Legal Definitions - paid-up lease

A paid-up lease is a type of mineral lease used in the oil and gas industry. It differs from other leases in that it does not require the lessee to make delay-rental payments or commit to drilling. Instead, the lessor pays all delay-rental payments and any bonus when the lease is signed. This type of lease is often used for small areas, fractional interests, or short primary terms.

• Company A signs a paid-up lease with a landowner for a small plot of land. The lease does not require any delay-rental payments or drilling commitments, and the landowner receives a bonus payment upfront.
• Company B signs a paid-up lease for a fractional interest in a larger mineral estate. The lease allows Company B to extract oil and gas from their portion of the estate without any additional payments or drilling commitments.

These examples illustrate how a paid-up lease works in practice. In both cases, the lessor receives an upfront payment and does not have to worry about delay-rental payments or drilling commitments. The lessee, on the other hand, is able to extract oil and gas from the leased area without any additional financial obligations.