Tx Bar '14 - Real Property

Front 1

[Real Prop: General]

What are the rights & duties of a life tenant?

Back 1

T is to maintain the estate, if they do more, they have committed waste.

Voluntary Waste: any affirmative action beyond the right of maintenance that harms the premises.

Permissive Waste: results from a T's failure to maintain - they must repair, pay taxes, & interest on mortgage.

Ameliorative Waste: alters the property, but enhances its value.

Front 2

[Real Prop: General]

When can the life T commit waste?

Back 2

If changed conditions have made the property relatively worthless in its present condition, life estate can tear down w/o liability to the future interests.

Front 3

[Real Prop: General]

What is the rule of convenience?

Back 3

A class closes when any member of the class is entitled to a distribution.

Front 4

[Real Prop: General]

What is the effect of the "cy pres doctrine" in TX?

Back 4

Grants court equitable power to effectuate the general charitable intent of a testator when his particular purpose becomes impossible, impractical, or illegal to carry out, foregoing RAP.

Front 5

[Real Prop: Concurrent Estates]

What is a Joint Tenancy w/ Right of Survivorship?

Back 5

Common Law JT does not exist in TX, but right of survivorship can be had by K b/w the parties.

Definition: each T has an undivided interest in the whole estate & the surviving co-T has a right to the whole estate.

Creation: Requires exact JT w/ right of survivorship language + 4 Unities:

(PITT)

1) Possession

2) Interest

3) Time

4) Title

Termination: any JT can, w/o permission:

1) Partition

2) Sever

Severance occurs by conveyance (if 3+ JTs, convey only destorys sellers JT), K of Sale, or creditor's sale;

NOTE: TX is Lien Theory State, Mortgage does NOT sever JT

Front 6

[Real Prop: Concurrent Estates]

What are the rights of Tenants in Common (TiC)?

Back 6

TiC is the DEFAULT concurrent estate in TX & characterized by right to partition & No right of survivorship.

Tenants can hold different interests in the prop but each is entitled to possession of whole.

Interests are inheritable, alienable, deviseable.

Rights/Duties b/w Co-T:

1) Accounting (profits/rents): co-T can keep for own use absent ouster (keeping Co-T off land) or agreement;

2) Contributions: req'd for repairs/taxes/mortgage but NEVER for improvements;

3) Co-T may encumber only his interest but not others.

Terminated by partition.

Front 7

[Real Prop: Landlord - Tenant]

What types of tenancies exist?

Back 7

Tenancy for Years: runs for FIXED period of time no matter how short

Periodic Tenancy (repeating): continues to renew itself for successive like periods until ended by proper notice. Created by express agreement, implication, or law.

Tenancy at Will: must have agreement b/w parties that either Party can terminate Tenancy at any time, w/ or w/o notice, or by behavior incons w/ lease renewal.

Front 8

[Real Prop: Landlord - Tenant]

What happens when T holds over?

Back 8

If T continues in possession after lease term ends, LL may evict T OR bind T to new Periodic Tenancy. (if resid, then mo-to-mo; if comm, yr-to-yr, if orig was 1yr+)

TX LL must provide holdover T w/ at least 3 days written notice to vacate before filing a forcible detainer suit.

Front 9

[Real Prop: Landlord - Tenant]

What if T assigns or subleases the property?

Back 9

T may NOT sublease or assign leased premises during the term of the lease w/o first obtaining LL's consent.

Front 10

[Real Prop: Landlord - Tenant]

What are T's duties & LL's remedies?

Back 10

T's Duties:

1) Pay Rent,

2) Keep premises in good repair (unless agree otherwise)

3) Not to Commit Waste

LL's Remedies:

Nonbreaching party has right to

1) Terminate;

2) Sue for Rent Due; or

3) Evict under TX Unlawful Detainer §;

4) Retake or Re-Rent Prop if T Abandons

Front 11

[Real Prop: Landlord - Tenant]

What are LL's duties & T's remedies?

Back 11

LL's Duties:

1) Deliver Possession;

2) Implied Covenant of Quiet Enjoyment;

3) Fix Conds Materially Affecting Health/Safety (NO implied warranty of habitability (residental leases) in TX. Generally NO DUTY TO REPAIR/MAINTAIN.)

T's Remedies:

1) Move Out & Terminate Lease (constructive eviction);

2) Make repairs directly & offset cost against future rent obligations;

3) Remain in possession, pay full rent, & seek damages from LL.

Front 12

[Real Prop: Landlord - Tenant]

What about fixtures?

Back 12

Fixtures are items physcially attached to the property by owner or T of the land.

IF the attached item becomes a fixture, it CANNOT be removed by either LL or T.

TEST: did the one installing INTEND the item to stay with the prop as a fixture?

Factors:

1) degree of attachment;

2) custom;

3) degree of harm for removal.

NOTE: items for biz NOT fixture.

Front 13

[Real Prop: Conveyances - Deed]

What is conveyance?

Back 13

2 step process: K of sale + Deed

Front 14

[Real Prop: Conveyances - Deed]

What are K of sale reqs?

Back 14

Land Sale K must be:

1) In writing;

2) names of buyer/seller;

3) adequate description of land;

4) purchase price;

5) signature of party to be charged.

EXCEPTIONS to SoF:

TX recognizes doctrine of part performance: Oral K Valid if:

1) no ambiguities;

2) acts show existence of the K

(look for party w/ poss, improvements or payments)

Front 15

[Real Prop: Conveyances - Deed]

Legal effect of Land Sale K before closing?

Back 15

Risk of Loss = on person in possession @ time of the loss (TX follows Uniform Vender & Purchaser Risk Act, not Doctrine of Equitable Conversion)

If seller dies, buyer closes w/ seller's estate & seller's interest is personal property

If buyer dies, seller closes w/ buyer's estate & buyer's interest is real property.

Front 16

[Real Prop: Conveyances - Deed]

Marketable Title?

Back 16

Seller will giver buyer in every land sale K:

Implied Warranty of Marketable Title

(not perfect title, but one reasonable buyer would accept)

This must include:

1) Proof of Title;

2) Title Free of Encumberances [easements, restrictives covs, mortgages, options, etc.]; &

3) Valid Title on Closing Day.

Violation of a zoning ordinance = encum, housing/bldg code violation = OK.

Remedies = recission, damages, specific performance

Front 17

[Real Prop: Conveyances - Deed]

What are the deed reqs?

Back 17

Deeds transfer title to an interest in real property. K merges into deed once accepted.

In order to pass legal title from seller to buyer, deed must:

1) Properly Executed = deed in writing, signed by Grantor, & reasonably identify the land;

2) Validly Delivered + Accepted = Grantor relinquishes dominion & control over deed w/ intent to affect a conveyance of prop, even if poss. postponed.

Delivery can NOT be revoked/returned; must re-deed.

Front 18

[Real Prop: Conveyances - Deed]

What covenants of title exists in TX?

Back 18

General Warranty Deed: covs of:

[SAR QuWF]

1) Seisin (title+poss);

2) Against Encumbrances;

3) Right to Convey;

4) Quiet Enjoyment;

5) Warranty;

6) Further Assurances (G will perfect title)

1-3 are Present; 4-6 are Future

Special Warranty Deed: limited to those claiming by/through Grantor

Quitclaim Deed: releases whatever interest the Grantor has, no covs of title included or implied.

Front 19

[Real Prop: Conveyances - Deed]

What is Doctrine of After-Acquired Title?

Back 19

If Grantor purports to convey estate he does NOT own, G's subsequent acquisition of estate AUTO goes to buyer.

Front 20

[Real Prop: Conveyances - Deed]

When can a deed be recorded in TX?

Back 20

When it is

1) Signed &

2) Notarized or Signed by 2 witnesses.

Front 21

[Real Prop: Conveyances - Deed]

What recording act does TX have?

Back 21

TX has a pure notice recording act system.

Subsequent BFP who takes w/o notice of prior instrument prevails over prior grantee who failed to record (regardless if BFP records; only matters that prior grantee did NOT record);

Judgment lien creditors are protected under recording § (ie treat JC as if a subsequent BFP).

Key is that subsequent purchaser had no actual, inquiry, record, or constructive notice at time of the conveyance.

Recording is irrelevant, expect that it might give notice. There is also a duty to inspect that will give notice.

Front 22

[Real Prop: Easement & Covenants]

What is an easement?

Back 22

An easement is a non-possessory interest in land involving a right of USE!

Easement Appurtenant = directly benefits the use & enjoyment of a specific piece of land (always 2 pieces of prop) = Auto transferred w/ Land

Easement in Gross = exists where ther is no dominant estate = c/n be transferred unless easement lang allows.

Easement presumed to be of perpetual duration.

Front 23

[Real Prop: Easement & Covenants]

How is easement created?

Back 23

Express Grant or Reservation: must comply w/ SoF & deed formalities; can ONLY be reserved for Grantor, not someone else.

Implication: previouse use by common owner that is continuous, apparent, & reasonable necessary;

Necessity: when Prop is landlocked

Prescription (adverse possession)

1) Open & Notorious

2) Adverse

3) Continuous & Uninterrupted

4) w/o permission for TX 10 yr § period

Front 24

[Real Prop: Easement & Covenants]

Easement termination?

Back 24

(PREMAN)

1) Prescription;

2) Release;

3) Estoppel (declare relinquish + change in position);

4) Merger;

5) Abandonment (intent shown by some phy. act, non-use never surf.);

6) Necessity.

Front 25

[Real Prop: Easement & Covenants]

What is a license?

Back 25

Limited privilege of use - NOT a prop interes - revocable at will of licensor (i.e. Ticket).

Failed attempt to create an easement results in a license (i.e. oral grant of easement for more than 1 yr)

Front 26

[Real Prop: Easement & Covenants]

What is a covenant?

Back 26

Real Covenant: Written promise to do (maintain fence) or NOT do something (build store) on the land.

Equitable Servitude: equity enforces.

Front 27

[Real Prop: Easement & Covenants]

What is required for a covenant to run w/ the land?

Back 27

(PINT C)

1) Privity;

2) Intent that it run w/ the land;

3) Notice to person against whom enforcement is sought;

4) must Touch & Concern land

Front 28

[Real Prop: Easement & Covenants]

What about Equitable Servitude?

Back 28

1) Intent;

2) Notice;

3) T&C land - Not privity.

Negative ES is implied from common scheme/development

Front 29

[Real Prop: Liens]

Mechanics & Materialmen's lien (MML)?

Back 29

Protects GCs, subcontractors, suppliers owed $ on a project; can file MML providing notice worker hasn't been paid for work performed/material supplied.

Reqs:

1) file affidavit w/ county clerk where prop located no later than 15th day of 4th month after debt,

2) list amount of claim/names/address/stmt of work done,

3) legal description of property sought,

4) copy of filing sent to owner w/in 5 days.

Valid MMLs can be foreclosed like any other lien on prop.

Front 30

[Real Prop: Liens]

Vendor liens?

Back 30

In favor of seller of real property to secure payment of unpaid portion of purchase price.

Front 31

[Real Prop: Adverse Possession]

How is title by AP established?

Back 31

AP must prove:

(ONE HAC)

1) Open,

2) Nortorious,

3) Exclusive

4) Hostile,

5) Actual,

6) Continuous

Adverse Possessor takes land free of covenants unless his use complies with the covenant.

Front 32

[Real Prop: Adverse Possession]

What are the Limitation periods?

Back 32

TX has 4 different status:

3 YR: if possessor = color of title (ie bad title) & has narrow defects.

5 YR: if possessor cultivates/uses prop + pays all taxes + claims under registered deed.

10 YR: If possessor just in bare possession w/ no color of title (naked trespasser)

25 YR: if possessor had color of title + paid all taxes + true owner is under disability.

Front 33

[Real Prop: Adverse Possession]

What is doctrine of constructive adverse possession?

Back 33

If someone goes onto land under color of title (ie bad title), but does not possess the whole, they will acquire title to the whole even though they didn't possess the whole.

It must be reasonable in relation to the amount possessed, & the land must be contiguous.

Front 34

[Real Prop: Adverse Possession]

What can affect the AP period & how?

Back 34

Leasing of the property to another counts as possession for AP purposes.

Tacking allowed so long as no gaps.

If owner is under a disability when the period begins, AP doesn't start until owner is free of disability. If the disability arises after the AP period begins, it is ignored.

Front 35

[Real Prop: Security Interests]

Types?

Back 35

1) Mortgage (given by debtor to creditor)

2) Deed of Trust (given by debtor to 3d P trustee who holds until load paid off)

3) Installment Land K (debtor signs K promising to make payment & seller keeps title until loan is paid off)

Front 36

[Real Prop: Security Interests]

Consequences of having a mortgage or deed or trust?

Back 36

1) Equity of Redemption (debtor can redeem prop any time up to foreclosure sale);

2) § redemption (debtor can redeem AFTER foreclosure if § met;

3) Foreclosure must be by public auction sale;

4) if multiple mortgages, priorites are "first in time, first in right"

(NOTE: PMM given priority over other mtgs executed around the same time; Seller PMM > 3rd party PMM);

5) Foreclosures wipe out all jr. interests but senior interests

(NOTE: jr. interests are necessary parties to any foreclosure proceeding and if not joined there interest remains; also purchaser take subject to senior liens);

6) Foreclsure Proceeds Priority (in order)

i) costs of foreclosure sale,

ii) principal + interest of foreclosing mortgage,

iii) junior mtg,

iv) remainder to mortgagor;

7) mortgagee can sue debtor for balance due if foreclosure doesn't net enough money to pay off mortgage.

Front 37

[Real Prop: Security Interests]

Deficiency Judgements?

Back 37

In TX, limited to difference between the debt and the fair market value of the property. (NOT dif b/w debt & sale price)

Front 38

[Real Prop: Security Interests]

Installement Land K (or K for Deed)?

Back 38

Forfeiture clause saying seller can:

1) cancel K if debtor misses a payment

2) keep all money to date,

3) and get property back

TX has § protections:

1) selles must give buyers detailed notice of prospective forfeiture

2) buyers have statutory 30 day period to CURE default.

Front 39

[Real Prop: Security Interests]

What TX authority governs foreclosures?

Back 39

Texas Property Code

Front 40

[Real Prop: Security Interests]

Nonjudicial Foreclosure Procedure (Deed of Trust)?

Back 40

Deed of Trust + power of sale provision: trustee has right to sell the property w/o resorting to court action upon debtor default.

Requirements:

Give notice >= 21 days before date of sale

(i) posting written notice in county where property located,

(ii) file copy of notice w/ county clerk, or

(iii) send notice to debtor by certified mail

Notice must contain contact info for trustee & time/place of sale (courthouse)

Sale takes place at county courthouse where prop located b/w 10am & 4pm.

Debtor has until sale to cure.

Front 41

[Real Prop: Water Rights]

Ground Water (percolating/well water)?

Back 41

TX follows English Rule of Capture: owner can take all the water from a well on their property -must NOT be reasonable.

Only limitations: can't use:

(i) maliciously,

(ii) waste, or

(iii) cause subsidence to neighbors land.

Since land owner may assert absolute ownership over groundwater by drilling a well & capturing, water = surface estate.

Front 42

[Real Prop: Water Rights]

Rivers & Lakes?

Back 42

Permit Regulatory System exists in TX, with prior appropriation (1st in time takes) being main factor & previous uses matter.

Front 43

[Real Prop: Water Rights]

Surface Water (runoff/flood/rain)?

Back 43

TX follows Natural Flow Theory: Courts allow reasonable steps to deal with flood water. Drainage pipes/ditches that divert flood water are OK if reasonable.

Front 44

[Real Prop: O&G - General]

Strategy?

Back 44

Master 2 steps:

1) Idnetify the INTEREST (mineral, surface, royalty, shared)

2) How to profit from: Leases & Production (essential clauses, division orders, implied covs, etc)

Front 45

[Real Prop: O&G - Property Rights in O&G]

What is the rule of capture?

Back 45

Landowner is entitled to all the O&G he may bring to surface even if he causes migration or drainage from another's land.

LIMITS: limited by correlative rgts of adjacent owners - owes legal duty not to exercise priv in harmful manner (ie. no RoC for stored gas, illegally or neg drained gas).

Front 46

[Real Prop: O&G - Property Rights in O&G]

What types of O&G interests exist?

Back 46

1) Minerial Interest,

2) Surface Interest,

3) Royalty Interest,

4) Leasehold Interest,

5) Royalty/Mineral mixed,

6) Production Payment

Front 47

[Real Prop: O&G - Mineral Interests]

What are fee simple interest & severance?

Back 47

Fee simple owner owns both mineral & surface rights; may transfer less than his entire interest through severance.

A "Mineral Deed" conveys mineral interests in fee, for life, or for a term of years.

Front 48

[Real Prop: O&G - Mineral Interests]

What are the mineral interest owner's rights?

Back 48

Development Rights: exclusive right to explore, produce, & develop the land.

Executive Rights: the right to lease the property

Lease Benefits:

- bonus (upfront payment for signing lease)

- royalty (share of production free of costs)

- delay rentals (deferring drilling)

Front 49

[Real Prop: O&G - Mineral Interests]

Duhig Doctrine?

Back 49

An owner who reserves an interest, while attempting to convey more than he owns, will be estopped from claiming his reserved interest insofar as it is necessary to satisfy his conveyance; Grantor bears loss.

TX court determines whose title will fail.

Grantor - NOT the Grantee -- will bear the loss.

Front 50

[Real Prop: O&G - Mineral Interests]

What interests do O&G leases create?

Back 50

O&G lease conveys a deed of fee simple determinable (poss, revertor):

Lease may last forever ("as long as O&G produced") or terminate if no production @ specific time.

Creates:

1) Working Interest (Lessee has exclusive right to explore/develop/produce + pay production costs)

2) Royalty Interest (Lessor gets share of production).

Lessee has implied rt (easement) to use surface as reasonable necessary for development.

Front 51

[Real Prop: O&G - Royalty Interests]

What is a royalty interest?

Back 51

RI is a non-possessory right in land.

It is Real Property in TX.

Royalty may be fixed term, defeasible, or perpetual.

Front 52

[Real Prop: O&G - Royalty Interests]

Rights of Royalty Interest owners?

Back 52

Royalty owners have NO right to explore, drill, or produce the minerals, nor grant such rights to others.

Rights are limited to receipt of a stated share of the gross production (contra mineral owner).

Royalty owner has NO obligation to pay any production costs.

Front 53

[Real Prop: O&G - Royalty Interests]

What is the landowner's royalty?

Back 53

The fractional share of production (typically 1/8, but negotiable) payable to Lessor in the royalty clause of the O&G lease.

Created when owner leases tract to oil company.

Front 54

[Real Prop: O&G - Royalty Interests]

What is a Non-Participating Royalty Interest (NPRI) & what do they own?

Back 54

NPRI is a royalty interest carved out of Lessor's mineral interest that entitles someone other than the ME Owner to a stated share of production.

If ME owner conveys (by gift/sale/will) his right to receive royalty payments to another but retains ownership of ME, that person has an NPRI.

Term "nonparticipating" means holder doesn't have right to participate in the lease, bonus, or rentals but owns a cost free fraction share of all production.

Front 55

[Real Prop: O&G - Surface Interest]

What is a surface interest?

Back 55

All that remains in the bundle of rights of land ownership after mineral interest has been severed.

SI is subject to implied easement of surface use by the dominant mineral interest owner.

Front 56

[Real Prop: O&G - Surface Interest]

Which estate, surface or mineral, is dominant?

Back 56

MINERAL estate is dominant; ME owner can use surface as reasonably necessary to develop O&G.

Front 57

[Real Prop: O&G - Surface Interest]

What is the accommodiation doctrine? [9/10 yrs]

Back 57

Mineral owner/lessee must accommodate surface uses ONLY if:

1) SE owner has preexisting use,

2) ME has reasonable alternative method of developing the O&G that is both economical & less destructive to surface use,

3) the alternative is available on the leased tract.

Front 58

[Real Prop: O&G - Divided O'ship of Min Estate]

Concurrent ownership: what are a cotenant's rights w/ respect to the minerals?

Back 58

Every CoT has right to drill, produce, lease his undivided interest w/o the other CoT consents (ie. development rts)

But, CoT MUST account to others their rightful share of profits (revenue - costs).

Non-consenting CoT gets profits according to their total ownership share.

Non-consenting CoT CANNOT receive any profit from the well until costs chargeable to his interest (ie development costs) are recovered from production.

Front 59

[Real Prop: O&G - Divided O'ship of Min Estate]

What are the non-leasing cotenant's options?

Back 59

Unleased CoT can choose to ratify the lease or retain a profit share interest in the well (not both)

CoT has absolute right to partition property in judicial proceeding (courts prefer partition in kind to partition by sale).

Front 60

[Real Prop: O&G - Divided O'ship of Min Estate]

What is the rule of nonapportionment?

Back 60

When prop is subdivided AFTER said prop is already under a lease, owners of subdivided interests are NOT entitled to an apportioned lease royalty payment (unless clause in conveyance displaces this rule).

Instead, owner of tract w/ producing well is entitled to all royalties under lease.

Front 61

[Real Prop: O&G - Divided O'ship of Min Estate]

Successive Ownership: What are rights of Life Tenants (LT) & Remainderman?

Back 61

BOTH must consent to a lease.

At Common Law:

Life Tenant = delay rentals + interest on bonus & royalty;

RRmen = Principle of bonus & royalty upon LT's death.

Can agree otherwise.

Front 62

[Real Prop: O&G - Divided O'ship of Min Estate]

What is the open mine doctrine?

Back 62

If Mine was OPENED prior to Life Estate, then

LT entitled to all bonus, royalties, and delay rentals paid under lease.

Front 63

[Real Prop: O&G - Divided O'ship of Min Estate]

What share of a trust does the income beneficiary receive of O&G?

Back 63

Applies if LE created in trust & trust is silent.

Pre July '04: LT gets delay rentals + 72-1/2% of royalties & bonus + interest on the remainder.

Post July '04: LT gets 85% + delay rentals

Front 64

[Real Prop: O&G - The O&G Lease]

What is a Granting Clause?

Back 64

Sets forth:

1) rights given by Lessor to Lessee &

2) description of the property

Typically specifies a number of uses that Lessee is likely to make of the prop (locate wells, build pipeline).

Mother Hubbard: protects against inaccuracy in land description by including small strips of land in area.

Front 65

[Real Prop: O&G - The O&G Lease]

What is a Habendum Clause?

Back 65

Creates primary & secondary terms; ie Duration.

Primary Term = term of years

Secondary Term = indefinite grant usually linked to production.

"Production" does NOT = mere drilling/discovery

Construed against Lessee!

Front 66

[Real Prop: O&G - The O&G Lease]

What is delay rental clause?

Back 66

Included in lease to negate any implied duty/covenant to drill exploratory test well during primary term. Authorizes Lessee to delay drilling initial well/start production by periodically paying stipulated sum to Lessor during primary term.

Front 67

[Real Prop: O&G - The O&G Lease]

What is a pooling clause?

Back 67

Gives Lessee authority to pool Lessor's interests w/ adjacent interests. Royalties usually apportioned to different landowners whose land combined into pooled unit on basis on surface acreage.

Front 68

[Real Prop: O&G - The O&G Lease]

What typical savings clauses appear in an O&G lease?

Back 68

Typically:

1) Completion Clause;

2) Force Majeure Clause;

3) Shut-in Clause (hold lease during market downturn);

4) Pooling Clause (prod on any 1 well good to hold ALL wells)

Front 69

[Real Prop: O&G - Producing O&G]

What is a Division Order (w/in Royalty context)?

Back 69

D/O determines how to divide proceeds; statements executed by all interest holders in a particular well stipulating their fractional interests for distribution of royalty payments.

Front 70

[Real Prop: O&G - Producing O&G]

Main D/O issues?

Back 70

D/Os are:

1) Binding until Revoked;

2) Can NEVER change or contradict the lease (but can clarify royalty terms)

3) Lessee may withhold payments ONLY IF title dispute;

4) sometimes Lessor's royalty is to be paid on basis of "market value at well" where gas sold/used off premises.

Front 71

[Real Prop: O&G - Producing O&G]

When are drilling operations considered "commenced"?

Back 71

Commencement = objective phys. act (ie build road) + subjective GF intent to pursue drilling.

Front 72

[Real Prop: O&G - Producing O&G]

What is the effect of failure to pay money owed to the lessor?

Back 72

Failure to pay delay rentals, terminates the lease.

Failure to pay royalties does not terminate lease, but the lessor has a claim.

Front 73

[Real Prop: O&G - Producing O&G]

What is the formula for production in paying quantities (PPQ)?

Back 73

Revenues - royalties - operating cost = positive #. Usually viewed on a yearly basis.

TEST: would reasonably prudent operator interested in making a profit continue to operate the well at a loss?

Front 74

[Real Prop: O&G - Producing O&G]

PPQ Exception: the temporary cessation doctrine?

Back 74

Once PPQ established, short sudden stoppage, due to a mechanical breakdown or the like, that Lessee tries to fix will NOT terminate lease.

Must resume production w/in a reasonable amount of time.

Front 75

[Real Prop: O&G - Implied Covenants]

Covenant to Protect against Drainage?

Back 75

Requires Lessee to act as reasonably prudent operator to protect leased premises against drainage. Note this is contrary to general rule that Lessee has no obligation to drill during primary term of lease.

Front 76

[Real Prop: O&G - Implied Covenants]

Covenant to Market?

Back 76

Requires Lessee to market production from the leased premises:

1) w/in reasonable period of time

2) at best available price.

Qs of fact.

Front 77

[Real Prop: O&G - Implied Covenants]

Covenant for Reasonable Development?

Back 77

TX Cts hold there is no implied covenant to explore separate from this Development covenant;

this covers ALL additional drilling duties once production is obtained on lease.

Burden on Lessor to prove reasonably prudent operator would drill more wells (ie. make profit here)

Front 78

[Real Prop: O&G - Title & Conveyance Issues]

What is executive right?

Back 78

Right to lease & manage the ME;

MPRIs rely on the executive right owners to realize income from their interests.

Executive Right Owner's duties depend on their conduct: due regard for NPRIs fiduciary standard only when engaging in self-dealing.

Front 79

[Real Prop: O&G - Title & Conveyance Issues]

What language conveys a Royalty Inerests? What language conveys a Mineral Interest?

Back 79

Royalty: "Oil, gas, & other minerals produced & saved"

Mineral: "O,G,& other minerals in, on, or under [land]."

Mixed Language: indicates mineral interest in TX

Front 80

[Real Prop: O&G - State Regulation]

What are the basic tenets of state O&G regulation?

Back 80

Railroad Commission regulates O&G production.

To:

1) Prevent Waste,

2) Protect Correlative Rights, &

3) Protect Environment.

RRC requires wells to be properly plugged, will enforce in order against:

1) Operators (1y);

2) Non-Operator owning working interest @ time will ceased operation (NOT landowner, royalty owner, or subsequent oil co)

3) State of TX (oil cleanup fund)

Front 81

[Real Prop: O&G - State Regulation]

What minerals = "Mineral Estate" by law?

Back 81

Surface: Building stones, limestone, caliche, surface shale, sand, gravel, water, near-surface lignite, iron ore.

Mineral: is it mineral in its ordinary & natural meaning?