What it is:
A habendum clause in a real estate contract transfers ownership of a piece of real estate with no restrictions. It generally pertains to oil and gas leases for pieces of property but can relate to any transfer of property.
How it works (Example):
Let's assume Jane Doe sells her house to John Smith. The habendum clause in the contract gives John Smith absolute ownership of the house, including the right to sell the house or give it to his heirs when he dies. Often, the clause begins with "To have and to hold."
In the oil and gas example, let's assume John Smith inserts a habendum clause into the lease for his five acres of land in Texas to an oil company that wants to drill for oil there.
The clause says Oil Company XYZ has the right but not the obligation to operate on John's land for five years and that if the land begins producing oil, Oil Company XYZ automatically has the right to operate on John's land for another five years.
Why it Matters:
Habendum clauses transfer ownership of property, and in the oil and gas world, they may also extend the time on which a lessee can operate on a piece of land.