Legal Update 2020
Instructor: John Henderson
Oil and Gas Lease Brokerage Requires a Real Estate License
Dundics v. Eric Petroleum Corp, 155 Ohio St. 3d, 2018-Ohio-3826, 120 N.E.3d 758 (2018)
Supreme Court of Ohio
Facts: Dundics entered into an agreement with Eric Petroleum Corp. to “find property owners, negotiate gas leases, and work with Eric to obtain executed gas leases.” Eric compensated Dundics for some of his work, but allegedly refused payment for certain leases. Dundics sued Eric for breach of contract. Eric asserted that Ohio’s real estate license laws barred Dundics’ lawsuit because he engaged in acts requiring a broker’s license that he did not possesses. A trial court agreed and dismissed the case, which decision was affirmed by the Court of Appeals of Ohio. Dundics appealed to the Ohio Supreme Court.
Issue: Are landmen who help to obtain oil and gas leases required to have an Ohio real estate license in order to sue for a commission?
Held: Yes. Judgment affirmed. Ohio license laws define a “real estate broker” as any person or entity who, for compensation or other valuable consideration, performs certain activities including negotiating the lease of real estate, holding oneself out as engaged in that business, and procuring prospects or negotiating any transaction calculated to result in the lease of real estate [O.R.C. §4735.01(A)]. “Real estate” is broadly defined to include “leaseholds as well as any and every interest or estate in land situated in this state, whether corporeal or incorporeal, whether freehold or non-freehold, and the improvements on the land ....” [O.R.C. §4735.01(B)]. Also, O.R.C. §4735.21 precludes a cause of action seeking compensation for acts requiring a real estate license without proof that the person is a licensed broker. There is simply no exception in the statutes for oil-and-gas leases or land professionals. Whether it makes sense to apply the real estate license laws to the activities of oil and gas landmen is a policy question for the General Assembly, not the courts. [Note: In response to this decision, the Ohio Legislature, 133rd General Assembly, passed Senate Bill 263 to create a real estate license law exemption for defined “oil and gas land professionals” who comply with new registration requirements. See, O.R.C. 4735.023.]