownership.

Ohio Title Standards

General Rule as to Marke tability

• Marketable title is one that a purchaser would be compelled to accept in a lawsuit for specific performance

• Objections to title should not be made by an attorney when the irregularities or defects do not impair the title or cannot reasonably be expected to expose the client to the hazard of adverse claims, litigation or expense in clearing the title

Ohio Supreme Court States;

• “A Marketable title imports such ownership as insures to the owner the peaceable enjoyment and control of the land as against all others.”

Marketable Title Act

• 40 year SOL regarding the Marketability of title• Any person “who has an unbroken chain of title of record to

any interest in land for forty years or more, has a marketable record title to such interest”

• Does not apply to extinguish interest in coal, railroad, public utility easements, or easements observable by physical evidence

• Does not apply to severed mineral interest• Conflicting points of view

• A title search often must go beyond the root of title. • For example, an oil and gas lease, or easement, which was effective in

1950 would be beyond 40 years of a search conducted in 2014, but still could affect the title to the property. In such a situation, fee title could be passed, but the title might be subject to the lease or easement made in 1950, which would not be found if the search were limited to 40 years.

Dormant Mineral Act - 1989

DMA I

Silent as to notice requirement

Twenty year look back period

Six different savings events

Three year grace period (3/22/1989 – 3/22/1992)

Automatic reunification of minerals with surface estate?

Six Savings Events:

1. Subject of a title transaction filed or recorded with county recorder

2. Actual production or withdrawal of minerals 3. Minerals used in underground gas storage

operations4. A drilling or mining permit 5. Claim to preserve the interest has been filed6. A separately listed tax parcel number

Dormant Mineral Act - 2006

DMA II

• Specific notice and filing requirements

• Effective June 30, 2006

• Severed more than 20 years • Examine closely to determine if

there has been possible automatic abandonment under 1989 DMA

Six different savings events

Process Under 2006 DMA• Notice of Intent to Declare Mineral Interest Abandoned

• 20 year look back period

• Affidavit of Abandonment• Not less than 30 days but no more than 60 days

• Affidavit to Preserve Mineral Interest . . . or . . . Affidavit of Event Preventing Abandonment

• No more than 60 days after receipt of notice

• County Recorder Memorializes Record . . . errrrr . . . “Notice of Failure to File.”

Drilling Title [determining properly leased mineral owners]v. Division Order Title [determining proper payments]

• Arguably, the 2006 DMA does not apply to a royalty because “royalties” are treated as personal property in Ohio jurisprudence. “Mineral Interest” is defined as a fee interest under the 2006 Act. A fee interest is real property and not personal property. However, several Ohio trial courts are allowing the DMA (under both versions) to declare a royalty reservation abandoned. The trial courts do not discuss the statutory definition of a mineral interest compared to a royalty interest. The 1989 DMA does not define a mineral interest.

• Therefore, it is unclear whether a royalty interest could be declared abandoned by this version.

Recording Statutes

• Race – Notice: as to all documents except Oil and Gas Leases• First to file of record and possible actual notice

• Race: As to Oil and Gas Leases (and OGL assignments)• First to file of record

Restrictive Covenants

• Need to be aware of restrictions and covenants filed of record

• Ohio case law looks to the specific language of the restriction/covenant

• May need to amend the restriction/covenant• Draft Waiver of Covenant

• If all parties bound by the restriction/covenant are leased, then we consider the covenant waived

Mortgages• Foreclosure of Mortgage with Priority• Super Priority for Oil and Gas Leases in Ohio

• “If a mortgaged property that is being foreclosed is subject to an oil or gas lease, pipeline agreement, or other instrument related to the production or sale of oil or natural gas and the lease, agreement, or other instrument was recorded subsequent to the mortgage, and if the lease, agreement, or other instrument is not in default, the oil or gas lease, pipeline agreement, or other instrument, as applicable, has priority over all other liens, claims, or encumbrances on the property so that the oil or gas lease, pipeline agreement, or other instrument is not terminated or extinguished upon the foreclosure sale of the mortgaged property. If the owner of the mortgaged property was entitled to oil and gas royalties before the foreclosure sale, the oil or gas royalties shall be paid to the purchaser of the foreclosed property.”

• Subordinations are still pursued

Land Installment Contract

• Definition: An agreement that obligates the parties involved financially over a period of time but does not involve the transferring of a deed for the property. The buyer is permitted to move into the property and make payments. Once the obligation is satisfied, the seller then records the deed and passes it over to the buyer.

• Lease (and/or ratify) both sides!• Record title owner• Equity interest owner

Power of Attorney

• POA must be recorded before a deed• A general power (anything the principal could do

if present) is NOT sufficient• Must be a specific grant of authority to convey or

lease real estate

Dower (Marital Status)

• Statutory Inchoate Dower• Black’s Law Dictionary = at common law, a wife’s right,

upon her husband’s death, to a life estate in one-third of the land that he owned in fee.• 1/3 Life Estate in the surviving spouse

• Must have both spouses execute oil and gas lease to release inchoate dower

• Deed from one spouse to another is not sufficient to release the grantor spouse’s inchoate dower interest (unless the deed is pursuant to a divorce decree)

Roads?

• Default Rule: the road is owned to the center by abutting landowner, unless;- Dedications (recorded subdivision plat is a dedication)- Owned by County or municipality (statutory)- Be aware of a fee conveyance to any governmental entity

Definition of Minerals

• A conveyance of “minerals” includes oil and gas

• Qualifying or limiting words

• Intention of the parties

• Construed in favor of the grantee rather than grantor

Abstracts and Title Opinions

• Order• Review . . . in detail• Determine type of curative• Determine level of curative• Proceed with curing title defects

Title Curative Documents• Amendments and Ratifications of Oil and Gas Leases

• Unleased Spouse (dower)• Improper legal descriptions

• Affidavits of Marital Status • Waiver of Restrictive Covenants• Stipulation of Interests and Cross-Conveyance

• Dormant Mineral Act issues• Releases of expired Oil and Gas Leases• Affidavits of Non-production

• Unreleased OGLs• Mortgage Subordinations

Title Team Product = Title Review• Approve legal title to:

• Drillsites (elevated review)• Laterals• Drilling Units

• Marketable Title v. Business Risk• Marketable Title does NOT equate to Drilling Title• It is for insurance purposes• Valuable Tool for Operators

Closing Statement

• Thank You Very Much!

Bibliography

• Ohio Title Standards prepared by the Real Property Law Section of the Ohio State Bar Association, including;• OTS 1.1 General Rules-Marketability

• Ohio Supreme Court syllabus of McCarty v. Lingham, 111 Ohio St. 551, 146 N.E. 64 (1924)

• Ohio Revised Code § 5301.48 (Marketable Title Act)• Ohio Revised Code § 5301.56 (Dormant Mineral Act)

• Effective Date: 03-22-1989; 06-30-2006; 1-30-2014• Ohio Revised Code § 1509.31(D) - Notice to holder of royalty interest

of assignment or transfer of entire interest in lease• Online property law resources provided by Ohio State Bar

Association: https://www.ohiobar.org