Property

Ohio farm and rural road
By: Peggy Kirk Hall, Tuesday, September 20th, 2022

Did you know yellow grove bamboo is on Ohio’s “noxious weeds” list?  We’ve seen an increase in legal questions about bamboo, a plant that can cross property boundaries pretty quickly and create a neighbor dispute.  Weeds often cause neighbor issues, which is why Ohio has a set of noxious weed laws.  The laws aim to resolve problems around yellow grove bamboo and other species designated as “noxious weeds.”

The noxious weeds list

The Ohio legislature designated shatter cane and Russian thistle as noxious weeds years ago, then granted the Ohio Department of Agriculture (ODA) the authority to determine other noxious weeds that could be prohibited in Ohio.  Since that time, the noxious weed list has grown to include 31 weed species.   Two of the species, yellow grove bamboo and grapevines, are noxious weeds only if not managed in a certain way.  The list includes the following:

  • Shatter Cane
  • Kudzu
  • Russian Thistle
  • Japanese knotweed
  • Johnsongrass
  • Field bindweed
  • Wild parsnip
  • Heart-podded hoary cress
  • Canada thistle
  • Hairy whitetop or ballcress
  • Poison hemlock
  • Perennial sowthistle
  • Cressleaf groundsel
  • Russian knapweed
  • Musk thistle
  • Leafy spurge
  • Purple loosestrife
  • Hedge bindweed
  • Mile-A-Minute Weed
  • Serrated tussock
  • Giant Hogweed
  • Columbus grass
  • Apple of Peru
  • Musk thistle
  • Marestail
  • Forage Kochia
  • Kochia
  • Water Hemp
  • Palmer amaranth
  • Yellow Grove Bamboo, when spread from its original premise of planting and not being maintained
  • Grapevines: when growing in groups of 100 or more and not pruned, sprayed, cultivated, or otherwise maintained for 2 consecutive years

Talking about noxious weeds

Since noxious weeds can be harmful to all, the hope is that all landowners will manage noxious weeds effectively and reduce the possibility that the weeds will invade a neighbor’s property.  But for many reasons, that isn’t always the case.  When it appears that noxious weeds on a neighbor’s property are getting out of hand, first try to address the issue through neighbor communications.  A “friendly” discussion about the weeds might reveal helpful information that can reduce the neighbor conflict.  Maybe the neighbor has recently sprayed the weeds or isn’t aware of the weeds. Maybe the neighbor’s tenant is responsible for managing the land. Or, as is sometimes the case, maybe the suspected plants aren’t actually noxious weeds.  Good communication between the neighbors could bring a quick resolution to the situation.

Agronomic help with noxious weeds

Knowledge and management might be the solution to a noxious weeds problem between neighbors. For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.

Help with noxious weeds

Knowledge and management might be the solution to a noxious weeds problem between neighbors. For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.

Legal procedures might be necessary

If communication isn’t helpful or possible, the laws establish procedures for dealing with noxious weeds. Different procedures in the law apply for different weed locations.

  • If the weeds are in the fence row between two properties, a landowner has a right to ask the neighbor to clear the row of weeds within four feet of the line fence.  If the neighbor doesn’t do so within 10 days, the landowner may notify the board of township trustees.  Once notified, the trustees must visit the property and determine whether the fence row should be cleared.  If so, the trustees must hire someone to clean up the fence row.  The costs of the clearing are then assessed on the neighbor’s property taxes.
  • If the weeds are on private land beyond the fence row, a landowner can send written notice of the noxious weeds to the township trustees.  A letter describing the type and location of the weeds, for instance, would serve as written notice.  Once the trustees receive a written notice, they must notify the neighbor to cut or destroy the weeds or alternatively, to show why there is no need for such action.  If the neighbor doesn’t respond to the trustees and take action within 5 days of the notice being given, the trustees must order the weeds to be cut or destroyed.  The cost of destroying the weeds is then assessed on the neighbor’s property taxes.
  • If the neighbor is a railroad, the railroad must cut or destroy noxious weeds along the railway between June 1 and 20, August 1 and 20, and if necessary, September 1 and 20.  If a railroad fails to do so and the township trustees are aware of the problem, the trustees may remove the weeds and recover costs in a civil action against the railroad.  While the law doesn’t state it, a landowner may have to document whether the railroad follows the required cutting schedule and notify the trustees if it does not.
  • If the neighbor is the Ohio Department of Natural Resources or a park owned by the state or a political subdivision, the landowner must provide information about the noxious weeds to the township trustees.  The trustees then notify the county Extension educator, who must meet with a park authority and a representative of the soil and water conservation district within five days to consider ways to deal with the problem.  The Extension educator must report findings and recommendations back to the township trustees, but the law doesn’t require the trustees to take action on the report.  Apparently, the hope is that the problem would be resolved after considering ways to deal with it.

What if the neighbor leases the land?

We mentioned that sometimes a neighbor might not be tending to noxious weeds because it’s actually the responsibility of the neighbor’s tenant under a leasing arrangement, such as a farmland lease or a solar lease.  These types of leases should state which party is responsible for noxious weeds.  Note that the law recognizes the possibility of a leasing situation by requiring the trustee to notify the “owner, lessee, agent, or tenant having charge of the land” when the weeds are on private land and the “owner or tenant” when the weeds are in the fence row.  The “or” in these provisions can be problematic though, as that doesn’t require the township to notify both the neighbor and tenant.  A landowner might need to ask the trustees to communicate with both the neighbor and its tenant so that the parties are both aware and can resolve which is responsible for managing the noxious weeds according to the leasing arrangement. 

For more information about noxious weeds, refer to our law bulletins in the property law library on https://farmoffice.osu.edu.  For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.

Posted In: Crop Issues, Property
Tags: noxious weeds, Property, neighbor law
Comments: 0
Red barn and wooden fence with anti-solar sign
By: Peggy Kirk Hall, Friday, September 09th, 2022

The siting of renewable energy projects on Ohio farmland is a divisive issue these days, pitting neighbors against neighbors and farmers against farmers.  Some support expanding renewable energy capacity while others oppose losing productive farmland or changing the rural landscape.  A common question arising in this conflict is this: when can a county or township say “no” to a proposed renewable energy development?  Several new laws, old laws, and recent court cases can help answer this question, although the answer is not always clear.

The “public utility exemption” from zoning.  A long-standing provision of Ohio law that limits county and township land use power is the “public utility exemption” from zoning. Ohio Revised Code Sections 303.211(counties) and 519.211 (townships) specifically state that counties and townships have no zoning authority “in respect to the location, erection, construction, reconstruction, change, alteration, maintenance, removal, use, or enlargement of any buildings or structures of any public utilities.” The historical reason for this exemption is to keep local regulations from interfering with the provision of public utility services to Ohio residents.  But what is a “public utility”?  The exemption does not define the term, leaving Ohio courts to determine what is and is not a public utility on a case-by-case basis.  More on that later.

New powers in Senate Bill 52.  Effective in October of 2021, Senate Bill 52 gave new powers to county commissioners over certain renewable energy developments, setting aside the “public utility exemption” in those situations.  The new law states that counties can designate restricted areas where wind and solar development is prohibited and can prohibit an individual proposed wind and solar facility or limit its size.  These new powers, however, apply only to facilities with a single interconnection to the electrical grid and beyond a certain production size.  For solar facilities, that size is 50 MW or more of energy production and for wind facilities, it’s 5 MW or more. Facilities that aren’t connected to the grid or are beneath those amounts are not subject to the new powers granted in S.B. 52.  Additionally, facilities that had reached a certain point in the state approval process aren’t subject to the new law.  Several Ohio counties have already established restricted areas or worked with townships to determine whether the county will approve individual projects as they come forward.

Authority over “small wind farms.”  New wind power development in Ohio a decade ago led to the “small wind farm” provision in Ohio Revised Code Sections 303.213 (counties) and 519.213 (townships).  This law allows counties and townships to use their zoning powers to regulate the location and construction of publicly and privately owned “small wind farms,” regardless of the public utility exemption.  A “small wind farm” is any wind turbine that is not subject to Ohio Power Siting Board jurisdiction, meaning that it produces less than 5 MW of energy.  Some counties and townships have utilized this provision of law to establish setback distances for wind turbines in residential areas.

The “bioenergy” exemptions.  Yet another Ohio law limits county and township zoning authority over bioenergy facilities.  Found in the “agricultural exemption from zoning” statute, Ohio Revised Code Sections 303.21(C) (counties) and 519.21(C) (townships) states that county and township zoning cannot prohibit the use of any land for biodiesel production, biomass energy production, electric or heat energy production, or biologically derived methane gas production if the facility is on land that qualifies as “land devoted exclusively to agricultural use” under Ohio’s Current Agricultural Use Valuation program and if, for biologically derived methane gas, the facility does not produce more than 5 MW or 17.06 million BTUs of energy.  Ohio now has several facilities that fit within this exemption from zoning authority.

Two recent cases examine when a renewable energy facility a “public utility.”  The “public utility exemption” from county and township zoning was at issue in two similar Ohio cases concerning biodigesters, facilities that process manure and other solid wastes into methane gas that is used to generate electricity.  The most recent is Dovetail Energy v. Bath TownshipThe township claimed that the Dovetail biodigester located on farmland in Greene County was an “industrial use” that violated township zoning regulations.  The owners argued that the biodigester was exempt from township zoning under both the “public utility” exemption and the “bioenergy” exemption. 

The case reached the Second District Court of Appeals, which focused a large part of its analysis on the issue of whether the biodigester is a “public utility” that is exempt from township zoning under Ohio Revised Code 519.211.  Relying on earlier cases from the Ohio Supreme Court, the court explained that an entity is a public utility if “the nature of its operation is a matter of public concern” and if “membership is indiscriminately and reasonably made available to the general public” as a public service. 

The court analyzed the “public service” and “public concern” factors for the Dovetail biodigester, examining first whether Dovetail provides a public service, which requires a showing that the facility indiscriminately provides essential goods or services to the public, which has a legal right to demand or receive the goods or services, and that the goods or services can’t be arbitrarily withdrawn.  Because Dovetail generates electricity that is sold into the wholesale energy market and used to provide energy to local utilities and customers and because Dovetail is also required to provide renewable energy credits that it cannot arbitrarily or unreasonable withdraw, the court concluded that the facility is a “public service.”

Factors determining whether Dovetail’s operation is also a matter of “public concern” that the court analyzed included whether Dovetail “serves such a substantial part of the public that its rates, charges and methods of operation become a public concern.” The court looked to Ohio’s incentives for renewable energy development, the lack of competition in the electric grid, the “heavy” regulatory environment for Dovetail, and its payment of public utility taxes as indications that Dovetail and the energy it produces are “public concerns.”  Meeting both the “public service” and “public concern” components, the appeals court agreed with the lower court’s ruling that Dovetail is a public utility and is exempt from Bath Township zoning regulations.

The Dovetail decision echoes an earlier decision in the Fifth Appellate District, Westfield Township v. Emerald Bioenergy, where the appellate court examined a biodigester on farmland in Morrow County and found that the township could not regulate it because it is a “public utility.”  The court cited factors such as Emerald’s provision of electric to the general public through interconnection agreements that distribute the energy to the energy grid, its lack of control over which customers receive or use the energy, its renewable energy credit requirements that can’t be arbitrarily or unreasonably withdrawn, its acceptance of waste from any customer, its governmental regulations and oversight, and its public utility taxes.  The court also noted that it need not address the “bioenergy” exemption because it found the enterprise to be a “public utility.”

Both townships in the Dovetail Energy and Emerald Bioenergy cases requested a review of the decision by the Ohio Supreme Court.  But the Supreme Court decided not to hear either case, although several of the justices dissented from that decision in each case.  Without further review by the Supreme Court, the appellate court decisions stand.

What do these cases mean for solar energy facilities under 50 MW?  Recall that S.B. 52 allows counties to prohibit or restrict solar facilities that are 50 MW or higher, but no other law addresses solar facilities with a single interconnection point to the energy grid that produce less than 50 MW.  Would such a facility be a “public utility” under the public utility exemption?  As with Dovetail and Emerald, a court would have to examine the solar facility and determine whether “the nature of its operation is a matter of public concern” and if “membership is indiscriminately and reasonably made available to the general public” as a public service.  If so, a county or township could not use zoning to prohibit or regulate the location or construction of the solar facility. 

Learn more about renewable energy laws in the Farm Office Energy Law Library at https://farmoffice.osu.edu/our-library/energy-law.

Ohio farm and rural road
By: Peggy Kirk Hall, Wednesday, September 07th, 2022

Farm neighbor laws have been around nearly as long as there have been farm neighbors.  From trees to fences to drainage, farmers can impact and be impacted by their neighbors.  In the spirit of managing these impacts and helping everyone get along, our courts and legislatures have established a body of laws over the years that allocate rights and responsibilities among farm neighbors.  Explaining these laws is the goal of our new series on farm neighbor laws. 

Here’s a timely farm neighbor problem that we’ve heard before: Farmer’s soybeans are looking good and Farmer is anxious for harvest.  But some neighbors drive their ATV into the field and flatten a big section of Farmer’s beans.  What can Farmer do about the harm? 

Ohio’s “reckless destruction of vegetation law” might be the solution. The law, Ohio Revised Code Section 901.51, states that “no person, without privilege to do so, shall recklessly cut down, destroy, girdle, or otherwise injure a vine, bush, shrub, sapling, tree, or crop standing or growing on the land of another or upon public land.” This law could provide a remedy if its three components fit Farmer’s situation:

  1. Recklessness
  2. Destruction or injury to a vine, bush, shrub, sapling, tree, or crop on the land of another
  3. No privilege

A key requirement of the law is “recklessness.”  Under Ohio law, a person is “reckless” if the person acts with heedless indifference to the consequences or disregards the risk that the person's conduct is likely to cause a certain result.  For example, if the neighbors were out driving the ATV at night and simply didn’t care where they were and that their actions could be harming Farmer’s property, that behavior is likely to rise to the level of “recklessness.”  Alternatively, if another driver ran the neighbors off the road and the neighbors tried but could not avoid going into the bean field, their behavior isn’t likely to be deemed “reckless.”

A second requirement is destruction or injury to vegetation on another’s land.  In the unlikely event that Farmer’s soybeans aren’t actually injured or destroyed, the law wouldn’t apply.  Note that the law doesn’t just apply to a crop like soybeans, but also includes other vegetation such as vines, bushes, shrubs, and trees, recognizing that all of these types of vegetation have value for a landowner.

The final requirement is “without privilege to do so.”  Privilege in the context of this law means “permission.”  As long as Farmer didn’t tell the neighbors they could drive their ATV through his field, Farmer could prove that the neighbors did not have privilege or permission to cause the destruction and injuries to Farmer’s beans.

So what?  The law clearly prohibits the neighbors from recklessly destroying Farmer’s beans, but what happens if they do?  The law also addresses this question by stating that a violator of the law is liable “in treble damages.” Attorneys always take notice of treble damages language because it requires the damages award to be tripled after a judge or jury determines the amount of the actual harm. This tripling of damages is intended to punish the person for their “recklessness.”  So, if a jury decided that the value of Farmer’s lost beans is $1,000, the treble damages would result in a $3,000 award against the neighbors due to their reckless destruction of Farmer’s crop.

There is also a criminal element to the law.  The law states that a violator is also guilty of a fourth-degree misdemeanor. That would require a criminal proceeding by the local law enforcement, and the result could be no more than 30 days in jail and up to $250 in fines.

If the reckless destruction law doesn’t apply, Farmer would need to look to other mechanisms for resolving the harm.  If the neighbors were trespassing, trespass laws could provide a remedy but wouldn’t award treble damages.  Or the Farmer’s property insurance might address the harm. But if the neighbors destroyed Farmer’s beans by behaving recklessly, the reckless destruction of vegetation law can help resolve this farm neighbor issue.

Find the “reckless destruction of vegetation” law at Ohio Revised Code Section 901.51.

September 1 calendar
By: Peggy Kirk Hall, Wednesday, August 24th, 2022

September 1 is fast approaching, and this year it’s an especially important date for landowners leasing cropland under an existing lease that doesn’t address when or how the lease terminates.  In those situations, September 1 is the new deadline established in Ohio law for a landowner to notify a tenant that the landowner wants to terminate the lease.  If the landowner does not provide notice by September 1, the lease continues for another lease term. 

This September 1 deadline only applies to verbal or written leases that don’t have a termination date or a deadline for giving notice of termination.  If a crop lease already includes a termination date or a deadline for giving notice of termination, those provisions are unchanged by the new law. The new September 1 termination date also only affects leases of land for agricultural crops.  It does not apply to leases for pasture, timber, farm buildings, horticultural buildings, or leases solely for equipment.

To meet the new legal requirements, a landowner must give the notice of termination in writing and deliver it to the tenant operator by hand, mail, fax, or email on or before September 1.  While the law does not specify what the termination must say, we recommend including the date of the notice, the identity of the lease property being terminated, and the date the lease terminates, which the law states will be the earlier of the end of harvest or December 31, unless the parties agree otherwise.

Tenant operators are not subject to the new September 1 termination deadline—the law applies only to the landowner.  Even so, it’s important for tenant operators to understand the new law because it protects a tenant if a landowner attempts to terminate a lease after September 1.  In those instances, the law allows the tenant to continue the lease for another term because the termination notice was late.

A lesson this new law teaches is the importance of having a written farm lease that includes termination provisions. The parties can agree in advance when the lease will terminate or can set a deadline for notifying the other party of the intent to terminate the lease.  Such terms provide certainty and reduce the risk of conflict and litigation over a “late” termination.

Read the new “termination of agricultural leases” law in Section 5301.71 of the Ohio Revised Code.

By: Barry Ward, Wednesday, August 10th, 2022

High crop prices and COVID era legislative ad-hoc government payments coupled with lower interest rates (among other factors) over the last 2 and half years have given strength to farmland markets. Higher input costs over the last year and half together with rising interest rates have offset some of this strength but farmland values continue to increase. Many of these same factors have given strength to the farmland rental markets which have also seen increases this last year and will likely see additional increases in 2022.

According to the Western Ohio Cropland Values and Cash Rents Survey, cropland values in western Ohio are expected to increase in 2022 by 8.0 to 11.3 percent depending on the region and land class. This is on top of increases from 2020 to 2021 of 7.2 to 26.6 percent depending on region and productivity class.

Cash rents are expected to increase from 5.8 to 6.8 percent depending on the region and land class. This is on top of rental increases of 1.5 to 7.7 percent from 2020 to 2021.

Ohio Cropland Values and Cash Rent

Ohio cropland varies significantly in its production capabilities and, consequently, cropland values and cash rents vary widely throughout the state. Generally, western Ohio cropland values and cash rents differ from much of southern and eastern Ohio cropland values and cash rents. The primary factors affecting these values and rents are land productivity and potential crop return, and the variability of those crop returns. Soils, fertility and drainage/irrigation capabilities are primary factors that most influence land productivity, crop return and variability of those crop returns.

Other factors impacting land values and cash rents may include field size and shape, field accessibility, market access, local market prices, field perimeter characteristics and potential for wildlife damage, buildings and grain storage, previous tillage system and crops, tolerant/resistant weed populations, USDA Program Yields, population density, and competition for the cropland in a region. Factors specific to cash rental rates may include services provided by the operator and specific conditions of the lease. This fact sheet summarizes data collected for western Ohio cropland values and cash rents.

Study Results 

The Western Ohio Cropland Values and Cash Rents study was conducted from January through April in 2022. The opinion-based study surveyed professionals with a knowledge of Ohio’s cropland values and rental rates. Professionals surveyed were rural appraisers, agricultural lenders, professional farm managers, ag business professionals, OSU Extension educators, farmers, landowners, and Farm Service Agency personnel.

Respondents were asked to group their estimates based on three land quality classes: average, top, and poor. Within each land-quality class, respondents were asked to estimate average corn and soybean yields for a five-year period based on typical farming practices. Survey respondents were also asked to estimate current bare cropland values and cash rents negotiated in the current or recent year for each land-quality class. Survey results are summarized for western Ohio with regional summaries (subsets of western Ohio) for northwest Ohio and southwest Ohio.

The complete survey summary can be accessed and downloaded here on one of our Farm Office pages:

https://farmoffice.osu.edu/farm-management-tools/farm-management-publications/cash-rents

 

Posted In: Business and Financial, Property
Tags:
Comments: 0
By: Robert Moore, Friday, July 08th, 2022

Robert Moore, Attorney and Research Specialist, OSU Agricultural & Resource Law Program

Legal Groundwork

A Right of First Refusal (ROFR) is a contract between the owner of the real estate and the person who is receiving the right to purchase (Holder).  If the owner wishes to sell or transfer the property, the Holder has a legal right to purchase the property subject to the terms and conditions of the ROFR.  If the Holder does not exercise their right to purchase the property, the owner can transfer the property to the third-party buyer. A ROFR can be an effective way to help keep land ownership in the family.

A ROFR can be established in a number of ways including on a deed.  However, in most situations the best method of creating a ROFR is a stand-alone document that is recorded with the county recorder.  By using a separate document, the terms and conditions of the ROFR can be clearly expressed to avoid future confusion or conflict.

There are a number of terms and conditions to include in a ROFR.  Perhaps the most important term is how to determine purchase price.  One way to establish the purchase price is by matching a bona fide offer.  Upon receiving an offer to purchase the land, the owner offers to sell the land at that same price to the Holder.  If the Holder declines to purchase the land at that price, the owner is free to sell to the third party at that price.

Another way to establish the purchase price is by appraisal.  If the appraisal method is used to establish the purchase price, a multi-step approach should be considered to avoid the effect of an outlier appraisal.  For example, the owner can obtain and appraisal first.  If the Holder objects to the owner’s appraisal, the Holder can obtain an appraisal of their own.  If the two appraisals do not match or not within a certain percentage of each, the owner and Holder agree on a third appraisal.  After the third appraisal is conducted, the middle appraisal of the three establishes the purchase price.  Also, any qualifications for appraisers, such a licensed or unaffiliated with the parties, should be included in the terms.

Sometimes both the offer matching and appraisal will be used in a ROFR to establish the purchase price. Terms may include using the lesser of an offer and an appraisal for the purchase price.  Or, if there is no offer and the owner would like to sell, then the appraisal method is used to establish the purchase price.  The important thing is to make it very clear how the purchase price is established to avoid disputes between the owner and potential buyer.

Timelines should be included in the ROFR.  Timelines should be included for:

  • Number of days to provide an offer to the Holder
  • Number of days to establish the purchase price by appraisal
  • Number of days to accept or reject an offer by the Holder
  • Number of days to close the purchase

An additional term to consider is what transfers are exempt from the ROFR.  The owner of the land may want to be able to transfer to their family or spouse without triggering the ROFR.  Therefore, the ROFR should specifically state any transfers that are exempt.  The most common exempt transfers are those transfers to descendants and spouses.

Another important provision is the length of term of the ROFR.  The ROFR should have a limit on its term whether it be a number of years or for the life of the owner.  A ROFR that goes on generation after generation can cause big problems for a future owner because the Holder or their heirs may be difficult to find and/or cooperate.

Consider the following example of a common way in which a ROFR is used.

Mom and Dad want to gift five acres to their daughter, Jane, so that she can build a house.  Mom and Dad’s only concern is that they do not want the five acres to leave the family because it sits in the middle of their farmland.  Mom and Dad gift the five acres to Jane and enter into a ROFR at the same time.  The ROFR requires Jane to offer Mom and Dad the first chance to buy the five acres before Jane transfers it.  An exception is made that Jane may transfer the land to her children without triggering the ROFR.  The purchase price is established by a three-step appraisal price with the appropriate timelines included.  The ROFR will be in effect for the next 30 years and then will expire.

The ROFR gives Mom and Dad the assurance that Jane will not be able to simply sell the property to someone outside of the family.  Without the ROFR, Mom and Dad may be reluctant to gift the land for fear of Jane transferring the land to someone else.  The ROFR allows Jane to have full ownership of the property and the discretion to build a house as she wishes but also protects Mom and Dad from having an unwanted neighbor.

ROFRs can be effective in real estate transfers, particularly among family members, and in estate planning.  Keep ROFRs in mind the next time you are considering transferring real estate or as you design your estate plan that includes real estate.  A ROFR should be drafted with the assistance of an attorney to be sure that all the important terms and provisions are included, and it is executed and recorded property.  

Posted In: Property
Tags: Right of First Refusal
Comments: 0
By: Robert Moore, Thursday, June 09th, 2022

Legal GroundworkBy Robert Moore

Attorney/Research Specialist

 

In the prior post, we explained partition and the risk it poses to family farmland.  Fortunately, there are a few strategies that can be implemented to avoid partition. 

One strategy that can prevent partition is the use of a Limited Liability Company (LLC).  The concept of using the LLC is to replace the multiple owners of the land with one LLC owning the land.  Then, those same owners own the LLC rather than the land.  Partition rights only apply to real estate, not to business entities.  So, instead of three people owning the land, three people own an LLC that owns the land.  Since there are no partition rights with an LLC, no one owner can force the sale of the land. 

Consider the following example.  Andy, Betty and Charlie are siblings and own a farm together.  Each is aware of partition rights and wants to prevent any of the owners, including future owners, from exercising their partition rights.  They establish an LLC and transfer the land into ABC Family Farms LLC.  The LLC operating agreement states that land can only be sold with the consent of all members. 

The three owners of the land have eliminated the threat of partition to the family farmland.  The legal owner of the farmland is now the LLC, not the three siblings.  Andy, Betty and Charlie are the owners of the LLC but Ohio law does not provide for partition rights of an LLC.  Additionally, as added protection, the siblings require unanimous consent before any of the land in the LLC can be sold.  By placing the land in the LLC, the three owners have ensured that the only way the farm will leave the family is by joint agreement of the family.  A well-designed LLC can make it nearly impossible for land to leave the family without the agreement of the family. 

The above example illustrates how an LLC prevents partition by the owners and family members, but LLCs also protect against creditors and lawsuits.  Let’s assume Andy has financial problems and creditors have filed and won lawsuits against him.  Without the LLC, the creditor could force the sale of the land through foreclosure on Andy’s share.  However, Ohio law only allows creditors to attach to an LLC owner’s interest.  This means that a creditor is entitled to an owner’s share of the LLC profits but cannot force the sale of the assets owned by the LLC.  In this example, Andy’s’s creditors are entitled to receive his share of the profits from the LLC but cannot force the sale of the land.  An LLC can prevent an owner’s financial problems or lawsuits from causing the sale of family farmland.  

LLCs are often used in estate and succession planning to protect the family farmland.  Instead of multiple family members inheriting land (and the risk of partition), mom and dad may establish an LLC for the farmland.  Then, the children inherit the LLC without the partition rights.  By transferring the land via an LLC, mom and dad do not need to worry that one child or their creditors will force the family farmland to be sold. 

Consider the following example.  Mom and Dad want their three children to inherit their farmland.  They would like their children to own the farmland together as it is too difficult to divide up the land equitably.  Mom and Dad are aware of partition rights and want to make sure that no co-owner can force the sale of land against the family’s wishes.  Mom and Dad transfer their land to an LLC.  Their three children will inherit the LLC with the land.  Because each child will own an interest in the LLC, and not an interest in the real estate directly, partition rights are not available.  Mom and Dad also established the LLC with the requirement that any transfers of land require unanimous consent of all the members. 

This example illustrates how LLCs can be incorporated into estate plans to minimize the risks of partition.  By having multiple heirs and beneficiaries inherit the LLC, and not the land itself, the land will not be transferred out of the family due to partition.  We often think of using LLCs for liability protection but LLCs may be even more valuable to protect against partition rights. 

Another way to protect against partition rights for heirs is to use a trust.  With this strategy, the land is owned by a trust rather than the beneficiaries. Since the beneficiaries do not legally own the land, they are not entitled to partition rights.  The disadvantage to this strategy is that the trust beneficiaries will not be able to use the assets as collateral nor to build their wealth. 

Consider the following example. Mom and Dad want their children to have the benefit of their land upon inheritance but want to be 100% sure that their children do not sell the land before their grandchildren can inherit it. Mom and Dad establish a trust that holds the land for their children’s lives. During the children’s lives, the children receive the rent but do not own the land. Thus, the children cannot take action to sell the land. Upon the death of the children, the grandchildren will receive the land. 

While the land is in trust, the children do not own the land. Thus, they do not have partition rights and cannot force the sale of the land. The grandchildren are nearly certain to inherit the land. On the other hand, the land is not available as collateral for a loan and the other benefits of ownership are not available to the children. 

As the example shows, trusts are an excellent method to avoid partition. However, trusts also severely restrict the rights of the beneficiaries while the land is held in trust. A careful analysis of the benefits and disadvantages of using a trust to avoid partition must be carefully considered. 

In conclusion, before allowing land to be owned jointly, the owners should consider the risks of a forced sale of the land through partition. Partition can be avoided by using LLCs or trusts to hold the land. Be sure to consult an attorney to determine the best course of action to address the perils of partition. 

Posted In: Property
Tags: Partition, Forced Sale, LLC, trusts
Comments: 0
Vintage cowgirl on a horse with a lasso
By: Peggy Kirk Hall, Monday, June 06th, 2022

It's time for another roundup of legal questions we've been receiving in the Agricultural & Resource Law Program.  Our sampling this month includes registering a business, starting a butchery, noxious weed liability in a farm lease situation, promoting local craft beer at a farmers market, herd share agreements, and agritourism's exemption from zoning.  Read on to hear the answers to these questions from across the state.

I want to name my farm business but am not an LLC or corporation.  Do I have to register the name I want to use for the business?

Yes, if your business name won’t be your personal name and even if the business is not a formally organized entity such as an LLC.  You must register the business with the Ohio Secretary of State.  First, make sure the name you want to use is not already registered by another business.  Check the name availability using the Secretary of State’s business name search tool at https://businesssearch.ohiosos.gov/.  If the name is available, register the name with the Secretary of State using the form at https://www.sos.state.oh.us/businesses/filing-forms--fee-schedule/#name.  If there is already a business registered with the name you want to use, you might be able to register a similar name if your proposed name is “distinguishable” from the registered name. The Secretary of State reviews names to make sure they are not already registered and are distinguishable from similar names.  See the Guide to Name Availability page for examples of when names are or are not distinguishable from one another.

I am interested in starting a small butchery.  What resources and information are helpful for beginning this endeavor?

There are legal issues associated with beginning a meat processing operation, and there are also feasibility issues to first consider.  A good resource for initial considerations to make for starting a meat processing business is this toolkit from OSU at https://meatsci.osu.edu/programs/meat-processing-business-toolkit.   A similar resource that targets niche meat marketers is at https://www.nichemeatprocessing.org/get-started/.  On the legal side, requirements vary depending on whether you will only process meat as a custom operator or fully inspected operator, and if you also want to sell the meat through your own meat market.  The Ohio Department of Agriculture’s Division of Meat Inspection has licensing information for different types of processors here:  https://agri.ohio.gov/divisions/meat-inspection/home.  If you also want to have a retail meat market, you’ll need a retail food establishment (RFE) license from your local health department.  To help you with that process, it’s likely that your health department will have a food facility plan review resource like this one from the Putnam County Health Department.

Is Ohio’s noxious weeds law enforceable against the tenant operator of my farm, or just against me as the landowner?

Ohio’s noxious weed law states that the township trustees, upon receiving written information that noxious weeds are on land in their township, must notify the “owner, lessee, agent, or tenant having charge of the land.”  This language means that the trustees are to notify a tenant operator if the operator is the one who is in charge of the land where the noxious weeds exist.  The law then requires the notified party –which should be the tenant operator—to cut or destroy the noxious weeds within five days or show why there is no need to do so.  The concern with a rental situation like yours is that if the tenant does not destroy the weeds in five days, the law requires the township to hire someone to do so and assess the costs of removal as a lien on the land.  This puts you as the landowner at risk of financial responsibility for the lien and would require you to seek recourse against the tenant operator if you want to recover those costs.  Another option is to take care of removing the noxious weeds yourself, but that could possibly expose you to a claim of crop damages from the tenant operator.  A written farm lease can address this situation by clearing shifting the responsibility for noxious weeds in the crop to the tenant operator and stating how to deal with crop damages if the landowner must step in and destroy the noxious weeds.

Can we promote local craft beers at our farmers market?

Ohio established a new “F-11” permit in H.B. 674 last year.  The F-11 is a temporary permit that allows a qualifying non-profit organization to organize and conduct an event that introduces, showcases, or promotes Ohio craft beers that are sold at the event. There are restrictions on how long the event can last, how much beer can be sold, who can participate in the event, and requirements that food must also be sold at the event. The permit is $60 per day for up to 3 days.  Learn more about the permit on the Department of Commerce website at  https://com.ohio.gov/divisions-and-programs/liquor-control/new-permit-info/guides-and-resources/permit-class-types.

Can a goat herdsman legally provide goat milk through a herd share agreement program? 

Herd share agreements raise the raw milk controversy and whether it’s legal or safe to sell or consume raw milk.  Ohio statutory law does clearly prohibit the sales of raw milk to an “ultimate consumer” in ORC 971.04, on the basis that raw milk poses a food safety risk to consumers.  But the law does not prohibit animal owners from consuming raw milk from their own animals.  A herd share agreement sells ownership in an animal, rather than selling the raw milk from the animal.  Under the agreement, a person who pays the producer for a share of ownership in the animal may take their share of milk from the animal.  The Ohio Department of Agriculture challenged the use of herd share agreements as illegal in the 2006 case of Schitmeyer v. ODA, but the court did not uphold the ODA’s attempt to revoke the license of the dairy that was using herd share agreements.  As a result, it appears that the herd share agreement approach for raw milk sales is currently legally acceptable.  But many still claim that raw milk consumption is risky because the lack of pasteurization can allow harmful bacteria to exist in the milk. 

Can the township prohibit me from having a farm animal petting zoo on my hay farm?

It depends whether you qualify for the “agritourism exemption” granted in Ohio law.  The agritourism exemption states that a county or township can’t use its zoning authority to prohibit “agritourism,” although it may have same zoning regulations that affect agritourism buildings, parking lots, and access to and from the property.  “Agritourism” is an agriculturally related entertainment, recreational, cultural, educational or historical activity that takes place on a working farm where a certain amount of commercial agricultural production is also taking place. If you have more than ten acres in commercial production, like growing and selling your alfalfa, or you have less than ten acres but averaged more than $2,500 in gross sales from your alfalfa, you qualify under the agritourism exemption and the township zoning authorities cannot prohibit you from having your petting zoo.  However, any zoning regulations the township has for ingress and egress on your property, buildings used primarily for your petting zoo, or necessary parking areas would apply to your petting zoo activity. If you don't qualify as "agritourism," the township zoning regulations could apply to the petting zoo activity, and you must determine whether a petting zoo is a permitted use according to your zoning district, which could depend upon whether or not you want to operate the petting zoo as a commercial business.

 

 

 

 

By: Robert Moore, Tuesday, May 31st, 2022

Legal Groundwork

By Robert Moore, Attorney and Research Specialist, OSU Agricultural & Resource Law Program

One of the more common ways that farm families involuntarily lose farmland is through partition.  Under Ohio law, any person that is a co-tenant (co-owner) of real estate has partition rights.  Essentially, partition rights allow a co-tenant to force the other owners to buy them out or force the land to be sold.  Partition is a harsh, but arguably necessary, right of every co-tenant of real estate.  With proper planning, partition can be avoided.

Partition law is codified in Section 5307 of the Ohio Revised Code.  A partition is initiated by a co-tenant filing a petition for partition with the common pleas court.  A partition must be filed in the county in which the real estate is located.  Any co-tenant, even one owning a small percentage of the real estate, may file the partition.  The petition is very similar to filing a lawsuit and all co-tenants are served notice the petition.  All defendant co-tenants are provided an opportunity to respond to the petition.

After all co-tenants have been served and had an opportunity to respond to the petition, the court will appoint a commissioner.  The role of the commissioner is to essentially oversee the petition process on behalf of the court. The partition commissioner is permitted to physically divide the real estate if the property can be divided without the loss of value.  Due to the unique nature of farmland and the variation within each parcel, administrators rarely will physically divide the land.  Instead, the commissioner will usually decide to sell the land at auction and divide the sale proceeds among the owners. The first step in selling the land is to obtain the value of the land by appraisal. 

After the value of the property is established, each party will be given an opportunity to buy the land at the appraised value.  If no party wishes to purchase, the land will be ordered sold by the court.  The land may be sold at sheriff’s sale but the parties usually agree to sell the land at public auction.  The one issue that the feuding co-tenants can usually agree upon is that they are likely to get a better price at an advertised auction rather than a sheriff’s sale.   The land must bring at least 2/3 of the appraisal price at auction.  After the land is sold, the proceeds are divided among the co-tenants in proportion to ownership.

The reason that partition law is a necessity is that Ohio law provides very little guidance to co-tenants as to how to manage their co-owned real estate.  For example, Ohio law implies that unanimous consent must be obtained in the management of real estate.  Therefore, one co-tenant holding a minority ownership percentage can prevent the land from being leased or sold.  Ohio law solves this issue by providing partition rights.  Basically, the law says that if the co-tenants cannot resolve their differences, then any one of them can force sale the land and divide the proceeds.  Partition is necessary because the law seeks to allow individuals to divest themselves of any asset they may own.  Without partition, a person could be forced to own real estate that they may not want to own and/or do not receive financial benefit.

Consider the following example.  Amy, Bob and Charlie inherit a farm from their parents.  Amy and Bob want to lease the land to a neighbor farmer but Charlie insists he is going to farm it.  Charlie has no experience farming and Amy and Bob know it will end up in a disaster if Charlie gets his wish.  Any potential tenant that Amy and Bob consider is contacted by Charlie and told the farm is not for lease.  Amy and Bob get frustrated and decide to file a partition because they are tired of dealing with Charlie and do not think they will get a fair, financial benefit from the farm if Charlie is the operator.  The court orders the farm sold and Amy, Bob and Charlie share the proceeds.

The risk of partition is not limited to just the initial family members who may own the land.  Any future owner also has the same partition rights.  Spouses, children and anyone else who may  become a co-tenant can force a partition.

Using the same scenario as above, assume Amy dies.  Her parents assumed that Amy’s share of the farm would go to her children (their grandchildren) but Amy never got around to doing and estate plan. So, under Ohio law, everything goes to her husband, Dale.  Dale has no attachment to the farm and just sees dollar signs now that he is a 1/3 owner of the farm.  Dale quickly files for partition and forces the sale of the land so that he can have money to buy the boat he has always wanted.

This example illustrates how easy it is for someone to become a co-tenant and gain partition rights.  Deaths, divorces, and poor business and estate planning can allow someone to become a unexpected and unwanted co-tenant.  Partition law does not care how long farmland has been in the family or how vital it is for a farming operation. Partition law treats a city lot that has been owned for a few months the same as a 1,000-acre farm that has been in the family five generations.  Partition can lead to harsh results that should be avoided if possible.

With proper planning, partition can be averted.  In the next installment, the various strategies to prevent partition will be discussed.

See the prior blog post “Ohio Case Illustrates the Risk of Leaving Farmland to Co-Owners” by Peggy Hall for a discussion of a Madison County case and the perils of partition.

Posted In: Property
Tags: Partition, Forced Sale, Farmland
Comments: 0
Signficant surface water draining across farm field
By: Peggy Kirk Hall, Wednesday, May 18th, 2022

We can count on legal questions about surface water drainage to flow steadily in the Spring, and this year is no exception.  Spring rains can cause drainage changes made on one person’s land to show up as harm on another’s land.  When that happens, is the person who altered the flow of surface water liable for that harm?  Possibly.  Here is a reminder of how Ohio law deals with surface water drainage problems and allocates liability for drainage interferences, followed by guidance on how to deal with a drainage dispute.

Ohio law allows landowners to change surface water drainage

Back in 1980, the Ohio Supreme Court adopted a new rule for resolving surface water disputes in the case of McGlashan v. Spade Rockledge.  Previous Ohio law treated water as a “common enemy” to be pushed onto others, then absolutely prohibited any land changes that would increase surface water drainage for lower landowners.  In McGlashan, the Court replaced these old laws with the “reasonable use rule” that remains the law in Ohio.  The rule states that landowners do have a right to interfere with the natural flow of surface waters on their property, even if those changes are to the detriment of other landowners.  But the right to alter drainage is limited to only those actions that are “reasonable.”

Drainage changes must be “reasonable”

Although it allows drainage changes, the reasonable use doctrine also states that landowners incur liability when their interference with surface water drainage is “unreasonable.”   What does that mean?  The law contains factors that help clarify when an interference is unreasonable, a determination made on a case-by-case basis.  The factors attempt to balance the need for the land use change that altered drainage against the negative impacts that change has on other landowners.  A court will examine four factors to determine whether the drainage change is unreasonable:  the utility of the land use, the gravity of the harm, the practicality of avoiding that harm, and unfairness to other landowners.    For example, if a land use change has low utility but causes drainage harm to other landowners, or the landowner could take measures to prevent unfair harm to others, a court might deem the landowner’s interference with drainage as “unreasonable.”

What to do if a neighbor’s drainage is causing harm?  

The unfortunate reality of the reasonable use doctrine is that it requires litigation, forcing the harmed party to file an action claiming that the neighbor has acted unreasonably.  Before jumping into litigation, other actions might resolve the problem.  An important first step is to understand the physical nature of the problem.  Can the cause of the increased flow be remedied with physical changes?  Is there a simple change that could reduce the interference, or is there need for a larger-scale drainage solution?  Identifying the source of the harm and the magnitude of the drainage need can lead to solutions.  Involving the local soil and water conservation district or a drainage engineer might be necessary. 

Based on the significance of the solutions necessary to eliminate the problem, several options are available:

  • If identified changes would remedy the problem, a talk with a drainage expert or a letter from an attorney explaining the reasonable use doctrine and demanding the changes could encourage the offending landowner to resolve the problem.  If the landowner still refuses to remedy the problem, litigation is the last resort.  The threat of litigation often spurs people into action.
  • Sometimes the issue is one that requires collaboration by multiple landowners.  Identifying a solution and sharing its costs among landowners, based on acreage draining into the area, can be a way to solve the problem.
  • For more substantial drainage problems, a petition for a drainage improvement with the soil and water conservation district or the county engineer might be necessary.  Petitioned drainage improvements involve all landowners in the affected area and are financed through assessments on land within that area.  A visit with those agencies would determine whether a petition improvement is necessary and if so, how to proceed with the petition.
  • For smaller fixes, a landowner always has the option of filing a claim for damages through the small claims court.  The estimated damages or repairs must fall below the $6,000 limit for small claims.  A landowner can make the claim without the assistance of an attorney, and the dispute could be resolved more quickly through this forum.

As the Spring rains continue, keep in mind that the reasonable use doctrine sets a guideline for Ohio landowners:  make only reasonable changes to your surface water drainage and don’t cause an unreasonable drainage problem for your neighbors.  Where changes and interferences are unreasonable and landowners are unwilling to resolve them, the reasonable use doctrine is the last resort that provides the legal remedy for resolving the problem.

For more information on Ohio drainage law, refer to our law bulletin on Surface Water Drainage Rights

Pages

Subscribe to RSS - Property