Habendum Clause (Leases) Defined
The Habendum clause, also known as a “to have and to hold” clause, is a part of the lease that defines the rights and interests that the lessee or grantee enjoys. Commonly used during real estate transfers, the habendum clause incorporates all terms and restrictions pertaining to the transfer. The clause is also in use in oil and gas leases as a ‘term clause’. The term clause predicates the period of enforcement of the lease and segregates the lease period into a primary and a secondary term, with a provision for lease extension given that the terms continue to be enforced.
A Little More on Habendum Clauses
The habendum clause is an essential legal definition that is incorporated into property transfer papers. Although a fairly generic component of most deeds, this clause is most commonly used during real estate transfers.
Habendum Clauses in Real Estate Transfers
During real estate transfers, the habendum clause present in the property title predicates a total transfer of property rights without restraints. The title, also called a fee simple absolute, bestows upon the buyer the rights to sell or pass on the property to a beneficiary, given that the buyer has, as a prerequisite, satisfied all the terms of the purchase. In any case, all deeds or leases must conform to government legislation.
Certain real estate transfers do place restrictions within the habendum clause. A good example is a timeshare lease that enforces restrictions such as the percentage of transfer of real estate ownership. Other leases allow for long-term yet transitory types of ownership transfers where properties are leased out for extended periods such as 100 years or until the death of the lessee.
Habendum Clauses and Oil and Gas Leases
A habendum clause incorporated into an oil and gas lease agreement bestows upon the exploration company the right to hold the land without commencing exploration operations. Since the lease period is segregated into primary and secondary terms, the clause mandates that a total passage of the primary term (which can be anywhere from a year to a decade) without the commencement of exploration operations will deem the lease as ‘expired’. Conversely, if exploration commences and production is still in progress after the passage of the primary term, the secondary term is initiated automatically.