A habendum clause is a part of the contract that addresses rights to property as well as interests and the other elements of ownership that are granted either party in a deal. It is a basic legal document It is typically found in documents relating to property.
The majority of buyers and sellers are familiar with it from the transfer of real estate, but it is also utilized in all sorts in lease agreements as well as deeds particularly in the gas and oil industry.
Understanding a Habendum Clause
The meaning of a clause is contingent upon the purpose of the contract. In real estate contracts, the clause is a reference to ownership transfer over the property as well as any associated restrictions. Since the clause is based on the phrase “To hold and have,” the habendum clause is often referred to as the “to hold and have clause.”
In leases for oil and gas the havedum clause determines the primary and second clause of the lease. It also specifies how long the lease will remain in effect. In the context of gas and oil leases, the emphasis of the clause on the “and as long after that” section which extends the lease when the conditions are satisfied. Within the petroleum and natural gas sector the havedum clause is often known as”the “term clause.”
Habendum clauses found in real Estate
In leases for real estate, the clauses known as habedum are part of the contract which explains the rights and rights granted to the lessee.
In the case of real estate transactions that are not outright, a havedum clause deals on the ownership transfer the property as well as any associated restrictions. Usually, the clause says that the property has been transferred with no restrictions. The new owner is in absolute possession of the property once they have met the conditions (usually the payment is to the full amount) and also has the power to transfer this property’s title to an heir, and other such.
The kind of title to property that is transferred through a havedum clause is known as “fee simply absolute.” An absolute fee gives all ownership rights to a property subject to the laws of the government and power.habendum clause
Certain real estate transactions may include restrictions in the havedum clause. For instance, a lease will specify the ownership percentage to be transferred as well as any other limitations.
Sometimes, the property or terrain itself may be subjected to a countdown where ownership shifts to another person. Certain treaty lands permit development, but limit that transfer to 100 years, for instance. This makes the property that is located situated on the land attractive during the initial phase of the lease period, however the value decreases when the ownership period is counted down until the deadline. In addition, certain leases may have a tie-in to the life span of the leasee or the property being returned to the original owner after the death of the buyer.
Habendum Clauses, Oil/Gas Leases
In the field of oil and gas the havedum clause spells the initial period that a firm holds mineral right over the property, but is not required to begin exploration. The initial term may vary between one and 10 years, based on the degree to which established the field is. If the initial term ends without producing, the lease is deemed to be over. But, if the leased area has been drilled and gas or oil is flowing, that is, the lease is producing–the second term begins and runs for the duration of time that the lease area is producing.
In this case the clause allows the lessee to purchase the lease in the event that the lessee fails to begin production within the first year of the lease and also safeguards the lessee when they make investments into the land, and begin producing.
