Title Research & Due Diligence Flashcards

Which instrument is most commonly used to establish that an oil and gas lease is still in force after the primary term has expired?

Answer: Affidavit of production or certificate of production

An affidavit or certificate of production (or producing operations) filed in the county records gives constructive notice that a lease is being maintained by production or operations beyond the primary term.

A 'top lease' is executed when:

Answer: A new lease is executed on the same land before the existing lease expires, to take effect upon expiration

A top lease is a lease taken on land already covered by an existing lease, designed to become effective when and if the underlying lease expires or terminates.

During title due diligence, which factor most directly determines whether a recorded instrument provides constructive notice to a subsequent purchaser?

Answer: Whether the instrument is properly indexed in the county records so it can be found by a reasonable search

Constructive notice depends on proper recordation and indexing; an instrument recorded but not findable in a reasonable search (a 'wild deed') generally does not impart constructive notice.

A 'shut-in royalty' clause in an oil and gas lease allows the lessee to:

Answer: Maintain the lease in force by paying a flat fee when a well capable of production cannot market its gas

A shut-in royalty clause permits the lessee to keep the lease alive by paying a specified shut-in royalty when a gas well capable of production cannot sell gas due to market or pipeline issues.

In the context of mineral title research, 'adverse possession' of a mineral interest requires which additional element compared to surface adverse possession in most jurisdictions?

Answer: Actual extraction or drilling activity on the mineral estate, not merely surface use

Most courts require actual use of the mineral estate—such as drilling or extracting minerals—for adverse possession of severed mineral rights because surface occupation alone does not constitute possession of the mineral estate.

A 'habendum clause' in a mineral deed or oil and gas lease defines:

Answer: The duration and conditions under which the grantee holds the granted interest

The habendum clause (the 'to have and to hold' clause) specifies the nature and duration of the estate granted—for example, 'for so long as oil or gas is produced in paying quantities.'

When a mineral deed contains a warranty clause and the grantor's title later fails, the grantee's remedy under the warranty is typically limited to:

Answer: Recovery up to the amount of consideration paid plus interest

A warranty of title obligates the grantor to compensate the grantee up to the amount of consideration received if the title fails, not the current market value or subsequent appreciation.