Title Examination Series: The Granting Clause

The granting clause in a lease establishes the primary purpose of the lease (the rights being granted, the lands covered, the interest of the Lessor and the substances covered). A title examiner needs to confirm the presence of a granting clause, that the granting clause actually grants to the Lessor the rights desired, and that the granting clause does not take away any desired rights.

The following is an example of a granting clause:

Lessor, in consideration of Ten and No/100 Dollars ($10.00) and other valuable consideration in hand paid by Lessee, the receipt of which is hereby acknowledged, and in consideration of the royalties herein provided and the covenants, agreements and obligations of Lessee herein contained, hereby leases and lets exclusively unto said Lessee, for the purposes of investigation, exploring, prospecting, drilling and mining for, and producing oil and/or gas, laying pipelines, building tanks, roads, power stations, telephone lines and other structures thereon to produce, save, take care of, treat, store, transport and own said products, the following described lands and premises in Live Oak County, Texas, (hereafter referred to as the “Leased Premises”), to-wit:

The following is a provision included in a granting clause that takes away, or reserves, rights and interests:

Lessor expressly EXCEPTS from this Lease and RESERVES to Lessor, all minerals of every kind and character, in, on and under the lands above described, except only the oil and gas as herein defined. In addition, Lessor expressly EXCEPTS from this Lease and RESERVES to Lessor, all minerals of every kind and character lying at, or below, a depth of 12,000 feet below the surface. In addition, Lessor expressly EXCEPTS from this Lease and RESERVES to Lessor, the right to use the Leased Premises and the surface thereof for the purposes of investigation, exploring, prospecting, drilling and mining for, and producing all reserved minerals, including oil and/or gas as to depths at, or below, a depth of 12,000 feet below the surface, and laying pipelines, building tanks, roads, power stations, telephone lines and other structures thereon to produce, save, take care of, treat, store, transport and own said minerals; provided, however, that such operations shall not unreasonably interfere with Lessee’s and use of the Leased Premises.

The title examiner should indicate any inconsistencies, unusual provisions, or restrictions or reservations that could interfere with the desired operations of the Lessee. In addition, if there is no granting clause, or if the granting clause is insufficient, a correction lease should be sought. Although it is not recommended, if it is not possible to obtain an amendment or new lease because of uncooperative or absent Lessors, the lease should be closely examined to determine if there are other provisions in the lease that could serve as a granting clause to preserve the validity of the lease.