In Oklahoma you can easily change your “regular” LLC into a Series LLC.

October 26th, 2018

Have you got a regular LLC? Considering whether or not to change it into a Series LLC? Here are some of the things to think about before making the change:

  1. Are you in a Series LLC state? In Oklahoma the answer is: Yes! So you can file an amendment to your Articles of LLC to legally convert your regular LLC into a Series LLC.
  2. If you want to start a whole new Series LLC, you can do that too.
  3. If your LLC is from a non-Series LLC state, and if it is really important to you to keep your existing LLC’s history, Tax ID number, etc., you can move your LLC’s corporate home to Oklahoma and simultaneously convert it into a Series LLC. That would allow you to keep your existing history. You would then dissolve your existing LLC in your home state, to cancel it off the books. And finally, you’d have to reintroduce your newly converted Series LLC, this time as a foreign entity, back into your home state.
  4. Are you in a state that isn’t Series LLC friendly? All states permit LLCs from out-of-state to cross-register in, when required. The same goes for Series LLCs (you cross-register the parent only; there is no way to cross-register Series LLC Cells at this time).
  5. Beware of California which looks at each Cell in the Series LLC as a distinct entity for tax purposes. As such, every Cell would register with the Franchise Tax Board and pay the state’s minimum $800/year franchise tax fee!
  6. There are many variables when you’re structuring a business. Unless you talk to someone who’s got some knowledge and experience on the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.
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Qualified Opportunity Funds Self-Certification News

May 20th, 2018

The IRS released Opportunity Zone FAQs on April 24, 2018 explaining that an eligible entity will be able to self-certify to become a Qualified Opportunity Fund (QOF) by filing a form to be released this summer with its timely filed (including extensions) federal income tax return for the taxable year.

As part of the extensive Tax Cuts and Jobs Act of 2017 (TCJA), Congress created a little known but beneficial tax program to incentivize investments into “qualified low-income communities” aka Qualified Opportunity Zones designated by the governors of each state. The investment is made through a QOF which is generally a privately managed investment vehicle organized as a corporation, partnership or limited liability company for the sole purpose (at least 90 percent of its assets) of investing directly into a certified qualified opportunity zone property. The IRS has issued a Revenue Procedure, but more rules will follow this summer.

Similar, but in many ways more advantageous, to Section 1031 tax deferred or like-kind exchanges, taxpayers who roll over (re-invest unrealized capital gains) sales proceeds within 180 days of the sale or exchange of non-zone assets (including stock, partnership interests, real estate and property used for personal purposes) before December 31, 2026, will be able to take advantage of the beneficial tax treatment this provision provides. The tax incentives available to investors in QOFs are significant. First, investors can defer capital gains taxes until the earlier of the date on which the QOF investment is sold or exchanged, or December 31, 2026. Second, capital gains taxes are reduced when the investment is maintained for at least 5 years, and additional tax cuts are available for investments held for periods of 7 and 10 years. Third, if the investor holds the investment in the QOF for at least 10 years, the investor is eligible for an increase in basis equal to the fair market value of the investment on the date that the investment is sold or exchanged. Additional, more complex incentives may also be available.

Here is the link to a map of all of the OZs that have been designated, including the 117 in Oklahoma chosen by our Governor. The investment must be in one of these zones via a QOF. Criteria the Governor used in selecting the OZs included community interest and support for additional investment, the potential of at least one “ready to go” or otherwise identifiable project, and that the identified project addressed one of the following target uses: industrial/business development, housing, or agriculture.

Now we know that the IRS will establish a simplified QOF certification process that real estate investors should find attractive. Self-certification should result in a fast and less expensive process for investors and sponsors of QOFs. Just how simple and inexpensive this process will be, of course, depends on what is required in the actual tax form released by the IRS.

Huddleston Law Offices will monitor guidance from the IRS on Opportunity Zone Funds and provide updates when guidance is released.

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Street Law School: My Neighbor’s New Video Camera Faces My House! Now What?

March 19th, 2018

You have just noticed that your neighbor’s front door camera directly faces your door and/or window. With the new motion sensitive video surveillance systems and online cloud storage of all video, you are recorded every time you open the door. Maybe this makes you uncomfortable, and you feel a loss of privacy. But is this illegal?

It is estimated that the average American is caught on camera more than 75 times each day. We are all recorded more than we realize, and while sometimes it makes us feel safer, other times it makes us uncomfortable, or worse, feel violated. For better or worse, being recorded is now a fact of life. Our society and legal system have been playing catchup with this growing trend to regulate the use of cameras and punish people who abuse the technology. Unless your neighbor is misusing the video recorded, perhaps by posting it on social media sites, there is likely not much that can be done.

Property owners have the right to place cameras in and around their home for security reasons. The cameras should either be easily noticeable, or there should be signs warning visitors that they are being recorded. The cameras should not be used to record neighbors or anyone where they have a reasonable expectation of privacy, such as inside their house, a hot tub, or any place where that person would expect that no one is looking at them without their permission or knowledge.

Penalties for being a video “peeping tom” are severe. Oklahoma Statute §21-1171, commonly known as the “Peeping Tom” law, prohibits the use of video equipment in a clandestine manner to record others without consent in areas where they have a reasonable expectation of privacy. This law does not affect your right to a home surveillance system unless your cameras are recording any private area of your neighbor’s property (i.e. interior rooms, fenced backyard, etc.).

Once you have a properly configured security camera system installed, you should be aware of your rights and responsibilities to operate the system. Oklahoma Statute §13.176.3 prohibits anyone from intercepting or disrupting your security camera signals, either to your internal storage device or to an external monitoring center.

Another Oklahoma law, Oklahoma Statute §21-1993, prohibits others from tampering with or disabling your security cameras. This can include covering the camera lens, manipulating the signal, disconnecting the device, or destroying any part of the system.

If someone does record you without your knowledge and permission when you are somewhere that should be private, the law will look at the intent with which you were recorded. If your neighbor’s door camera was for security and positioned so that it just happened to see inside your home as you entered and exited (a time when you might not normally expect privacy), then it would likely be legal. But if your neighbor has set up cameras to be a high-tech Peeping Tom, he very well may be committing a crime.

By court decision, Oklahoma already recognizes a limited cause of action in tort founded on invasion of privacy. Munley v. ISC Financial House, Inc., 584 P.2d 1336 (Okl. 1978). In addition 21 O.S. 1971 § 839.1 prohibits appropriation for one’s own benefit of another’s name or likeness and makes such appropriation a misdemeanor. Section 839.2 provides a cause of action for damages resulting from the appropriation.

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Street Law School: I am buying property. Should I buy title insurance?

March 19th, 2018

If you are getting a home loan, you will always have to purchase a lender’s policy of title insurance. Even when you have a choice, I always recommend that everyone buying a home get an owner’s title insurance policy. For a low, one-time cost, you get an insurance policy that protects what is most likely your most significant investment.

Mortgage lenders make getting a title insurance policy that protects them a requirement for giving you a loan for very important reasons. While it’s uncommon for someone’s homeownership to be attacked, if you are unlucky enough to have it happen, you will be thankful for the protection.

Your seller or builder must have good title, but that may not actually be the case — and they may be long gone by the time a problem surfaces, leaving you with the title problem. Title insurance covers you for various threats that affect your ownership, including a forged deed that happened long ago; or a sale that happens without the seller clearing all the liens, and not being able to later clear all the liens.

Even if everything is on the up and up, mistakes happen, and things get missed, so you don’t want to be the one who ends up paying for the error. Even without title insurance, it may be possible to sue the offending party, but it will be on your dime and at your risk. This is just not a smart chance to take when you can pass it on to a title insurance company.

While it does pay to shop around for title insurance services, the cost of the actual insurance policy premium is almost always the same at all the title and closing companies in Oklahoma. However, other settlement closing costs can vary, and are often discounted in order to get your title insurance business. Most, but not all Oklahoma title insurance agents are attorneys, so you may want to check to see if an attorney owns the title insurance company you select.

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Medical Marijuana Risks for Cultivation Lease Landlords

January 9th, 2018

It may be tempting for a farming operation with fallow acreage to consider leasing to a tenant for above-market rents. However, when the offer is coming from a marijuana grower, the would-be landlord will have a number of additional legal issues to consider.

It bears repeating that marijuana is still illegal as a Schedule I drug under the Federal Controlled Substances Act. Even though Oklahoma is likely to approve marijuana for medicinal use this Summer, the federal government doesn’t recognize such use as valid and prohibits the manufacture, sale, and distribution of marijuana. An owner who leases to a tenant for the purpose of manufacturing, distributing, or storing controlled substances, illegal under federal law, is punishable under the Controlled Substances Act by a fine and up to 20 years in prison.

That might be the end of the story for most landlords. This is especially true now that the Trump Administration’s Justice Department has signaled that it may take a different path with respect to marijuana prosecutions. The U.S. Department of Justice could seek to take real property used in connection with marijuana-related crimes of tenants through civil asset forfeiture. For landlords who determine that the potential revenues are too great to pass up and their risks associated with federal prosecution or civil asset forfeiture are immaterial, there are still other concerns. A landlord may find that a conservative financial institution could refuse to accept deposits of funds related to a marijuana grow operation lease. Also, if the landlord has a loan from a financial institution, the landlord may find itself in breach of that loan without available replacement financing.

Most loan agreements prohibit the borrower from violating the law, and if the loan was entered into more recently, there may be express prohibitions against use of the property with respect to state-licensed marijuana-related businesses. Thus, a financial institution could call a loan due from a landlord renting to a marijuana grow operation. If there is an opportunity for replacement financing, the loan amount may be reduced (if the financial institution excludes rents from the marijuana-growing tenant when calculating the value of the collateral or the revenues of the landlord).

Oregon and Colorado federal bankruptcy courts have come to the conclusion that bankruptcy protections are not available to a landlord leasing to a marijuana business, even if the tenant’s marijuana business is operated in compliance with state law. Federal bankruptcy courts in Oklahoma may come to the same conclusion. Some of this risk can be mitigated with proper planning, but there would always be some portion of the landlord’s business operation that would remain at risk.

Aside from the issues concerning federal law, a landlord could find itself at risk of violating state law if its tenant is not in compliance with state and local regulations.

Unless and until the Controlled Substances Act is changed to permit the state-legalized marijuana activities, landlords should be wary of leasing to marijuana grow operations and should consider the other risks and potential obligations of having such a tenant. At a minimum, before you negotiate a lease, make sure you have a cannabis lawyer help you guard against potential pitfalls down the road. The cannabis industry is unlike any other industry, and there are several factors to consider before you lease.

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Governor Mary Fallin Sets Election Date for Medical Marijuana Issue

January 4th, 2018

OKLAHOMA CITY – Governor Mary Fallin today set a June election date for the medical marijuana ballot measure.

Fallin filed an executive proclamation placing State Question 788 on the June 26 primary election ballot. The governor’s other option was to place the issue on the November general election ballot.

Supporters of an initiative petition asking voters to legalize medical marijuana gathered enough signatures in 2016 to schedule a statewide referendum on the measure.

“Backers of this proposal to legalize medical marijuana followed procedures and gathered the more than 66,000 required signatures to submit the issue to a vote of the people,” said Fallin. “I’m fulfilling my duty as governor to decide when that election will occur this year.”

If approved by voters, the measure would permit doctors to recommend a patient, who is at least 18 years old, for a state-issued medical marijuana license. A license holder would be allowed to legally possess up to 3 ounces of the drug, six mature plants and six seedlings. These limits can be increased by individual counties or cities.

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If Medical Marijuana Businesses Are Legalized In Oklahoma What Clauses Should Your Lease Include?

December 24th, 2017

As Oklahoma citizens consider State Question 788, landlords and property managers need to know how to address medical marijuana use in their buildings.

The supremacy clause in the U.S. Constitution says that states must not (and cannot) enact laws that conflict with Federal law—but states have been doing just that when it comes to legalizing marijuana. Until now, the Federal government’s marijuana policy has been to essentially turn a blind eye to the changing marijuana laws. And now Oklahoma will consider SQ 788 and possibly another ballot measure in 2018 to legalize medical marijuana. Half of the states, including Arkansas, and the District of Columbia have already legalized medical marijuana so it is a safe bet that marijuana will be legalized in some form in Oklahoma. Although cannabis remains illegal under Federal law, the U.S. Drug Enforcement Agency — which made marijuana a primary target in its “war on drugs” — is considering reclassifying it as a Schedule II drug, which could open the door to decriminalizing pot on a Federal level.

As a result, Oklahoma landlords and property managers could face new considerations when it comes to how marijuana laws affect their lease agreements. There are a number of scenarios related to marijuana legalization you could find yourself in, but if you stay informed, you can take steps to address any changes in the legal landscape.

If Oklahoma Legalizes Medical Marijuana…

Landlords and property managers are not required to accommodate recreational pot use under state law, but they may choose to make some exceptions for tenants who use marijuana for medical purposes. Still, that doesn’t mean you have no control over how it’s used inside your building. And unless federal law is changed, you may still prohibit marijuana use in any form.

One of the first things you need to decide is whether you want to allow smoking of any kind in the building (e.g., rent houses). Tobacco, for example, is a legal substance nationwide, but most property and business owners — restaurants, bars, apartment buildings — have the right to ban smoking cigarettes inside. The case for marijuana is no different.

You can easily add a few sentences to your lease agreement prohibiting smoking or using tobacco or cannabis on the property. However, there are other ways to use medical marijuana besides smoking it, such as using a vaporizer, eating THC-infused edibles, or using cannabis tonics and extracts. You could choose to specify which types of usage are allowed onsite, as long as you include this clause in the lease agreement.

It is extremely important for landlords to recognize that they may be dealing with a medical marijuana tenant who may have a disability as defined under the Fair Housing Act. So, for example, it would not be a good policy to reject a rental applicant because the person uses medical marijuana to treat a disability. It may be better to simply inform the applicant that smoking marijuana or growing plants is not allowed on the property, and give the disabled applicant the opportunity to decide whether to pursue the vacancy (or use other forms of medical marijuana such as edibles). Past drug addiction also is protected under anti-discrimination statutes, and is not a topic that should be explored during tenant screening.  Because the use of marijuana remains a Federal offense, there is an argument that you may deny a reasonable accommodation claim for the use of medical marijuana under the Federal Fair Housing Act. However, the Federal Courts are not in agreement on this issue and the law is changing. In the employment area, courts have denied medical marijuana as a reasonable accommodation. Given the Federal government’s express intention to not allow US Department of Justice enforcement of the law prohibiting the use, sale and cultivation of medical marijuana (Specifically, see page 230: Section 537 of the Consolidated Appropriations Act of 2017), this may lead Oklahoma state courts to be more lenient when it comes to requiring reasonable accommodations.

What Can Landlords Do to Regulate Marijuana Use?

There are a number of strategies that landlords may employ to prohibit marijuana use. It is helpful to remember the reasons why landlords may want to regulate marijuana — for instance, to minimize tenant complaints, to minimize property damage, to reduce crime, and so on. The most encompassing strategy is to prohibit marijuana possession and use because it is illegal under Federal law.

If Oklahoma does legalize medical marijuana, it will very likely apply only to tenants over the age of 21. Those landlords who manage student rentals and typically deal with younger tenants, would want to ban marijuana use entirely. Marijuana use or cultivation may be viewed as a disturbance which violates other tenants’ quiet enjoyment.

Here are some marijuana addendum clauses that can be included in a lease to specify the approved cannabis use:

  1. The use of tobacco and cannabis in accordance with state law is allowed on the Premises. Prior written consent of the Landlord is required before medical cannabis may be grown on the Premises.
  2. This is a nonsmoking residence. No smoking, including medical marijuana, inside the home or on the Premise is permitted. However, consuming medical marijuana with a vaporizer or in cannabis edibles, tonics, or concentrates is permitted.
  3. No recreational or medical marijuana may be grown or consumed on the Premises by the Tenant(s) or guest(s) without the prior written consent of the Landlord. 

If Oklahoma Does Not Legalize Medical Marijuana…

Then you don’t specifically need to address cannabis in your lease agreement because it automatically falls into the category of illegal activity. But — and this is a big but — with legal attitudes toward marijuana changing as fast as they are, your opportunity for recourse may become more complicated if you don’t explicitly address its use. You should include an anti-drug policy in your lease agreement, or include an anti-drug and crime addendum specifically outlining its prohibited use. Here’s an example:

“Usage of cannabis and any other federally prohibited drug is not allowed on the premises. Further, tenant and their guest(s) may not engage in any illegal drug-related activity, including but not limited to medical cannabis on or near the premises. Landlord may terminate this agreement if tenant and/or guests engage in such activities. If this provision is violated, tenants will be subject to charges, damages, and eviction. Tenant forfeits their security deposit if there is any evidence of cannabis use on the premises.”

Can You Evict a Tenant for Using Medical Marijuana?

Currently in Oklahoma all marijuana is banned, so issuing an eviction notice to a tenant who violates your anti-drug policy or anti-marijuana clause is fairly straightforward. But even if medical marijuana is legalized, you have the right to evict tenants who violate the terms of your lease, which would be an eviction for engaging in federally illegal activity. If you ban smoking marijuana — but not other forms of consumption of the drug — and a tenant continually violates that term, you can evict. This is why it is so important for a landlord to clearly state the rules concerning marijuana use in their lease agreements.

Can You Ban Growing Marijuana on Your Property?

When it comes to cultivation, you would want to require tenants to receive written consent from the landlord before growing cannabis on the premises. The language of the written consent should allow the landlord or property manager to inspect the unit from time to time to ensure that tenants are not growing more cannabis than is legally allowed.

Something to keep in mind: Cultivation often requires higher electricity and water usage—and plants require a lot of moisture, which can be harmful to the building. So you have very legitimate reasons to prohibit all cultivation on the premises.

Final Thoughts

After you have a marijuana policy in place, be sure to enforce it consistently among all tenants. “I would advise a landlord that you need to uniformly enforce the rule,” says Oklahoma Real Estate lawyer Brian Huddleston. “You can’t just pick and choose, because then you could face some discriminatory blowback.”

Hopefully, landlord-tenant disputes about marijuana use will be covered by a well drafted lease agreement. Complaints typically come from other tenants who are concerned about marijuana smoke or odors. If you find yourself in this situation, act quickly in devising a solution that works for all parties—for example, perhaps the marijuana user would happily switch to edibles.

Over the last 20 years, the number of states allowing use of marijuana has been increasing, and with a recent poll showing over 60% of Americans support legalization, we can expect that trend to continue. The implications for real estate are numerous. The conflict between Oklahoma and Federal law creates extra considerations. Owners/managers should take care to be up-to-date on the laws, and ensure their lease provisions specifically address their policies related to these laws along with any other special considerations.

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Fast Evictions

September 25th, 2017

In the unfortunate event you have to move forward with an eviction, you will likely want to evict your non-paying or nuisance tenant(s) just as quickly as the law allows. When you have tenants in your properties that aren’t paying or are in violation of their Rental/Lease Contract, acting quickly will minimize the amount of lost rent, vacancy loss, property damage and make ready expenses.

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Victory On Appeal (Again)

September 18th, 2017

I am pleased to announce that I have another recent appellate court victory. This time in an unreported case where, as is often the case, the trial court granted the bank’s motion for summary judgment for foreclosure against the homeowner, but the Oklahoma Court of Appeals reversed and remanded the case, finding that there exists a material issue of disputed fact as to whether HSBC was the holder of the promissory note at the time that it filed its amended petition. The opinion makes it clear that a motion for summary judgment in a foreclosure case must present undisputed facts supported by acceptable evidentiary materials  showing that the bank is a person entitled to enforce the note at the time that the petition is filed. The bank’s evidentiary materials were deficient because it had made inherently contradictory allegations in its pleadings and affidavit in support of its motion for summary judgment. Here is a link to the slip opinion: HSBC vs Williamson.

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Street Law School: Oklahoma Surface Damages Act

September 12th, 2017

When property is leased for exploration, the lessee has the right to go out and drill on that property. However, this exercise often causes damage to the surface of the land — damage to crops and land, pollution, damage caused by pipelines, access roads, etc. The issue of surface damages is addressed in the Oklahoma Surface Damages Act. While one individual may own the surface of property, another may own the land below the surface. This can rapidly become a complicated legal situation when surface damages occur.

Surface owners may become involved in a surface damages claim and require legal representation. Although the lessee can drill on the property they are leasing, they are ultimately responsible for compensating the surface owner for any damage done to the surface property. If you are a surface owner we can explain the legalities of the Oklahoma Surface Damages Act and how this law affects you.

§52-318.2.  Definitions.

For purposes of Sections 1 through 8 of this act:

1.  “Operator” means a mineral owner or lessee who is engaged in drilling or preparing to drill for oil or gas; and

2.  “Surface owner” means the owner or owners of record of the surface of the property on which the drilling operation is to occur.

§52-318.3.  Notice of intent to drill – Negotiating surface damages.
Before entering upon a site for oil or gas drilling, except in instances where there are non-state resident surface owners, non-state resident surface tenants, unknown heirs, imperfect titles, surface owners, or surface tenants whose whereabouts cannot be ascertained with reasonable diligence, the operator shall give to the surface owner a written notice of his intent to drill containing a designation of the proposed location and the approximate date that the operator proposes to commence drilling.

Such notice shall be given to the surface owner in any manner as provided for in paragraph 1 and paragraph 2 of subsection C of Section 2004 of Title 12 of the Oklahoma Statutes for the service by personal delivery or by mail of a summons in a civil action.  If the operator makes an affidavit that he has conducted a search with reasonable diligence and the whereabouts of the surface owner cannot be ascertained or such notice cannot be delivered, then constructive notice of the intent to drill may be given in the same manner as provided for the notice of proceedings to appoint appraisers.

Within five (5) days of the date of delivery or service of the notice of intent to drill, it shall be the duty of the operator and the surface owner to enter into good faith negotiations to determine the surface damages.

§52-318.4.  Undertakings which may be posted as damage deposit.
A.  Every operator doing business in this state shall file a corporate surety bond, letter of credit from a banking institution, cash, or a certificate of deposit with the Secretary of State in the sum of Twenty-five Thousand Dollars ($25,000.00) conditioned upon compliance with Sections 318.2 through 318.9 of this title for payment of any location damages due which the operator cannot otherwise pay.  The Secretary of State shall hold such corporate surety bond, letter of credit from a banking institution, cash or certificate of deposit for the benefit of the surface owners of this state and shall ensure that such security is in a form readily payable to a surface owner awarded damages in an action brought pursuant to this act.  Each corporate surety bond, letter of credit, cash, or certificate of deposit filed with the Secretary of State shall be accompanied by a filing fee of Ten Dollars ($10.00).

B.  The bonding company or banking institution shall file, for such fee as is provided for by law, a certificate that said bond or letter of credit is in effect or has been canceled, or that a claim has been made against it in the office of the court clerk in each county in which the operator is drilling or planning to drill.  Said bond or letter of credit must remain in full force and effect as long as the operator continues drilling operations in this state.  Each such filing shall be accompanied by a filing fee of Ten Dollars ($10.00).

C.  Upon deposit of the bond, letter of credit, cash, or certificate of deposit, the operator shall be permitted entry upon the property and shall be permitted to commence drilling of a well in accordance with the terms and conditions of any lease or other existing contractual or lawful right.

D.  If the damages agreed to by the parties or awarded by the court are greater than the bond, letter of credit, cash, or certificate of deposit posted, the operator shall pay the damages immediately or post an additional bond, letter of credit, cash, or certificate of deposit sufficient to cover the damages.  Said increase in bond, letter of credit, cash, or certificate of deposit shall comply with the requirements of this section.

§52-318.5.  Negotiating surface damages – Appraisers – Report and exceptions thereto – Jury trial.
A.  Prior to entering the site with heavy equipment, the operator shall negotiate with the surface owner for the payment of any damages which may be caused by the drilling operation.  If the parties agree, and a written contract is signed, the operator may enter the site to drill.  If agreement is not reached, or if the operator is not able to contact all parties, the operator shall petition the district court in the county in which the drilling site is located for appointment of appraisers to make recommendations to the parties and to the court concerning the amount of damages, if any.  Once the operator has petitioned for appointment of appraisers, the operator may enter the site to drill.

B.  Ten (10) days’ notice of the petition to appoint appraisers shall be given to the opposite party, either by personal service or by leaving a copy thereof at the party’s usual place of residence with some family member over fifteen (15) years of age, or, in the case of nonresidents, unknown heirs or other persons whose whereabouts cannot be ascertained, by publication in one issue of a newspaper qualified to publish legal notices in said county, as provided in Section 106 of Title 25 of the Oklahoma Statutes, said ten-day period to begin with the first publication.

C.  The operator shall select one appraiser, the surface owner shall select one appraiser, and the two selected appraisers shall select a third appraiser for appointment by the court, which such third appraiser shall be a state-certified general real estate appraiser and be in good standing with the Oklahoma Real Estate Appraisal Board.  Unless for good cause shown, additional time is allowed by the district court, the three (3) appraisers shall be selected within twenty (20) days of service of the notice of the petition to appoint appraisers or within twenty (20) days of the first date of publication of the notice as specified in subsection B of this section.  If either of the parties fails to appoint an appraiser or if the two appraisers cannot agree on the selection of the third appraiser within the required time period, the remaining required appraisers shall be selected by the district court upon application of either party of which at least one shall be a state-certified general real estate appraiser and be in good standing with the Oklahoma Real Estate Appraisal Board.  Before entering upon their duties, such appraisers shall take and subscribe an oath, before a notary public or some other person authorized to administer oaths, that they will perform their duties faithfully and impartially to the best of their ability.  They shall inspect the real property and consider the surface damages which the owner has sustained or will sustain by reason of entry upon the subject land and by reason of drilling or maintenance of oil or gas production on the subject tract of land.  The appraisers shall then file a written report within thirty (30) days of the date of their appointment with the clerk of the court.  The report shall set forth the quantity, boundaries and value of the property entered on or to be utilized in said oil or gas drilling, and the amount of surface damages done or to be done to the property.  The appraisers shall make a valuation and determine the amount of compensation to be paid by the operator to the surface owner and the manner in which the amount shall be paid.  Said appraisers shall then make a report of their proceedings to the court.  The compensation of the appraisers shall be fixed and determined by the court.  The operator and the surface owner shall share equally in the payment of the appraisers’ fees and court costs.

D.  Within ten (10) days after the report of the appraisers is filed, the clerk of the court shall forward to each attorney of record, each party, and interested party of record, a copy of the report of the appraisers and a notice stating the time limits for filing an exception or a demand for jury trial as provided for in this section.  The operator shall provide the clerk of the court with the names and last-known addresses of the parties to whom the notice and report shall be mailed, sufficient copies of the notice and report to be mailed, and pre-addressed, postage-paid envelopes.

1.  This notice shall be on a form prepared by the Administrative Director of the Courts, approved by the Oklahoma Supreme Court, and supplied to all district court clerks.

2.  If a party has been served by publication, the clerk shall forward a copy of the report of the appraisers and the notice of time limits for filing either an exception or a demand for jury trial to the last-known mailing address of each party, if any, and shall cause a copy of the notice of time limits to be published in one issue of a newspaper qualified to publish legal notices as provided in Section 106 of Title 25 of the Oklahoma Statutes.

3.  After issuing the notice provided herein, the clerk shall endorse on the notice form filed in the case the date that a copy of the report and the notice form was forwarded to each attorney of record, each party, and each interested party of record, or the date the notice was published.

E.  The time for filing an exception to the report or a demand for jury trial shall be calculated as commencing from the date the report of the appraisers is filed with the court.  Upon failure of the clerk to give notice within the time prescribed, the court, upon application by any interested party, may extend the time for filing an exception to the report or filing a demand for trial by jury for a reasonable period of time not less than twenty (20) days from the date the application is heard by the court.  Appraisers’ fees and court costs may be the subject of an exception, may be included in an action by the petitioner, and may be set and allowed by the court.

F.  The report of the appraisers may be reviewed by the court, upon written exceptions filed with the court by either party within thirty (30) days after the filing of the report.  After the hearing the court shall enter the appropriate order either by confirmation, rejection, modification, or order of a new appraisal for good cause shown.  Provided, that in the event a new appraisal is ordered, the operator shall have continuing right of entry subject to the continuance of the bond required herein.  Either party may, within sixty (60) days after the filing of such report, file with the clerk a written demand for a trial by jury, in which case the amount of damages shall be assessed by a jury.  The trial shall be conducted and judgment entered in the same manner as railroad condemnation actions tried in the court.  A copy of the final judgment shall be forwarded to the county assessor in the county or counties in which the property is located.  If the party demanding the jury trial does not recover a more favorable verdict than the assessment award of the appraisers, all court costs including reasonable attorney fees shall be assessed against the party.

§52-318.6.  Appeal of decision on exceptions to report of appraiser or verdict upon jury trial – Execution of instruments of conveyance.
Any aggrieved party may appeal from the decision of the court on exceptions to the report of the appraisers or the verdict rendered upon jury trial.  Such appeal shall not serve to delay the prosecution of the work on the premises in question if the award of the appraisers or jury has been deposited with the clerk for the use and benefit of the surface owner.  In case of review or appeal, a certified copy of the final order or judgment shall be transmitted by the clerk to the appropriate county clerk to be filed and recorded.

When an estate is being probated, or when a minor or incompetent person has a legal guardian or conservator, the administrator or executor of the estate, or guardian of the minor or of the incompetent person or the conservator, shall have the authority to execute all instruments of conveyance provided for in this act on behalf of the estate, or minor or incompetent person with no other proceedings than approval by the judge of the court of jurisdiction being endorsed on the instrument of conveyance.

§52-318.7.  Effect of act on existing contractual rights and contracts to establish correlative rights – Indian lands.
Nothing herein contained shall be construed to impair existing contractual rights nor shall it prohibit parties from contracting to establish correlative rights on the subject matter contained in this act.

This act shall not be applicable to nor affect in any way property held by an Indian whose interest is restricted against voluntary or involuntary alienation under the laws of the United States or property held by an Indian tribe or by the United States for any Indian tribe.

§52-318.8.  Effect of act on jurisdiction, authority and power of Corporation Commission.
Nothing in this act shall be construed as repealing or limiting the jurisdiction, authority and power of the Oklahoma Corporation Commission.

§52-318.9.  Violation of act – Damages.
Upon presentation of clear, cogent and convincing evidence that the operator willfully and knowingly entered upon the premises for the purpose of commencing the drilling of a well before giving notice of such entry or without the agreement of the surface owner, the court may, in a separate action, award treble damages.  The issue of noncompliance shall be a fact question, determinable without jury, and a de novo issue in the event of appeal.

Any operator who willfully and knowingly fails to keep posted the required bond or who fails to notify the surface owner, prior to entering, or fails to come to an agreement and does not ask the court for appraisers, shall pay, at the direction of the court, treble damages to the surface owner.

Damages collected pursuant to this act shall not preclude the surface owner from collecting any additional damages caused by the operator at a subsequent date.

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