Ohio Court Enforces Change-in-Ownership Provision; Burden on New Landowner to Notify Lessee of Change in Ownership
by Timothy B. McGranor
The Ohio Court of Appeals for the Seventh Appellate District recently issued a decision enforcing a change-in-ownership provision contained in an oil and gas lease. See Conny Farms, Ltd. v. Ball Resources, Inc., 7th Dist. No. 12 CO 18, 2012-Ohio-2874.
The plaintiff had purchased property on which there were two identical oil and gas leases, and before buying the property, the plaintiff had received title work that disclosed the existence of the leases. The leases contained a change-in-ownership provision that required the lessor to notify the lessee of any changes in ownership. Notwithstanding this knowledge, the plaintiff failed to notify the lessee that it now owned the property.
After the change in ownership, the lessee’s storage rental checks were returned unclaimed. For that reason, the lessee suspended further payments. Several years after the change in ownership, the plaintiff wrote to the lessee’s lawyer and demanded that the leases be canceled for failure to pay rentals. When the lessor refused, the landowner sued to have the lease terminated.
The court refused, holding that the landowner’s failure to notify the lessee of the change in ownership precluded its claims. Relying on a decision from the Fourth Appellate District, Burlington Resources Oil & Gas v. Cox, 133 Ohio App.3d 543 (4th Dist. 1999), the court in June held that a landowner’s duty to notify the lessee exists even where there is no express change-in-ownership provision in the lease. Finally, the court held that the suspense of the storage-rental payments was proper under the circumstances.
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