Babst Calland: Ohio Appellate Court Enforces Change In Ownership Clause in Lease

Babst Calland: Ohio Appellate Court Enforces Change In Ownership Clause in Lease

By Jessica L. Henry

The Fifth District Court of Appeals affirmed the trial court’s decision in Trico Land Company, LLC v. Kenoil Producing LLC, upholding the right to have and enforce a change of ownership clause in an oil and gas lease. The case involved a property subject to a 2008 oil and gas lease that was transferred to a new owner, who did not notify the lessee of the change in ownership. No well was drilled nor were the annual delay rental payments made until 2011 when the lessee paid all delay rental payments due under the lease. The court, quoting the Ohio Supreme Court in Harris v. Ohio Oil Co., stated that an oil and gas lease is a contract and the parties should be held to the written terms in the agreement. Because the lessor failed to comply with the condition precedent requiring written notice of a change of ownership, the lessee was relieved of its obligation to pay delay rentals annually and the lease was determined to be valid upon the lessee’s payment of the past due delay rentals.

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