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Simple English definitions for legal terms
no-term lease
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A quick definition of no-term lease:
A no-term lease is a type of agreement in the oil and gas industry where the lessee can extend the lease indefinitely by paying delay rentals. This means that there is no set end date for the lease, and it can continue as long as the lessee continues to pay the required fees. However, some courts have questioned the validity of these leases, and some have required the lessee to either test or release the lease within a reasonable time.
A more thorough explanation:
A no-term lease is a type of mineral lease used in the oil and gas industry. It includes a drilling-delay rental clause that allows the lessee to extend the primary term of the lease indefinitely by paying delay rentals.
For example, if a company leases a piece of land for oil drilling and the lease includes a no-term clause, the company can continue to hold the lease as long as they pay the delay rentals. This means that the lease has no set expiration date.
However, some courts have refused to enforce no-term leases because they create a mere estate at will, which can be terminated at any time by either the lessor or the lessee. Other courts have upheld them, but with the stipulation that the lessee has an obligation to either test or release the lease within a reasonable time.