What happens to an oil and gas lease if a property is foreclosed upon?

The oil and gas lease typically remains valid and continues to exist even in the event of foreclosure. This is due to the principle of "subordination" where, under Ohio law, an oil and gas lease does not automatically terminate upon foreclosure of the property it encumbers. In fact, the lease retains its standing and operates independently of the mortgage lien. This means that if a property has an outstanding oil and gas lease, that lease can remain in effect and the rights to the oil and gas may not be interrupted or canceled simply due to the foreclosure process.

It is important to understand that leases generally have specific terms and rights that are unaffected by the actions of the lender during foreclosure. While the new property owner, who may be the creditor or a third party buying at the foreclosure sale, may have the option to negotiate or modify the lease agreements, the lease itself does not go away. Therefore, its existence and enforceability are prioritized, allowing for potential oil and gas extraction as originally agreed within the terms of the lease, unless explicitly canceled or otherwise legally terminated under relevant contract law.