Legal-Ease: Farmland came with my new house, now what?


LEGAL-EASE

By Lee R. Schroeder - Guest Columnist



Lee R. Schroeder

Lee R. Schroeder


Purchasers of houses and building lots that are not connected to a public septic/sanitary sewer system must own additional acreage beyond just the building footprint, so sewage can be treated onsite.

As a result, in the context of purchasing existing houses or lots upon which to build houses, homeowners can find themselves with one or more acres of farmland or woods. The homeowner may desire to convert that acreage into a larger yard or woods. Alternatively, the homeowner may want to continue to have that acreage farmed or have the trees removed in order to avoid having to maintain that extensive area.

Nonetheless, when a homeowner acquires farmland of any size, there are three main items that the new homeowner should investigate and consider.

First, if the homeowner is not a farmer himself or herself, the homeowner will want to engage a tenant to farm the farmland. There are three primary types of farmland leases, specifically cash rent, crop share and hybrid cash/crop share. Descriptions of those leases can be easily found online.

I usually encourage my clients to initially offer tenancy to the tenant farmer who was farming the farmland when the homeowner acquired ownership. As to that farmer and any other, choosing a tenant based upon who will pay the most rent is usually not advisable. Rather, trust and confidence in a farm tenant is almost always the most important attribute for a homeowner to seek. A poor tenant can permanently damage property through soil compaction, depletion of nutrient levels and unnecessary soil erosion.

Second, the purchaser should investigate whether the farmland portion of the property is taxed under Current Agricultural Use Valuation. CAUV changes the value of some farmland to reflect the land’s return on investment when farmed — not the land’s fair market value.

To be eligible for CAUV, an application must be received by March 1 of each year by the county auditor confirming that the owner of the farmland owns at least 10 acres of agriculture-specific land in the county or that the subject farmland has earned at least $2,500 on average annually over the last three years.

If a new owner fails to file the form or is otherwise ineligible, the real estate taxes on the property will increase (sometimes very significantly), and there will be a one-time penalty to be paid by the owner when ineligibility is determined. That penalty is calculated as a repayment of the tax savings from having been in CAUV over the last three years.

Third, the purchaser of farmland or woods should contact the local, county Farm Service Agency immediately upon closing on the purchase of the property. The Farm Service Agency is a sub agency of the USDA, and it administers conservation and commodity price support protection programs. In our region, most farmland is enrolled in some FSA program that can impose conditions on use. Further, many wooded areas are also enrolled in FSA conservation programs (also not recorded at the courthouse) that can prohibit changes.

Lee R. Schroeder
https://www.limaohio.com/wp-content/uploads/sites/54/2017/10/web1_Schroeder-Lee-RGB.jpgLee R. Schroeder
LEGAL-EASE

By Lee R. Schroeder

Guest Columnist

Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.

Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.

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