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Exceptions and Reservations 101
Benjamin B. Holliday
ENERGY IS THE CENTER OF EVERYTHING WE DO
Holliday Energy Law Group PC
Holliday Energy Law Group, PC is a San Antonio-based transactionalenergy law firm focused on rendering title opinions and providingoperational/regulatory advising to oil and gas operators active across thecontinental United States. We represent clients throughout all stages of adrilling program – from acquisition through divestiture – in Texas, NewMexico, Oklahoma, North Dakota, Ohio, Nebraska, and Illinois.
ENERGY IS THE CENTER OF EVERYTHING WE DO
Presentation Overview
• Both prevent title from passing to the grantee• Exception and Reservation are similar but DIFFERENT
• Exception prevents an existing interest from passing• Reservation creates a new right in the grantor
• Must be clear• Exceptions and reservations are strongly construed against
grantor• Reservation to stranger/3rd party is void• If reservation/exception fails, all title passes
ENERGY IS THE CENTER OF EVERYTHING WE DO
Reservations
• Elements of a Valid Reservation
1. Creation of a new right or interest 2. for grantor 3. in real property granted to another
1. i.e. it is created in the instrument that reserves it.
ENERGY IS THE CENTER OF EVERYTHING WE DO
Reservations
• Element No. 1: New Right or Interest is Created
• Restricted to a right that did not exist prior to the reservation• Examples
• Easement• Severed mineral interest
• Holds back an interest and reserves it for grantor only
ENERGY IS THE CENTER OF EVERYTHING WE DO
Reservations
• Element No. 2: MUST be in favor of, and for the benefit of, the GRANTOR. Bright v. Johnson, 302 S.W.3d 483, 174 O.G.R. 392 (Tex. App.—Eastland 2009, no pet.)
• RESERVATION MUST RESULT IN GRANTOR OWNING THE INTEREST
• This is primary distinction b/w Exception and Reservation• Interests owned by 3rd parties may be excepted from the grant• Reservation must ALWAYS be in favor of the grantor
• CAUTION: Reservation of an interest to a third party is VOID and will not be given effect
ENERGY IS THE CENTER OF EVERYTHING WE DO
Reservations
• Element No. 3: New interest is created by the instrument containing the reservation itself, not in another instrument
• Must be made in clear language• Strongly construed against the grantor
ENERGY IS THE CENTER OF EVERYTHING WE DO
Exception
• Retention of an existing right or interest, by and for the grantor,in real property being granted to another
• Excepts the existing interest from the grant• May be a portion of the interest granted as opposed to a new
interest• Exception Example: Part of interest = Save & Except the eastern 10
feet of Tract 1 (we’re holding back a portion of the fee)• Reservation Example: Save & Except ½ of the minerals, where
minerals were previously not severed (new interest is created)
ENERGY IS THE CENTER OF EVERYTHING WE DO
Exception
• Unlike a reservation, the interest excepted is not created at thetime of the conveyance
• May well be talking about an interest that is presently vested in 3rd
parties
ENERGY IS THE CENTER OF EVERYTHING WE DO
General Rules
1. All interest passes in absence of a reservation1. If exception or reservation fails, all interest owned by grantor passes
2. Exception or reservation is effective only if made in clearlanguage
3. Property descriptions must be valid1. Must identify the property granted and reserved with reasonable
certainty2. Good reservation in a bad overall property description is a failed
reservation
ENERGY IS THE CENTER OF EVERYTHING WE DO
General Rules
1. Reason for reservation is immaterial, even if the reason isfalse1. Known as Pich exception, where grantor reserves ‘1/2 previously
reserved,’ and yet 1/2 was not previously reserved. If thereservation/exception was otherwise valid, but the reason for it beingmade was false, reservation or exception will still be upheld
2. If you see this, let’s discuss2. Exceptions and reservations are strongly construed against
the grantor
