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Simple English definitions for legal terms
lesser-interest clause
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A quick definition of lesser-interest clause:
A lesser-interest clause is a provision in an oil-and-gas lease that allows the person leasing the land to reduce their payments if the landowner does not own 100% of the mineral interest. This means that if the landowner only owns a portion of the minerals, the lease payments will be reduced proportionately. It is also known as a proportionate-reduction clause.
A more thorough explanation:
A lesser-interest clause is a provision in an oil-and-gas lease that allows the lessee to reduce payments proportionately if the lessor turns out to own less than 100% of the mineral interest. This clause is also known as a proportionate-reduction clause.
Suppose a landowner leases their land to an oil company for drilling purposes. The lease agreement includes a lesser-interest clause that states if the landowner only owns 75% of the mineral rights, the oil company will only pay 75% of the agreed-upon amount. This clause protects the oil company from overpaying for a lease and ensures that the landowner is only compensated for the percentage of mineral rights they actually own.
Another example could be a situation where a landowner has already leased a portion of their mineral rights to another company. In this case, the lesser-interest clause would allow the new lessee to pay a reduced amount based on the percentage of mineral rights that are still available for lease.
Overall, the lesser-interest clause is a way to ensure fair compensation for both the landowner and the lessee in an oil-and-gas lease agreement.