1.44 Agricultural Lands

1.44.1

In General

In order to regulate and control the ownership of agricultural or farm lands, the federal government and the states have imposed numerous regulations, restrictions, and prohibitions to the holding or ownership of any interest in agricultural or farm lands by aliens, corporations, partnerships, limited partnerships, trusts, pension, or investment funds and other business entities.

Similarly, ownership regulations and restrictions also exist in relation to ranch land, timber land, grazing land, mineral land, homestead land, public land, geothermic use land, and others.

In regard to agricultural or farm land, it must be emphasized that ownership prohibition may affect not only the possible interest that an alien, individual, or entity can own in this kind of land, but equally, the interest that any agency of the United States governmental entity can own.

State law must be researched in order to ascertain the statutory limitations in a certain state, if any, to the ownership of agricultural or farm land either by alien persons or by nonindividuals (corporations, partnerships, limited partnerships, trusts, etc.).

Additionally, The Agricultural Foreign Investment Disclosure Act of 1978 (7 U.S.C. sections 3501-3503; 3505-3508) imposes reporting requirements in connection with the acquisition or transfer of agricultural land interests by foreign persons or foreign entities. The penalty for failing to satisfy the reporting requirements is limited to a monetary fine. Additionally, no part of the statute affects the validity, the ownership, or the purchase or sale of the property.

1.44.2

Agricultural Credit Act of 1987

Enactment

The Agricultural Credit Act of 1987 was enacted on January 6, 1988 and was amended on August 17, 1988. The Act provides that some distressed farmers have the right to reacquire or lease agricultural property foreclosed or transferred by deed in lieu of foreclosure.

Farm Credit Systems Institutions

The Act applies to "agricultural real estate" acquired by Farm Credit System Institutions. Farm Credit System Institutions include: (1) Farm Credit Banks (formed by merger of Federal Land Banks and Federal Intermediate Credit Banks); (2) Production Credit Associations (as merged with Federal Land Bank Associations into new associations); and, (3) Other Financing Institutions (such as agricultural credit corporations, and stockman credit corporations). The Act does not apply to banks for cooperatives, savings associations, state and national banks, or individual lenders acquiring by foreclosure. "Agricultural real estate" financing is distinct from rural housing financing (such as housing in cities or villages having a population not exceeding 2,500 inhabitants).

Under 12 U.S.C. Sec. 2219a, the borrower ("previous owner") has the right of first refusal to repurchase or lease the property after foreclosure by, or deed in lieu of foreclosure to, a Farm Credit System Institution. The institution must notify the previous owner of that person's right to purchase the land at appraised market value or to offer to purchase at a lower price. This notice must be given by certified mail within 15 days after the institution first elects to sell the land publicly or privately. The previous owner must submit an offer to purchase with 30 days after receiving the notice. The institution must sell the property to the previous owner if the offer is the appraised value. The institution may reject an offer at a lower price. The institution must notify the previous owner of its acceptance or rejection of a lower price within 15 days after receipt of the lower price. The institution must afford the previous owner an opportunity to purchase if it rejects the offer of a lower price and if the third party sale is equal to or lower than the offer by the previous owner. The notice of opportunity must be given to the previous owner by certified mail. The previous owner has 15 days to submit an offer at the price of the third party offer (that was no greater than the previous owner's offer). If the institution elects to sell through public bid or auction, it also must notify the previous owner of the public offering (in addition to notice of the right to purchase for appraised value). If the previous owner's bid equals the other highest bid, the institution must accept the previous owner's bid.

The previous owner is given similar rights to elect to lease the property. Certified mail notice is satisfied by mailing one certified mail notice to the last known owner.

If agricultural real estate has been acquired by foreclosure or deed in lieu of foreclosure before or after January 6, 1988 and is being sold after January 6, 1988 by a Farm Credit System Institution, use the following exception:

"Rights of first refusal and options by the previous owner to purchase and/or lease subject property pursuant to 12 U.S.C. Sec. 2219a".

This exception may be deleted if you are furnished with a credible affidavit by an employee of the institution that the rights of 12 U.S.C . Sec. 2219a are not applicable (such as with rural housing loans). If 12 U.S.C. Sec. 2219a is applicable, you may secure an affidavit that:

  • The notices required by 12 U.S.C. Sec. 2219a were given;
  • The previous owner did not exercise the right to acquire or lease the property and the rights expired; and,
  • No third party (including the previous owner) is in possession of the property. The affidavit should recite the dates of mailing of notice and the response of the previous owner. If possible, the affidavit should attach copies of the notices.

The statute does not authorize waiver of these rights. If state law provides longer limits for similar rights, those provisions are not affected.

Secretary of Agriculture and Farmland

Pursuant to 7 U.S.C. Sec. 1985, the Secretary of Agriculture shall allow the borrower-owner from whom the Secretary acquired the property used to secure that borrower-owner's loan to purchase or lease the property. The period to purchase or lease expires 190 days after date of acquisition by foreclosure or deed in lieu of foreclosure. The rights to purchase or lease may be freely and knowingly waived. The Secretary also shall give preference in sales or leases with options to purchase to the borrower-owner, the spouses and children of the borrower-owner if actively farming, a stockholder of a family owned corporate borrower-owner, the immediate previous family size farm operator, and operators of family size farms. These rights are in addition to any rights of first refusal under state law.

If farmland has been acquired by the Secretary of Agriculture (or Farmer's Home Administration) and is being sold by that party, use the following exception:

"Rights and options to purchase and/or lease subject property pursuant to 7 U.S.C. Sec. 1985 or Sec. 2000."

The exception as to 7 U.S.C. Sec. 1985 may be deleted if you are furnished with a credible affidavit from an employee of the department of agriculture or related agency or institution that the option to purchase or lease pursuant to 7 U.S.C. Sec. 1985 has expired or that the provisions of that section do not apply. The affidavit also should recite that no third party (including the borrower-owner) is in possession of the property.

Farmland Homestead

The provisions of 7 U.S.C. Sec. 2000 apply to farmland "homestead property." The homestead property is the principal residence and adjoining land of not more than 10 acres. The Secretary of Agriculture or Administrator of Small Business Administration shall allow eligible borrowers to remain in possession of the homestead property that it acquires or owns (by foreclosure or deed in lieu of foreclosure) on or after January 6, 1988. The occupancy may not exceed 5 years. During occupancy, the borrower has the first right of refusal to reacquire the homestead property for an amount not in excess of the current market value. The Secretary must notify the borrower of the homestead protection rights within 30 days of acquisition of the homestead property securing an agricultural loan. At the end of the occupancy, the Secretary or Administrator shall grant the borrower a first right of refusal to reacquire the homestead property on terms no less favorable than those to be offered to any other buyer. State laws on sales and redemption are not affected.

If farmland has been acquired by the Secretary of Agriculture (or Farmer's Home Administration) and is being sold by that party, use the following exception:

"Rights and options to purchase and/or lease subject property pursuant to 7 U.S.C. Sec. 1985 or Sec. 2000."

If farmland has been acquired by the Administrator of the Small Business Administration and is being sold by that party, use the following exception:

"Rights and options to purchase and/or lease subject property pursuant to 7 U.S.C. Sec. 2000."

The exception as to 7 U.S.C. Sec. 2000 may be deleted if you are furnished with a credible affidavit stating either that the provisions of 7 U.S.C. Sec. 2000 do not apply to the land (such as where farmers home administration made a rural home loan under different laws) or that the rights of the borrower have expired. The affidavit should recite the notices given. If possible, the affidavit should attach copies of the notices. The affidavit also should recite that no third party (including the borrower) is in possession of the property.