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LAND & ENERGY QUARTERLY
LAWRENCE D. BRUDY & ASSOCIATES, INC. is pleased to provide you with the latest edition of Land & Energy Quarterly. The magazine features educational articles related to the development of oil and gas interests, real estate, estate planning and a spotlight on two of the firm’s dynamic members, David A. Neely and David Cooper. Our professional and para-professional staff members have produced over 3,000 certified title opinions for exploration and production companies determining ownership of oil, natural gas, coal and minerals; have represented clients in more than 10,000 residential, commercial and relocation real estate transactions and provided accredited continuing real estate education for over 1,000 Pennsylvania realtors. The firm was nationally recognized this year in Landman Magazine for its commitment to the American Association of Professional Landmen Code of Ethics, and established a firm paid clerkship with Duquesne University School of Law to provide second year law students practical experience in the Energy and Real Estate law fields. Finally in 2013 I was honored to be selected as one of the three hundred “Who’s Who in Energy” industry leaders. Energy exploration will continue to shape our region.
Staff Members Lawrence D. Brudy, Esq. (PA) Matthew L. Brudy Michael D. Brudy Samantha R. Cavalier, JD David R. Cooper Julian M. Donado Linda M. Eaves Anna M. Hall Jonathan D. Hall, Esq. (PA) Thomas J. Kearn, CPA Paula J. Klein Michael J. Krobot David A. Neely, Esq. (PA, WV) Lawrence B. Nydes, Esq. (PA, WV) Tenille R. Pack Linda C. Polley Anthony J. Racioppi, Esq. (PA) Mark C. Ramach, Esq. (OH) Tara L. Rodman Jasmine A. Romanie Julie L. Schneck Frank Spinelli, III David L. Trzeciak, JD
Emails lbrudy@ldbassoc.com mlbrudy@ldbassoc.com mdbrudy@ldbassoc.com scavalier@ldbassoc.com dcooper@ldbassoc.com jdonado@ldbassoc.com leaves@ldbassoc.com ahall@ldbassoc.com jhall@ldbassoc.com tkearn@ldbassoc.com pklein@ldbassoc.com mkrobot@ldbassoc.com dneely@ldbassoc.com lnydes@ldbassoc.com tpack@ldbassoc.com lpolley@ldbassoc.com aracioppi@ldbassoc.com mramach@ldbassoc.com trodman@ldbassoc.com jromanie@ldbassoc.com jschneck@ldbassoc.com fspinelli@ldbassoc.com dtrzeciak@ldbassoc.com
2500 Brooktree Road, Suite 301 Wexford, PA 15090 Phone: (724) 935-1400 Fax: (724) 935-1415 Toll Free: (855) 935-1400
Table of Contents Clerkship with Duquesne University School of Law
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In the Spotlight - David R. Cooper, Land and Real Estate Administration - David A. Neely, Attorney at Law
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Durable General Power of Attorney, Durable Healthcare Power of Attorney and Living Will -By: Lawrence D. Brudy, Esquire
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Why You Really DO Need to Have a Will -By: Jonathan D. Hall, Esquire
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Heirship Searches—Locating Missing Heirs -By: Paula Klein
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An Inside Look at the Dormant Mineral Act -By: Theo Collins and Jonathan D. Hall, Esquire
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Environmental Issues Related to: Oil and Gas Extraction -By: Samantha Cavalier, JD
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AND SO LONG THEREAFTER… Free Gas as an Extension of an Oil and Gas Lease’s Primary Term -By: Anthony J. Racioppi, Esquire and Ryan W. Brode
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Primacy in Penn’s Woods: The Rights of Oil and Gas Owners under Public Lands -By David L. Trzeciak, JD
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Action to Cure Defects in the Chain of Title, and the Pennsylvania Dormant Oil and Gas Act -By: Jonathan D. Hall, Esquire
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Land Warrants vs. Patents -By: Julie L. Schneck
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Mortgage Subordinations: The Procedures and Benefits -By: Jennifer N. McDonough, Esquire
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Differences Between a Note, Mortgage and Deed -By: Linda M. Eaves
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Notarial Seal Requirements By: Benjamin B. Kmetz
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Interesting Facts
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Clerkship Established with Duquesne University School of Law Recognizing the growing need for legal skills in Pennsylvania’s expanding natural gas industry, LAWRENCE D. BRUDY & ASSOCIATES, INC, has established an in-house clerkship program for law students interested in oil and gas law.
“Our law students continue to gain important practical experience in the oil and gas industry through the Brudy & Associates clerkships” said Maria Comas, Director of Career Services at Duquesne University School of Law.
The program, created by Lawrence D. Brudy, President of the Wexford-based firm, provides second-year students at the Duquesne University School of Law with practical experience in performing research in practice areas involving the interplay of natural gas, oil, coal, mineral and real estate law, all under the supervision of the firm’s attorneys. The students, who are paid for their clerkships, do the research principally on weekends, during the work week and after classes. Mr. Brudy created the program in conjunction with Duquesne, and also under the guidelines of the American Bar Association. He received his Juris Doctor degree from Duquesne, and also holds a bachelor’s degree from the University of Pittsburgh and a master's from Carnegie Mellon University. This is a way of giving back to the profession,” said Mr. Brudy. “The hands-on experience in the setting of a law office, doing real legal work under attorney supervision, is an invaluable addition to classroom work and lectures. This is especially true in this field, given the intricacies of oil and gas law in Pennsylvania. Mr. Brudy launched the program in the first semester of the 2013-14 school year, bringing in nine students. “Our
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law students continue to gain important practical experience in the oil and gas industry through the Brudy & Associates clerkships” said Maria Comas, Director of Career Services at Duquesne University School of Law. “Before the Marcellus Shale boom started in the mid-2000s, the need for natural gas lawyers in Pennsylvania was comparatively small,” Mr. Brudy said. “That need has expanded rapidly, and Duquesne is among the education leaders working to meet it. The Brudy program reflects the change not only in legal education but also in the firm’s practice. The firm formerly was engaged principally in residential and commercial real estate. But with the development in the Marcellus Shale gas industry, Brudy & Associates has expanded rapidly to meet the needs of clients, and now is comprised of lawyers licensed to practice in Ohio and West Virginia, as well as Pennsylvania, and also of paralegals, legal assistants, title examiners, title analysts and licensed title insurance agents.
Law Students Awarded Clerkships with LAWRENCE D. BRUDY & ASSOCIATES, INC. last semester: Matthew J. Bolewitz Ryan W. Brode Theo A. Collins Samantha C. Franco Mary E. Hancock Amanda D. Knorr Katrina S. Lawrence Gregory Sobol Frank Spinelli, III
David R. Cooper Land & Real Estate Administration
Dave, born and raised in Western Pennsylvania, joined the Firm in September 2013 and has been working extensively with the marketing department. Beginning in 2014, he launched various marketing campaigns in addition to working with existing and new clients. He is a graduate of Indiana University of Pennsylvania, where he earned a bachelor’s degree in Communications Media/Public Relations with a minor in journalism, and spent 12 years in Sales and Marketing. Dave worked over a decade in the Healthcare I.T. Industry marketing software and services to hospitals and physician groups across the United States. He also worked for an international healthcare company located in Tel Aviv, Israel, where he launched their products and services in the United States doubling the company’s clients and revenue. He recently completed his Certification in Land Administration for Oil & Gas through Community College of Allegheny County.
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David A. Neely, Esquire Attorney at Law
David was born and raised in New Brighton, Beaver County. He obtained his undergraduate degree from Indiana University of Pennsylvania and his law degree from Duquesne University in 1987. David has twenty-seven years of litigation experience and has practiced in State Courts throughout Pennsylvania and West Virginia, where he was licensed to practice in 1989. David’s major emphasis is on trying cases and using the art of persuasion to convince a jury to decide in favor of his client. He tends to focus his practice on personal injury matters, such as automobile accidents and defective products. David recently obtained a $600,000.00 settlement on behalf of a man who was injured when a defectively manufactured deer-hunting trees stand collapsed. He also concentrates on insurance disputes, particularly bad faith issues. In 2005, David obtained a $1.5 million dollar verdict against a major insurance company. Since joining LAWRENCE D. BRUDY & ASSOCIATES, INC. in July of 2011, David has become the face of the firm’s litigation department. Because a large concentration of law practiced by LAWRENCE D. BRUDY & ASSOCIATES, INC. is in energy and real estate, David has been active in defending and pursuing issues in those areas, including quiet title actions and matters involving breaches of agreements of sale for the purchase of real estate. David has tried more than 50 cases to verdict and has successfully engineered the settlement of numerous others. He maintains strong ties to both his native Beaver County and in Allegheny County, where he resides in the community of Crafton.
When you think of Oil and Gas . . . Think of us!
Watch for our campaign advertising Pawn Stars, Fox & Friends and House Hunters
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By: Lawrence D. Brudy, Esquire On several occasions the Firm’s Attorneys have been called upon by a client, or, more often a spouse, adult child or sibling to prepare a Last Will and Testament, Power of Attorney and/or Living Will, when and after a loved one has been hospitalized as a result of an accident, surgery or terminal condition. Rather than this reactive approach to a situation, our Firm’s professionals have always recommended a proactive position, that is to have these critical documents prepared in advance, not under the stress of the circumstances. This article will focus on the Powers of Attorney and Living Will. A Durable General Power of Attorney allows your appointed “Agent” (prior to 1999 identified as Attorney in Fact) to act in your place to manage your daily affairs, conduct financial and real estate transactions and make gifts among other responsibilities you the “Principal” designates. A “durable” power of attorney remains effective even after you suffer a disability. A Durable General Power of Attorney can be changed or modified at any time, remains in full force and effect unless revoked by the principal and extinguishes at the Principal’s death. Pursuant to Pa. C.S.A. § 2504 (a) original (and previously recorded certified copies of the originals) Powers of Attorneys may be recorded in any county within the Commonwealth, with a recorded certified copy of the original having the same force and effect as the original. For real estate transactions involving title insurance, the Power of Attorney must be recorded in the county where the land is located for the transaction to be insured. In Pennsylvania anyone 18 years of age
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with capacity can create a Power of Attorney. A Durable Power of Attorney for Healthcare provides your appointed “Agent” with the power to make decisions regarding your medical care if you are unable to understand, make or communicate those decisions for yourself. Since 2006 a Durable Health Care Power of Attorney and Living Will may be combined into one document. A properly drafted Durable General and Healthcare Power of Attorney can provide you and your dependents with comfort and protection in the event you are unable to manage your personal, legal, medical, financial and real estate affairs without court involvement. A Declaration of Living Will reflects the “Declarant’s” (you) decisions regarding life-sustaining treatment. Providing the attending physician, care provider or appointed “surrogate” with the declaration, directs those individuals to withhold or withdraw life-sustaining treatment that serves only to prolong the process of dying. Any person 18 years of age, or is a high school graduate or has married, with capacity, can create a Living Will. The firm’s Attorneys prepare Last Will and Testaments, Durable General and Healthcare Powers of Attorneys and Living Wills in triplicate originals. We suggest an original be provided to the Executor/ Executrix, Agent and Surrogate for safe-keeping and future exercise. Documents that require notarization are provided by the firm’s notaries, including ink and raised seals. We recommend to clients to have these documents reviewed every five (5) years for updates. In addition, if the documents are to be used in another state, to verify that jurisdiction will accept the documents that conform to Pennsylvania law. www.ldbassoc.com
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Why You Really DO Need To Have a Will By: Jonathan D. Hall, Esquire
Yes, this is an unpopular topic, mostly because it is unpleasant to be faced with our own mortality. As human beings, we like to focus on self-preservation and the longevity of our lives as opposed to the conclusion of our life. “…never send to know for whom the bell tolls; it tolls for thee” is the famous statement that John Donne wrote almost 500 years ago and reminds us that death is an inescapable certainty.
Many married couples believe that they do not need a Will because they mistakenly believe that their surviving spouse will inherit the entire estate, even if the decedent died intestate (without a Will). In many, if not most cases, a surviving spouse will not receive the entire estate without a Will. In Pennsylvania, a surviving spouse will only get the entire estate if the decedent has no issue (lineal descendants, e.g. children, grandchildren) or parents.
Planning and preparing for what will come can provide assurance and peace of mind. A Will puts YOU in control of your estate and can prevent family fighting and civil action over the distribution of assets. We all know that we should have life insurance because in our absence, we want our family and loved ones to be taken care of. In the same regard, a Will will ensure that your wishes are carried out, and that your assets are controlled and distributed as you wish. Taking the time and forethought to prepare a Will saves your family from having to figure out and agree on what you would have wanted.
If the decedent has either issue or parents, the surviving spouse is entitled to only the first $30,000 of the estate, plus a one-half interest of the remaining estate. The other half of the estate will be divided among the issue of the decedent. If the decedent has no issue, but is survived by parents, then the parents will inherit the remaining one-half interest. If the decedent has issue that is not the issue of the surviving spouse, the surviving spouse is not entitled to the first $30,000 of the estate and is entitled only to a one-half interest.
Our office on multiple occasions has been asked to prepare and deliver Wills, Power of Attorneys and Living Wills, on-site, by individuals or their families after they have been admitted to a hospital or hospice care. On every occasion, the explanation was similar: “I’ve been meaning to get this done sooner.” Unfortunately, far too many of us will not receive advance notice of our imminent death or terminal condition and that time may be running out. There are far too many unknowns; the time to complete your Will is now. LAWRENCE D. BRUDY & ASSOCIATES, INC.
For individuals with minor children, preparing a Will is of the utmost importance because it will declare who will take care of, and be the Guardian of the Testator’s children in the event of the Testator’s death and/or appoint
In many, if not most cases, a surviving spouse will not receive the entire estate without a Will.
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a contingent caretaker in the event that the Testator and their spouse die contemporaneously. A Will can also establish a Trust for the children, and dictate how the money is to be used for their support, and when, or under what conditions the child(ren) may receive the balance of the Trust. The chart at Exhibit 1 is provided by the Wills/Orphans’ Court Division of Allegheny County, Pennsylvania. It shows how Intestate Succession works within the Commonwealth. Having a Will drafted and prepared is faster, and easier than you may expect; and more importantly, it’s the right and responsible thing to do. A Will can also be changed, ratified or revoked at any time by the Testator as situations may dictate. The support requirements between beneficiaries may differ and fluctuate over time. A Will can be changed easily and as often as needed to specifically address the changes in your family’s lives. Contact your Estate Planning attorney to see how a Will, Living Will, and Power-of-Attorney can further benefit your family and loved ones.
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Example No. 1: William and Deborah are married with two children. William and Deborah are the natural parents of both children. William dies intestate, with his estate containing $200,000 of distributable assets. Deborah will receive $115,000; derived from the first $30,000 + $85,000 [200,000 – 30,000 (to Deborah) = 170,000; 170,000 / 2 = 85,000]. Each of their children will receive $42,500 [the remaining 85,000 / 2 = $42,500].
Example No. 2: Ben and Mandy are married with three children. Ben and Mandy are the natural parents of the three children. Ben has one child from a previous marriage. Ben dies intestate, with his estate containing $300,000 of distributable assets. Mandy will receive $150,000. [300,000 / 2 = $150,000] Each of Ben’s children will receive $37,500 [the remaining 150,000 / 4 = $37,500].
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Why You Really DO Need To Have a Will
Exhibit No. 1
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Heirship Searches Locating Missing Heirs The Energy Practice Group Attorneys licensed in Pennsylvania, Ohio and West Virginia, along with the firm’s para-professionals and abstracting corps research and examine county courthouse Recorder’s offices; including all deeds of conveyance, general, special, fiduciary, quitclaim, sheriff. treasurers, mortgages, secured transactions, ejectment, miscellaneous, equity, judgments and liens in the Prothonotary’s office, Treasurer’s office, Tax Claim Bureau, and Orphan’s Court Records in the Register of Wills. All identify ownership of surface and/or subsurface interests. In many instances, an abstract of the public records may not provide adequate documentation to evidence ownership of these interests into the early 1800’s. For example, a Last Will and Testament executed by the Testator in 1840, wherein he devised all real estate to his wife for her natural life, and at her death, remainder to his children. However, the Will does not identify the names or number of children. The subsequent conveyance from “the children” as Grantors to the Grantee fails to identify all of the heirs of the parents. Our staff begins with verifying the death of the mother. Employing genealogical websites
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By: Paula J. Klein
can in most situations, provide a date of death. Obtaining original death certificates however, are generally reserved to familial limitations, legal representative of a decedent’s estate, or by power of attorney. Genealogical search websites include obituaries, family trees and death records identifying children and grandchildren. Historical County and Census Bureau sites will provide early settlers, addresses, heads of households, people living in the home and occupations. State Archives are also a good place to search for on-line vital records prior to the Early 1900’s. Lastly, and most importantly a careful and comprehensive reading of dates, legal descriptions, signatures, including witnesses, notary acknowledgments and leases in public documents can provide clues in the identification process. The firm’s Certified Title Opinions account for all identifiable heirs in the chain of title minimizing the client’s investment of additional time and business risk.
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An Inside Look at the Ohio Dormant Mineral Act By Jonathan D. Hall, Esq. and Theo Collins Since the late 1800’s, the landscapes of Ohio, Pennsylvania, and West Virginia have been host to a common sight: oil and gas production wells. Also common, have been real estate transactions where a seller conveys the subsurface interests separately from the surface interests or reserves the subsurface when selling the surface. For example, a grantor can convey the surface, and reserve the oil, gas, coal, specific minerals, or any combination thereof. When this occurs, the subsurface “mineral estate” is deemed to be severed from the “surface estate.” When interests are severed, they can become lost, forgotten, and unused. In keeping with the theory that land ought to be used, or at least be able to be used, the Ohio Legislature enacted the Ohio Dormant Mineral Act, or ODMA, in 1989 in order to provide surface landowners with a process by which they may unite their surface property with the subsurface estates. It is important to note that in the State of Ohio, the term “minerals” is deemed to include both oil and gas with other subsurface minerals. In the Commonwealth of Pennsylvania, the term “minerals” does not include oil and gas and must be specifically mentioned. Under the ODMA, if the minerals underlying the surface were dormant and unused for 20-years, the minerals are deemed to be abandoned and automatically reunited with the surface once a three-year waiting period passed. The purpose of the three-year waiting period is to allow the owner(s) of
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unused minerals to come forward and to preserve their ownership. Therefore, all severed mineral interests that were dormant and unused since 1969 automatically vested with the surface owner in 1992, if the mineral owner did not preserve the minerals.
In 2006, the Legislature passed a modification to the Act, codified at O.R.C. 5301.56, requiring notice to be served on all identified holders of interest in the minerals. A holder is the most recent person deeded the subsurface estate. If the 20-year look back period concluded after 2006, the surface owner will need to follow the new procedure outlined by the 2006 amendment to the Act and file an Affidavit of Abandonment. If no notice can be served, publication in the newspaper will serve as notice. Once notice has been provided by newspaper publication or mailing, the surface owner may file an Affidavit of Abandonment after 30 days and within 60 days, and provided that no claim of preservation has been filed by a holder, the minerals will vest with the surface owner. Another modification, effective January 29, 2014, requires a surface owner to file notice that the holder has failed to file a claim or affidavit of preservation. If that identified holder fails to file their intent to claim and preserve the mineral estate within the statutory period, the court will deem the Affidavit of Abandonment effective and the minerals will transfer to the surface landowner. In order for a mineral estate to properly be declared abandoned, the holder must not have carried out an “act of preservation” within those www.ldbassoc.com
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20 years. An act of preservation occurs when a title transaction takes place which concerns the subject mineral interest (including oil and gas leases), an affidavit of preservation is filed, or a separate tax parcel identification number is created for the minerals. Active oil and gas production and storage are also valid acts of preservation. Where any of these have occurred within the last 20 years, the minerals will not be deemed to have been abandoned. However, mere payment of real estate taxes will not be viewed as acts of preservation. The “long and short” of this process that landowners need to be familiar with is as follows: when a surface landowner becomes aware that they do not have title in their subsurface mineral estate, or that their claim is clouded, and the minerals have been effectively abandoned for 20 years, they may commence actions to have them declared legally abandoned, whereby they would be united with the surface estate. Conversely, if a holder of a mineral estate is seeking to preserve their subsurface interest, they must file an affidavit of preservation with the county recorder’s office, declaring their intent to retain possession of their mineral interest. This affidavit will then be valid for 20 years.
Appeals, covering Belmont, Carroll, Columbiana, Harrison, Jefferson, Mahoning, Monroe and Noble Counties recently decided that the 1989 version of the ODMA automatically reverted the minerals to the surface owner because a savings event did not occur in the statutory time. Although questions of the constitutionality of the act have been raised in regards to its power to seize and transfer property, Indiana has a statute similar to Ohio’s ODMA, titled the Mineral Lapse Act, which was declared constitutional by the United States Supreme Court in 1982 in Texaco v. Short, 454 U.S. 516, 102 S. Ct. 781, 70 L. Ed. 2d 738, (1982). In fact, Indiana’s Act only allowed for a two (2) year grace period for land owners to become familiar with the act, whereas Ohio’s provides a three (3) year period. In Texaco, it was held that, “There was no constitutional right for a mineral interest owner to receive individual notice that his right will expire.” The process of reclaiming the subsurface mineral estate can be very complex and not all potential issues have been raised in this brief overview. It is highly recommended that you contact an attorney in the practice of oil and gas if you are considering pursuing this course of action.
So far, most lower courts have reaffirmed the 1989 version of the Act. See Taylor vs. Crosby, Walker vs. Noon, and Tribett vs. Shepherd. Currently, the 1989 version has not yet been brought before the Ohio State Supreme Court, however, in Walker vs. Noon, the Seventh District Court of
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By: Samantha Cavalier, JD
Although Oil and Gas extraction has raised an abundance of environmental issues, most companies in the oil and gas industry are taking precautions to mitigate the environmental impacts caused by oil and gas extraction. Some common environmental issues that are being raised include changes in air quality, ecological resources, hazardous materials, waste management and the depletion of water resources. Air Quality: Changes in the air quality can be caused by emissions and dust from vehicles, earthmoving equipment, seismic surveys, well completion, testing, and drill rig exhaust. Although these impacts can occur, the severity depends on many factors which include the duration and location of the oil and gas extraction. In addition, according to Tribal Energy and Environment Information Clearinghouse, emissions during this phase do not have a measureable impact on climate change. Ecological Resources: Impacts to ecological resources depend on the amount of surface disturbance and habitat fragmentation. Because vegetation and topsoil is removed for the development of well pads, access roads and pipelines, a loss of wildlife habitat, reduction in plant diversity and the potential for increased erosion could occur.
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Hazardous Materials & Waste Management: Development and drilling activities may produce solid and industrial waste. Most of the solid waste is nonhazardous such as containers and packaging materials. Industrial wastes include small amounts of paints, coatings, and spent solvents that are likely transported off-site for proper and safe disposal. Drilling wastes include used oils, oil filters, paint, scrap metal, hydraulic fluids, solid waste and garbage. Undesirable impacts could result if hazardous wastes are not properly handled and are released into the environment. Water Resources: Drilling and well development often remove massive amounts of groundwater. This generation of produced water can create numerous problems. Water may be depleted from nearby aquifers; and produced groundwater that is contaminated with drilling fluids can contaminate soils or surface waters, if brought to the surface and not re-injected to a suitable subsurface unit. Produced water also may contain organic acids, alkalis, diesel oil, crankcase oils and acidic stimulation fluids. Precautions to Mitigate Environmental Harm: Many Oil and Gas companies assess the potential environmental impacts prior to beginning an oil and gas project. The assessments look at the potential problems that www.ldbassoc.com
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may occur during the extraction stage and then plans are implemented in accordance with the assessments in order to provide the best possible methods with the least impact on the environment. One company has adopted this practice by enforcing a set of requirements for each new project they commence. Its goal is to ensure potential issues such as waste disposal, emissions reduction and discharges into the water, are thoroughly researched before a project is commenced and is carefully monitored from the beginning until the project’s end. Similarly, another company has enacted an Environmental Social and Health Impact Assessment (ESHIA) process which mandates the evaluation of all new capital projects for potential environmental, social and health impacts. When there is a potential for significant negative environmental impacts, ESHIA is used to plan ways to avoid, minimize or mitigate them. With this evaluation process, protecting people and the environment is one of the company’s core values. Further implementing
this approach, it has developed four environmental principles that define its commitment to doing business in environmentally responsible ways. These principles include the environment in decision-making processes; reducing its environmental footprint by identifying and managing risks to the environment and reducing potential environmental impacts throughout the life of operations; operating responsibly by aiming to improve reliability and safety of everything to prevent accidental releases, including spills; and stewarding its sites, meaning that a site has reached the end of its productive life, decommission it, remediate any environmental effects and look for ways to reuse the area that will have an overall benefit on the community and the environment. Despite all of the above raised environmental concerns dealing with oil and gas extraction, most companies in the industry are taking action to mitigate them and develop new methods that make the procedures regarding oil and gas extraction more environmentally responsible.
About the Author: Samantha R. Cavalier, JD Samantha was born and raised in New Middletown, Ohio where she attended Youngstown State University and graduated Cum Laude with a Bachelor of Arts degree in Journalism and Political Science. She continued her education at Duquesne University School of Law, earning her Juris Doctor in 2013, and serving as Associate Editor for Juris Magazine. Ms. Cavalier is a member of the Energy Practice Group and currently resides in West View.
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AND SO LONG THEREAFTER . . . Free Gas as an Extension of an Oil and Gas Lease’s Primary Term One of the most common provisions of an oil and gas lease is a “free gas” clause that affords a specified amount of natural gas (typically 200,000 cubic feet/year) of natural gas to the lessor, for domestic use. Although the receipt of free gas can confer a substantial benefit upon the lessor, unanticipated consequences associated with the use and enjoyment of free gas can catch an uninformed lessor off-guard, at a later date. The habendum clause of an oil and gas lease serves to inform the parties to the transaction of the rights to be afforded to the lessee. In particular, the habendum clause states the primary, and secondary term of the lease and will usually contain language as follows: This lease shall continue for a term of three years, and so long thereafter as oil and gas are (found/produced) in paying quantities. The question that arises after a cursory review of a lease’s term is whether the receipt of free gas will extend a lease beyond the primary term. Although courts within the tri-state region address the issue on a case-by-case basis, the habendum clause of a lease is consistently evaluated in making a determination whether the receipt of free gas will extend the primary term of an oil and gas lease. Generally, a finding of commercial oil and gas production, consistent with the purpose of the lease, will extend the primary term. However, a finding of commercial production may not be necessary to extend the primary term where the habendum clause provides for an extension of the lease’s term pursuant to a finding of oil and gas in paying quantities. The following is a summary of how Pennsylvania, Ohio, and West Virginia courts have historically addressed the issue.
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By: Anthony J. Racioppi, Esq. Research Assistance By: Ryan W. Brode
In Mitchell Energy Corp. v. Stagl, 27 Pa. D. & C.3d 132 (1983), the court found that the habendum clause contemplated continuation of the lease beyond the primary term, absent any commercial production, where the secondary term provided that the lease would continue “. . . as long as oil or gas are found in paying quantities thereon.”. The well associated with the subject lease in this case was shut-in, for legitimate reasons, but capable of production. In Babb v. Clemensen, 455 Pa. Super. 181 (1996), the secondary term of the subject lease provided, “. . . and as long thereafter as oil or gas casing-head gas or either or any of them, be produced therefrom . . .”. Contemplating the meaning of production, the court relied on the unpublished Ohio case of Tisdale v. W alla, 1994 WL 738744 (Ohio App. 11 Dist. 1994). In considering the persuasive authority of the Ohio case, which defined “production” as “produced in paying quantities”, the court found that domestic use did not constitute production as contemplated by the lease, and would not extend the primary term.
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Ohio courts have held that commercial oil and gas production will extend the primary term of a lease. Incidental use, which is not consistent with the primary purpose of commercial production of oil and gas by a lessee for sale to third parties, of an oil and gas well, will not preserve the rights of a lessee and extend the primary term. The case of Y oder v. Stocker & Sitler Oil Co., 5th Dist. No. CA465, 1993 WL 95604 (March. 30, 1993), is an example of an Ohio court finding a lease to be expired by term where commercial production was absent. The court stated, in pertinent part, that, “The lease is intended to give appellees [the oil and gas companies] the right to drill for, produce, and market this oil and gas. For this reason, it is appellees’ [the oil and gas companies’] operations for oil and gas to which [the lease] refers. Likewise, the production of oil and gas must be in “paying quantities” to appellees. The benefit that the [landowners] derive from their well for their own use, admittedly a noncommercial use, does not impact on this lease to extend it past the 10-year primary term. Consistent with the rationale of Pennsylvania and Ohio, West Virginia courts have held that the use of free oil and gas for domestic purposes does not constitute production that will extend the primary term of a lease. In Goodwin v. W right, 163 W. Va. 264 (1979), the court held that the purpose of an oil and gas lease is to obtain production. In its discussion of production, the court stated, “When a well is not producing in paying quantities and no royalties or rentals are being received by the lessors, these being required by the terms of a lease as necessary to its continuation, receipt by the lessors of free gas for domestic purposes from the well does not constitute consideration sufficient to keep lessors bound by the lease, nor does it amount to ‘production’.” Through clear and concise drafting that is consistent with the intention of the parties to the transaction, a proper oil gas lease, that mutually benefits both lessor and lessee, can be created. In executing a lease, a savvy lessor/lessee should pay special attention to the habendum clause of the lease, as this component is given the most deference by the court. In order to avoid a situation where the term of a lease is extended by domestic use only, a secondary term requiring commercial production should be sought. By carefully considering key components of a lease, such as the term, the transacting parties can further their interests while avoiding potential headaches down the road.
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By: David L. Trzeciak, JD
Primacy in Penn’s Woods: The Rights of Oil and Gas Owners under Public Lands Throughout its history the Commonwealth of Pennsylvania, renowned for its beauty and natural resources, lured its first settlers with that beauty and ease of access to those natural resources, whether those settlers were Native American tribes or colonists and frontiersmen. Since before the dawn of the Industrial Revolution, the prospect of material wealth derived from those resources inspired many hard working, innovative, and industrious citizens. People such as Edwin L. Drake, who drilled the first commercially successful oil well near Titusville, Pennsylvania, which pioneered the development of the oil and gas industry, and ushered in the United State’s first oil boom. Its vast reserves of oil, gas, and coal, underground, and timber on the surface, played a pivotal role in the development of the Commonwealth as one of the nation’s leading industrial areas. It was only natural that the value of the rights in property on the surface and below the surface was realized. Early in the 20th Century, the Commonwealth began its acquisition of multitudes of tracts of land for state forests, state parks and game lands. The ownership rights to the surface and subsurface property, in many cases, were separate.
lands that overlay the Marcellus and Utica Shale oil and natural gas formation. According to the 2011 report, A n Inventory of State -owned Real Property and Subsurface Mineral Rights, private parties own or control approximately 15 percent of the oil and gas rights, or approximately 330,000 acres underlying those state forest lands. The map included with this article, provided by the Pennsylvania Department of Conservation and Natural Resources (DCNR), shows Pennsylvania State Forest Land overlying the Marcellus Shale oil and natural gas formation, and in substantial part, lands overlying the Utica Shale oil and natural gas formation. (See Figure 1). The tracts of land highlighted in red show the state forest lands where the oil and gas rights are privately owned. It is often the case that ownership in the oil, gas and minerals stretches back more than a hundred years and as such the task of researching and identifying who those private parties is gigantic. As a result, the Commonwealth may not find out about the private ownership of the oil and gas until the lessee of private subsurface rights in state forest land applies for a well drilling permit from the Pennsylvania Department of Environmental Protection (DEP).
According to the Pennsylvania Constitution, Article I, § 27, “Pennsylvania’s public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people.” Therefore, in 2011, the Commonwealth took an inventory of state-owned
In the Commonwealth of Pennsylvania, the rights in property are divided into three distinct estates: the surface rights, support rights and subsurface rights. Simply put, the surface estate is the land. The support estate consists of the subsurface rock, minerals and other materials that support the surface and prevent subsidence. In general, the subsurface estate consists of
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the following: oil, gas, coal, sand, limestone and other minerals with the accompanying rights to access and develop the subsurface estate. Owning the surface does not necessarily mean that one also owns the subsurface or more specifically the oil, gas, coal, sand, limestone and other mineral rights. Oil, gas, coal and mineral rights are severable from the surface. Often property owners are unaware of whether or not they own the subsurface property; or in other words, possessing the real estate in "fee simple,” which indicates that one owns the surface as well as subsurface rights. Therefore, it may be necessary to research the chain of title for a property as far back as the 1850s or earlier to determine whether prior property owners severed the surface from subsurface estate. The owner of the subsurface is entitled to a right of access for the extraction of oil, gas, coal and minerals, even if this involves altering, or temporarily occupying parts of the surface, so long as such use is reasonable. Accordingly, the subsurface estate is dominant over the surface estate. Nevertheless, the owner of the surface estate is entitled to certain notifications and protections. The conflict between the rights of the surface and subsurface owners is particularly acute whenever it involves lands owned by the Commonwealth. When such a conflict arises, recent rulings by Pennsylvania courts reaffirmed the rights of the subsurface estate as the dominant estate. A recent case of note is Belden & Blake Corp. v. Commonwealth, DCNR, 969 A.2d 528 (Pa. 2009). That case involved the Belden & Blake’s claim to subsurface rights to extract oil and gas below land in Oil Creek State Park. Pursuant to the Oil and Gas Act, Belden & Blake
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notified the DCNR that it was planning to extract oil and gas by drilling wells on the parcels to which it owned a surface estate. Belden & Blake completed and submitted the necessary well permit applications, maps of proposed sites, as well as posted bond to ensure well closure, site reclamation, and pollution control. The DCNR sought to impose additional requirements in the form of a “coordination agreement,” and would not permit surface access without such an agreement. Thus, Belden & Blake sought judicial review, and argued that it had an implied easement to access the land in order to retrieve the oil and gas so long as the required surface use was reasonable. In response, the DCNR argued that it was authorized to condition the surface use of state lands under Article I, § 27 of the Pennsylvania Constitution. Belden & Blake’s response was that the additional requirements were so burdensome as to affect an unconstitutional regulatory “taking” of private property without just compensation. Upon review by the Pennsylvania Supreme Court, it affirmed the Commonwealth Court’s ruling and reaffirmed its prior ruling under Chartiers Block Coal Co. v. Mellon, 25 A. 597 (Pa. 1893), and noted that the DCNR could not require Belden & Blake to execute the “coordination agreement,” and that subsurface owners are entitled to access their property in a reasonable manner. It found that Belden & Blake met its duty to use the surface reasonably. The Court ruled further ruled that “a subsurface owner’s rights cannot be diminished because the surface comes to be owned by the government.” As such, it is the surface owner’s burden to seek legal action when he or she believes that the subsurface owner’s actions
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are unreasonable. However, the owner of the subsurface rights is also “limited by a good faith requirement that it use the surface area only in a reasonably necessary manner to extract the minerals.” The law of the Commonwealth is conclusive. The Commonwealth may not unduly interfere or burden the use and access to subsurface rights underlying state forests, state parks, and state game lands, where those rights are owned by a private party. The regulation of such private subsurface rights to protect public resources must be reasonable. That way such regulation is not so burdensome as to affect an unconstitutional “taking”
of private property without just compensation. However, the owner of the subsurface rights is limited by a good faith “reasonable use” requirement as a limit to its access to the surface area for the development of subsurface rights. As Pennsylvania experiences its second major oil and natural gas boom in a little over a hundred years, it is imperative that the Commonwealth strive to maintain a balance between the regulatory control of oil and gas operations of state owned land, and the private ownership of subsurface rights in oil and gas underlying those lands.
See Figure 1
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By: Jonathan D. Hall, Esq.
Actions to Cure Defects in the Chain of Title, and the Pennsylvania Dormant Oil and Gas Act Throughout the history of a piece of property, many actions and events can take place that may adversely affect the chain of title. Events such as deaths, marriages, tax sales, sheriff’s sales, wild deeds and non-recorded or misindexed deeds can create gaps in the chain of title and confusion as to the clear owner(s) of real property. Such “clouds” in the chain of title are common, especially in research back to the early 1800s. Property searches for residential conveyances are typically 60-year searches; however, with the development of the Marcellus and Utica Shales in the Appalachian Basin, searches as far back to the early 1800s are necessary to determine the owner(s) of the oil and gas estate. The first commercial oil well was drilled in Titusville, Pennsylvania in 1859. Since that time, the oil and gas may have been conveyed separately from the surface, or may have been reserved in a conveyance for the surface estate. Therefore, searches of property that do not predate 1859 are generally not acceptable for the purpose of determining the ownership of oil and gas. Historic searches are also necessary to examine all of the oil and gas leases that have encumbered the property throughout time. Examination of the leases is required, as historical leases may still be in effect, and t herefore, the oil and gas owner may not enter into a new oil and gas lease. This is because the habendum clause in a lease will usually contain two terms. The primary term establishes a short term, usually between one and ten years. The secondary term provides under what terms the lease will remain valid after the expiration of the primary term, (e.g. and as long thereafter as oil or gas is found in paying quantities.) It is not unusual for an oil and gas lease to have been executed
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over a hundred years ago and still be valid. This is most likely because there has been continuous production of oil or gas from the well. When defects in the chain of title are discovered, the client may have several options depending on the type and age of the defect, including commencing an action to quiet title, declaratory judgment, action in ejectment, actions pursuant to the Pennsylvania Dormant Oil and Gas Act, or perhaps even making a business decision to waive curative action. In Pennsylvania, actions to quiet title are governed by the Rules of Civil Procedure codified at Pa. R.C.P. 1061-1068, which provides that an action to quiet title may be brought: to compel an adverse party to commence an action of ejectment; to determine any right, lien, title or interest in the land or determine the validity or discharge of any document, obligation or deed affecting any right, lien, title or interest in land; to compel an adverse party to file, record, cancel, surrender or satisfy of record, or admit the validity, invalidity or discharge of, any document, obligation or deed affecting any right, lien, title or interest in land; or to obtain possession of land sold at a judicial or tax sale. An action to quiet title is brought when the plaintiff is in possession, or can claim proper possession of the property. Actions to quiet title are commonly brought in supporting a claim of adverse possession, or to cure gaps, missing interests, or wild deeds in the chain of title. They are also brought when there is a conflicting ownership interest. For example, if a piece of land was conveyed to four individuals in 1921 and the next deed of record appears in 1938, when three of the four individuals convey their interest in the property. No deed can be found of record from the fourth owner. Furthermore, no estate of the www.ldbassoc.com
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fourth individual can be found. After a diligent search is made to identify the heirs of the owner of the missing one-fourth interest, an action to quiet title may be commenced to merge the missing interest with the owner’s majority interest. Actions in ejectment are governed by Pa. R.C.P. 1051-1058. An action in ejectment is brought when the plaintiff is not in possession of the property, but has a right to be in possession. An action in ejectment is brought to remove occupants of the property and restore possession to the plaintiff. For example, if a landowner sells only the surface and reserves the oil and gas, and later discovers that the surface owner executed an oil and gas lease; or a home owner discovered that squatters are living in the owner’s house, an action in ejectment would be brought. Declaratory Judgments are governed by the Declaratory Judgments Act codified at 42 Pa.C.S.A. §7531-7541. Declaratory Judgments are used to interpret the construction, meaning or validity of a deed, will, written contract, or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise. A declaratory judgment would be sought, for example, if a reservation of oil and gas in the chain of title was unclear and ambiguous, making it difficult to ascertain if the reservation was a reservation for the oil and gas, or a reservation of oil and gas royalties. The Pennsylvania Dormant Oil and Gas Act, codified at 58 Pa. Stat. §§ 701.1-701.7, is very different from the Ohio Dormant Minerals Act. Where the earlier version of the ODMA provided an automatic transfer of dormant minerals (including oil and gas in OH) to the surface owner; the amended version requires that notice be given to the mineral owners. The Pennsylvania Dormant Oil and Gas Act was enacted to only clarify divisional, unknown oil and gas ownership interests: “The purpose of this act is to facilitate the development of subsurface properties by reducing the problems caused by fragLAWRENCE D. BRUDY & ASSOCIATES, INC.
mented and unknown or un-locatable ownership of oil and gas interests and to protect the interests of unknown or un-locatable owners of oil and gas. It is not the purpose of this act to vest the surface owner with title to oil and gas interests that have been severed from the surface estate.” What the Pennsylvania Dormant Oil and Gas Act does, after a diligent search has been made to identify missing oil and gas owners, is allow the court to appoint a Trustee on behalf of the unknown or unlocatable oil and gas owners. The Trustee can enter into an oil and gas lease and collect the bonus payment and royalties on their behalf. If the unlocatable owners are not found, eventually, the trust will be terminated, and the funds in the trust will escheat to the Commonwealth. While defects in a chain of title may be cured, the cures are often expensive, but more importantly, time consuming and lengthy processes. Ideally, all defects should be cured; however, some defects in title may be very old and the likelihood of litigation is very low. In this case, clients may conduct a cost-risk analysis. For example, an owner receives property in 1845, and then dies intestate in 1862; there is no estate found of record for the landowner in the county in which the property is located. The next deed of record is from two men and their wives purporting to be the sons and only heirs at law of the landowner. A search on A ncestry.com provides that the landowner had two sons, as named in the deed. In this instance, an oil and gas exploration and extraction company may decide to waive a curative action because of the age in the gap in title from the landowner and his sons, and the subsequent familial transaction. While defects in the chain of title are very common, it is important that each defect be evaluated and heavily scrutinized to determine the amount of the exposure to risk and liability, and which course of action the client should take. www.ldbassoc.com
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Land Warrants vs. Patents
By: Julie L. Schneck
In the past, real estate transactions typically have involved a 60-year search of the chain of title by the title company issuing the loan and/or owner’s title insurance policy. However, due to the rapid expansion occurring within the natural gas industry,
involving
exploration
and
lease
acquisition, a different approach is now necessary. In 1859 Edwin Drake drilled the first commercial oil well near Titusville, Pennsylvania. As a result, beginning in the 1860’s, landowners began transferring subsurface interests separately from surface interests, to third parties; often reserving the remainder to themselves. Consequently, today exploration and production (E&P) companies now
require a more exhaustive chain of title search dating back to 1859 or earlier, in order to accurately ascertain the ownership of sub-surface interests. A deed relating back to this time period can often be located within the county land records. However, in some instances such records cannot be located and an effective alternative would be to examine a state’s patent or warrant
records. Throughout its history, the United States has acquired land by purchase, war, and treaty agreements with foreign crowns, governments, and the Native American tribes. The granting of such lands, by the government, to an individual or corporation is known as a land patent; the grant of all right and title to a parcel of land. Thus,
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Historical Note: The first official land patent was granted to a John Martin in 1788, which reserved to the United States of America 1/3 interest in all gold, silver, lead and copper within the United States.
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theoretically, a patent may be been viewed as the
in which land is granted by the Federal Govern-
supreme title to a piece of land. A patent secures
ment. The Bureau of Land Management has ju-
that all evidence of title in existence before its
risdiction over public domain land, which is di-
issue date has been authenticated. Accordingly,
vided into Eastern and Western States. The Na-
the land patent became tangible
tional Archive tract books for the East-
title of the land as defined
ern States (which includes the Ohio
pursuant to the language and land
Archive)
description
Bureau of Land Management (BLM)
document.
of
the
There
are
patent
two
which
is
are
located
located
Virginia,
State Land States and Public
www.glorecords.blm.gov.
are those in which lands are granted by a Proprietor or by State Government. Such patent files are usually found at state archives and
are known to contain areas of property
which
were
granted
England,
France,
online
at
Example of understanding: A Historical Note: William Penn would be an example of a proprietor; as he received the land by King Charles II in 1681, to satisfy a debt the king owed to Penn’s father.
originally by foreign governments, e.g.,
the
Springfield,
recognized categories of states: Domain States. State Land States
or
in
at
Spain,
Mexico and Russia. Following the Treaty of Paris (1783), certain lands were placed in trust to the United States government, and the U.S. Treasury Department was assigned the responsi-
bility of managing the public records pertaining to said lands. Throughout the years, the U.S. government acquired other land, by the taking of Native American lands, the Louisiana Purchase, and other various acquisitions. All land owned by the federal government is called “Public Domain”. Public Domain States involve instances
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"warrant" was simply an authority to purchase a certain amount of land from the Proprietors (i.e., the Penns), but without specifying any particular tract of land. Then a selected tract of land was "surveyed" to the purchaser, and a "patent" was issued to seal the
deal.
Commonwealth
of
Pennsylvania:
Documents associated with early settlement of the Commonwealth can be found in the Pennsylvania Historical and Museum Commission, located in Harrisburg and online at: www.portal.state.pa.us. State of West Virginia: Records of conveyances prior to the Civil War are found within the Virginia Records, and post Civil War in the West Virginia State Archives, at the Cultural Center in Charleston, and online at www.wvculture.org.
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Mortgage Subordinations: The Procedures and Benefits By: Jennifer N. McDonough, Esquire
For production
oil
and
companies,
gas
exploration
obtaining
and
Mortgage
Subordinations has become an increasingly important step in the title curative process. In Pennsylvania, if a landowner has a mortgage or lien on their property that predates their oil and gas lease, and the landowner fails to pay on that lien, thus setting a foreclosure action into motion, the lender taking over the property would take it in the condition in which it existed when the lien was taken, i.e. without an oil and gas lease encumbrance.
Obviously, this places potential
decades of production on the part of oil and gas companies at risk. Therefore, these companies have begun putting safety measures into place to avoid that risk. Enter the Subordination Agreement.
exchange for allowing oil and gas production to continue on the property uninterrupted. The first step in obtaining a Subordination Agreement is usually executing a third-party authorization with the lessor. Many lenders do not
entertain
proposed
Subordination
without the authorization of the lessor. Most oil and gas companies have a standard Subordination Agreement that can be sent to the lender along with the third-party authorization. This is often just a starting point though, because many lenders have their own format for these agreements with more lender-friendly language. Negotiations on the terms
and language of Subordination Agreements are common, although the majority of the finalized products are very similar.
A
Agreements
Some lenders require
execution of the agreement by all of the parties
Subordination Agreement is a legal document
involved: Lessor, Lessee, and Lender.
that gives one instrument superiority over
simply execute the document without requiring any
another.
other parties’ signatures.
If a Subordination Agreement is in
place on a property that has a mortgage or lien predating an oil and gas lease, the Mortgagee can still foreclose on the property, but the oil and gas lease will remain in place. The Subordination Agreement almost always contains a clause providing that royalty payments will be assigned from the original lessor to the lender or new party taking the property over in a foreclosure proceeding, thereby giving the lender a benefit in
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Others
Some financial institutions refuse to execute
Subordination Agreements across the board. The reasons for refusal are unclear, as these lenders are missing out on potential revenue opportunities. When a property is taken over in foreclosure, the lender is, by definition, losing money. The lender could at least collect royalty payments if a Subordination Agreement is in place.
In some
cases, those royalty payments are greater than the www.ldbassoc.com
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mortgage payments would have been. A Subordination Agreement does not affect the lender’s right to
foreclosure upon a property either.
Significant
up-sides exist for both the lenders and the oil and gas
ABOUT THE AUTHOR
companies in having a Subordination Agreement in place.
JENNIFER N. MCDONOUGH, ESQ. A Consent to Lease can be used as an
alternative to a Subordination Agreement also. In this document, the lienholder consents to the existence of the lease and guarantees that the lease will not be disturbed, even in the event of a foreclosure on the property. Little difference exists between a Subordination Agreement and a Consent to Lease.
Upon admission to the Pennsylvania Bar in October 2009, Jennifer began her legal career in the energy field.
She has extensive experience in oil and gas issues in Pennsylvania and Ohio, including preparation and review
of
title
and
leasehold
searches, abstracting, curing title,
Still, if a lender will not execute a
and negotiating and completing
Subordination Agreement or a Consent to Lease even
mortgage subordinations.
after knowing all of the benefits, an oil and gas
earned
company can execute a Consent of Lienholder. This
Duquesne University School of Law
document serves as the lender’s acknowledgement
in 2009.
that the property owner has entered into an oil and
School, she was a high school
gas lease, and that the lender will, at the very least,
teacher in the Pittsburgh Public
notify the oil and gas company if a foreclosure action
School District.
is initiated. Although the option of a Consent of
Master of Education degree from the
Lienholder is not ideal, it serves as more protection
University of Maryland, and a
than having nothing in place at all.
Bachelor of Arts degree from James
With the boom of shale production in Pennsylvania in recent years, obtaining Subordination Agreements with lenders who have superior interests
in
leased
properties
is
increasingly
imperative. These agreements serve as protection for oil and gas companies, and can serve as opportunities
her
Juris
Jennifer
Doctor
from
Before attending Law
Jennifer holds a
Madison University. She is licensed to practice law by the Pennsylvania State Supreme Court and the United States District Court for the Western District of Pennsylvania, and is licensed to teach in Pennsylvania and Maryland.
for revenue for lenders. What is the down-side of that? LAWRENCE D. BRUDY & ASSOCIATES, INC.
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By: Linda M. Eaves
Differences Between a Note, Mortgage and Deed At a real estate closing numerous documents are signed by both seller and buyer. The buyer, who is purchasing the real estate by borrowing money from a lender, has many more documents to sign. The lender, usually a bank or mortgage company requires signatures to secure the loan. Three of the documents signed at a closing that can be confusing are the deed, the mortgage and the note. The deed is the legal instrument that passes, affirms or confirms an interest or right in a property and is signed, attested, delivered and in previous times was sealed. The deed confirms the interest being transferred. Usually the interest is 100% ownership, but is can be a partial interest. For instance, in a divorce situation, if the couple purchased the house jointly, one spouse may convey to the other spouse a one-half interest in the house as a requirement of the divorce. Also, in the instance of the death of a parent, the parent’s estate may convey to the children a percentage of the interest (if four children, each may receive 25%). The percentage of interest does not have to be equal. For instance, two investors may purchase a parcel of real estate, whereas one buys a 60% interest and the other 40%. The deed identifies the interest being conveyed, as well as the property, together with a legal description, and is signed by the grantor and the grantee, and then witnessed. The mortgage is the instrument that evidences the existence of a loan. It identifies the lending institution, the borrower, and the property that is encumbered by the mortgage. The mortgage also identifies the terms of the mortgage. For LAWRENCE D. BRUDY & ASSOCIATES, INC.
instance, the “if you don’t pay, you don’t stay” clause, explains the consequences of not making the agreed-to payments and the legal actions that can be taken by the lending institution. Of interest may be that the word mortgage originated from a French law term meaning “death pledge.” Some borrowers may think the term means that they will carry the mortgage until they are dead, but it really means that the mortgage ends when it is paid in full, or taken by foreclosure. The “note” is actually the promissory note associated with a particular mortgage. The borrower, by signing the note, promises to pay the mortgage amount that encumbers the real estate identified in the deed. This instrument usually identifies the term, monthly payments, and interest. The term can be, for instance, 30–year, or 15-year. The monthly payment is usually a fixed amount that includes the principal payment, and the interest. The interest will be either a fixed percentage, or an adjustable rate (ARM). With these examples, understand that the lending institution and the borrower can agree to a wide range of terms, rates and payments. The note is the instrument that proves that the borrower is the owner of the debt. At a real estate closing, the mortgage and the note are signed by the borrower before the deed is signed. The deed is usually the final document signed at the closing, after all the terms and conditions of the agreement of sale are finalized, and at which time the grantee-borrower-buyer, being one and the same, own the property.
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By: Benjamin B. Kmetz
Notarial Seal Requirements – Which states require Embossing Seal vs. Ink Stamp? A notary public is a public or state officer, of integrity, who is appointed by the governor, or most typically, by the Secretary of State. A notary public has a multitude of authorized notarial duties and principles. Specific duties and obligations for a notary public differ immensely throughout the United States. Although every state has a different procedure for appointing and commissioning notary public officers, each state has several universal guidelines. According to American Society of Notaries, a notary acts as an impartial witness in the execution of documents, helping to deter fraud and promote the integrity of document transactions. These acts are often referred to as notarizations or notarial acts. In order to accomplish these duties and prevent unauthorized use, notary public must act in strict compliance with the laws of their state. An effective way to deter document fraud and achieve the collective goal of a notary public is to understand notarial seal requirements. The three regions that require notaries to implement the embossing seal are the state of Alabama, District of Columbia and the U.S. Virgin Islands. Traditionalists prefer the embossing seal because it creates raised seal impressions, facilitates the achievement of the document’s integrity and provides ceremonial influence. Twenty seven states recognize the ink stamp, or embossing seal, to be used in notarizing a document. The Commonwealth of Pennsylvania requires an ink stamp. An embossing seal may be used, but only in conjunction with an ink stamp, and the seal must be photographically reproducible. A total of nine states do not require an embossing seal or ink stamp. Once a seal or stamp has expired, or information on the seal or stamp has changed, a notary public should destroy or deface the old stamp or seal. If a seal or stamp is stolen, it should be reported immediately to the respective state notary authority. An appointed and commissioned notary public should be educated on the duties and responsibilities, and take their notarial acts very seriously. Implementing the appropriate standards for sealing a notarial document is just one of the numerous proactive solutions a notary public can practice in order to aid the fight against falsified activities.
COMMONWEALTH OF PENNSYLVANIA Notarial Seal John Doe, Notary Public City of Pittsburgh, Allegheny County My Commission Expires June 29, 2014
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Did you know...
In Pennsylvania, the term “minerals” does not include oil and gas.
Powers of Attorney may be recorded in Pennsylvania.
A residential title search will not identify the ownership of oil and gas.
You can sell the oil, gas, coal and minerals from various subsurface strata and keep the surface.
The Pennsylvania coal notices required to be in every deed of conveyance since 1957 and 1966 (Bituminous Coal) do not identify whether you own any coal vein or not.
You only receive free gas when the well is on your property.
Title Insurance does not insure for oil and gas.
Because there is an oil and gas lease on the property that is no guarantee of oil and gas ownership.
LDB interesting facts 1. Oil is made into many different products, among them: clothes, fertilizers, plastic bottles and pens. 2. In 2013, the National Association of Realtors reported that the median age of first-time buyers was 31. On average these buyers purchased a 1,670 square-foot home costing $170,000. 3. Don’t be so quick to change your brass to brushed nickel! Brass doorknobs disinfect themselves. Its called the oligodynamic effect: the ions in the metal have a toxic effect on spores, fungi, viruses and other germs. 4. Can you come up with the only country club to have hosted eight U.S. Opens? It’s Oakmont Country Club. Oakmont has beaten golf’s best, and is the only course named a national historic landmark. Oakmont’s legendary lightning-fast greens, thick rough and plentiful bunkers have played host to a record 21 national golf championships, including eight U.S. Opens. Golf Digest ranks Oakmont No. 4 in its most recent version of America’s Top 100 courses. 5. You can get all the way from Pittsburgh to Washington, D.C. - that's 245 miles - via a bike and running trail called the Great Allegheny Passage and Chesapeake and Ohio Canal towpath trail. Should you feel compelled to try it, you'll pass landmarks like Frank Lloyd Wright's Fallingwater, one of two surviving cast-iron truss bridges in all of North America, an abandoned railway tunnel called the Big Savage Tunnel, Antietam Battlefield, Harpers Ferry, and Georgetown University.
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