Property
With the warm, dry, and windy months of October and November behind us, Ohio farmers will soon have legal clearance to conduct open burning during the daylight hours. Ohio law prohibits all open burning from 6 a.m. to 6 p.m. during October and November, and then again in March, April, and May. That’s because ground cover and weather conditions create high fire risk and volunteer firefighters with daytime jobs aren’t readily available to fight the fires.
December 1 marks the end of the daytime burn restriction, but other open burning laws remain in effect. Farmers can burn “agricultural waste,” but must follow conditions in the open burning laws. Burning wastes that aren't agricultural waste might require prior permission or notification, and it is illegal to burn some wastes due to the environmental harms they cause. Don't get burned by failing to know and follow the open burning laws. Here’s a summary of important provisions that affect farmers and farmland owners.
What you can burn. Ohio law allows the burning of “agricultural wastes” under certain conditions. Ohio law defines what is and is not “agricultural waste” as follows:
- Agricultural waste is any waste material generated by crop, horticultural, or livestock production practices, and includes such items as woody debris and plant matter from stream flooding, bags, cartons, structural materials, and landscape wastes that are generated in agricultural activities.
- Agricultural waste does not include buildings; dismantled or fallen barns; garbage; dead animals; animal waste; motor vehicles and parts thereof; or "economic poisons and containers," unless the manufacturer has identified open burning as a safe disposal procedure.
- Agricultural waste does not include"land clearing waste," which is debris resulting from the clearing of land for new development for agricultural, residential, commercial or industrial purposes. Burning of “land clearing waste” requires prior written notification to Ohio EPA.
- If an agricultural waste pile is greater than 20 ft. wide x 10 ft. high (4,000 cubic feet), permission from Ohio EPA is necessary.
Where you can burn. Laws that affect the burning location relate to where the waste is generated and whether the burn is in or near a village, city, or buildings:
- It is legal to burn agricultural waste only if it is generated on the property where the burn occurs. It is illegal to take agricultural waste to a different property for burning and to receive and burn agricultural waste from another property.
- Burning inside a “restricted area” requires providing a ten day written notice to Ohio EPA. A restricted area is any area inside city or village limits, within 1,000-feet of a city or village with a population of 1,000 to 10,000, or within one-mile of a city or village with a population of more than 10,000.
- A burn must be located more than 1,000 feet from any neighboring inhabited building.
How to manage the burn. Ohio laws impose practices a person must follow when conducting open burning, which includes:
- Remove all leaves, grass, wood, and inflammable materials around the burn to a safe distance.
- Stack waste to provide the best practicable condition for efficient burning.
- Don’t burn in weather conditions that prevent dispersion of smoke and emissions.
- Take reasonable precautions to keep the fire under control.
- Extinguish or safely cover an open fire before leaving the area.
Local laws matter too. A local government can also have laws that regulate burning activities, so it’s important to check with the local fire department to know whether any additional regulations apply to a burn.
A bad burn can burn you. Violation of state and local open burning laws creates several risks for farmers and farmland owners. First is the risk of enforcement by the Ohio EPA, which has the authority to issue fines of up to $1,000 per day per offense for an illegal burn. According to the EPA, the most common violations by farmers include burning substances that are not “agricultural wastes,” such as tires and plastics, failing to meet the 1,000 foot setback requirement, and burning waste from another property. EPA enforcement officers regularly patrol their districts, investigate fires they see, and investigate complaints from neighbors or others who report burning activities, so “getting caught” is quite possible.
An illegal burn might also bring in the Ohio Division of Forestry or local law enforcement. Beyond the environmental provisions, other violations of the open burning laws can result in third degree misdemeanor charges. Penalties of up to $500 and 60 days of jail time per violation could result.
A final risk to consider is liability for harm to yourself, other people, or other property if a burn goes wrong. It’s possible for a fire to escape and burn unintended property, to reduce roadway visibility and cause an accident, or to interfere with people, animals, crops, or buildings. These situations can cause personal injuries, property harm, and could result in insurance claims or a negligence or nuisance lawsuit. Using common sense and taking reasonable safety precautions when conducting a burn can go a long way toward reducing the risk of harm and resulting liability for harm.
To learn more about Ohio’s open burning laws, visit the Ohio EPA website at https://epa.ohio.gov/divisions-and-offices/air-pollution-control/permitting/open-burning.
Tags: open burning law, fire law, agricultural waste
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The fall hunting season is upon us, and landowners across Ohio are being asked to give permission to allow hunting on their land. That means now is a good time for a refresher on the laws that affect Ohio landowners and hunting. Here are ten legal tips for landowners considering hunting activities on their land.
- Ohio law requires permission in writing--but landowners should review the permission form and know who they’ve permitted. Ohio law requires a hunter to obtain a hunting license and written permission from a landowner or the landowner’s agent before hunting on private lands or waters. Landowners should expect to be asked to sign the permission form provided by ODNR, which is available on ODNR’s website. The permission form allows a landowner to designate a permission period—either the entire hunting season or specific dates. If a hunter uses a different permission form, it might contain additional provisions beyond the permission to hunt, such as the right to install a tree stand or a blind on the property. Landowners should have an attorney review a form if unsure of its meaning and should document names and contact information for hunters granted permission to hunt on the property. Contact information will be helpful if there is a hunting incident or a need to contact the hunter.
- Know the laws for family members and tenants. A landowner who is a resident of Ohio, the landowner’s spouse, all children of any age, and all grandchildren under the age of 18 are exempt from the hunting license requirement when hunting on the landowner’s land. All other family members must obtain a hunting license and follow the written permission requirement. When a landowner is not an Ohio resident, only the landowner, spouse, and children living with the landowner may hunt without a license, and only if the landowner’s state of residency grants the same rights to Ohioans who own land in that state. In a rental situation where a tenant resides on the land, the tenant and the tenant’s children who live on the land may hunt on the property without a hunting license and written permission.
- The hunting license exemption also applies to certain entities. If the owner of land is a limited liability company or a limited liability partnership with three or fewer individual members or partners, a member or partner who is a resident of Ohio may hunt on the land without a hunting license, as can the member or partner's children of any age and grandchildren under the age of 18. If a trust owns the land and has a total of three or fewer trustees and beneficiaries, a trustee or beneficiary who is an Ohio resident and their children of any age and grandchildren under the age of 18 may hunt on the land without a hunting license.
- A hunter must also have written permission to pursue or retrieve an injured animal. Hunters often mistakenly believe they have the right to pursue an injured animal onto another property, but Ohio law says otherwise. Written permission of a landowner is required for each of these hunting activities: shooting, shooting at, catching, killing, injuring, or pursuing a wild animal or bird. Contrary to popular belief, the law does not require a landowner to give a hunter permission to pursue an injured animal—it’s a choice a landowner can make.
- Two Ohio laws can protect landowners from liability for hunting injuries. The first is Ohio’s Recreational User Statute, which states that a landowner has no legal duty to keep the premises safe for a hunter and other recreational users who have permission to be on the land. This means the law will protect a landowner from liability if a hunter is harmed while on the property, but it won’t protect a landowner who caused the harm through intentional or reckless conduct. Note that the liability protection does not apply if a landowner charges a hunter a fee for hunting, unless the fee is a payment made under a hunting lease. Read more about the Recreational User’s Statute in our law bulletin on farmoffice.osu.edu. A second Ohio law addresses liability for someone who is hunting on land without permission. In that case, Ohio law states a landowner is not liable for “injury, death, or loss to person or property” that arises from a violation of the requirement to have a landowner’s permission to hunt on the land.
- Be mindful of the number of hunters who could be on the land. For safety purposes, a landowner should be careful about allowing multiple hunters onto the land at the same time. Strategies for managing multiple hunters include designating a specific parking area so hunters know if another hunter is present and setting specific hunting periods for different hunters. Taking reasonable steps to manage multiple hunters will help ensure that someone isn’t harmed, and it can also protect a landowner from a potential claim that the Recreational User’s Statute shouldn’t apply because the landowner behaved recklessly by not managing multiple hunters allowed on the land. While such a claim might not be legally successful, it would require landowners and their insurance providers to prove that the Recreational User’s Statute protects the landowner from liability.
- Consider a hunting lease. Many hunters and hunting groups prefer to secure hunting rights through a hunting lease. A lease can provide a landowner with additional income and is one situation where the liability protection of Ohio’s Recreational User Statute applies even if a payment is made to the landowner. A lease can also address other rights and responsibilities, such as number and gender of animals to be taken, placement of tree stands and blinds, use of feeders and bait, where animals may be cleaned, and property maintenance activities by hunters. See our law bulletin on hunting lease considerations in the property law library on farmoffice.osu.edu at https://farmoffice.osu.edu/our-library/property-law.
- Ohio laws address harm to property caused by hunters. What if a landowner gives permission to a hunter, but then that hunter causes property damage? Ohio’s hunting law is one law that can help. It prohibits a hunter from acting in a “negligent, careless or reckless manner so as to injure persons or property.” A hunter who violates this law can face first degree misdemeanor charges and revocation of the hunting license and must also pay compensation to the harmed landowner. Ohio’s reckless destruction of vegetation law is a second helpful law. It allows a landowner to seek compensation for “reckless” destruction of vegetation, trees, and crops and would address a situation where a hunter acted intentionally and without regard for the consequences. Intentionally cutting down a tree without permission or running an ATV through a planted crop are behaviors that could be deemed reckless. Under this law, a landowner could receive triple the amount of the harm caused to the property by a hunter’s reckless behavior.
- It’s a good time to mark property boundaries. Many of the old fences that marked a farm’s property boundaries in Ohio are long gone, and it’s not as easy today for hunters to know where one farm begins and another ends. Especially for landowners who don’t want hunting on their land, be sure boundary lines are clear to hunters. Use corner posts, fences, and “no trespassing signs.” In woodlots, marking the trees on the boundary with paint is also helpful. For an overview of woodlot boundary marking, refer to this video from OSU Extension at https://www.youtube.com/watch?v=zSYYn_onE80.
- Ohio has a process for dealing with poachers and trespassers. Ohio’s “Turn in a Poacher” program (TIP) establishes mechanisms for reporting a violation of wildlife laws, such as hunting without permission or a license and taking animals out of season. A person can report a violation using an online reporting form on ODNR’s website or by calling the TIP hotline at 1-800-POACHER (762-2437). Incident reporters are encouraged to share details such as what happened, the location, vehicle description and license plate, and descriptions of suspects. All information submitted to TIP is confidential, and reporters may choose whether or not they are willing to speak with a wildlife officer about the incident.
The State of Arkansas made history last month when it took steps to enforce its new law restricting foreign ownership of land in the state. Arkansas ordered Northrup King Seed Co., a subsidiary of Syngenta held by China-owned company ChemChina, to give up 160 acres of Arkansas farmland it owned. The State also assessed a $280,000 fine against Syngenta for failing to disclose the land ownership. The actions are the result of a new foreign ownership law enacted by the Arkansas legislature earlier this year.
Joining Arkansas and ten other states, Ohio also passed a law restricting foreign ownership of land earlier in 2023. Ohio’s new “Save our Farmland and Protect our National Security Act” quietly became effective last month. The law limits who can own agricultural land in the state and requires persons or entities who cannot own Ohio farmland to forfeit title to the property, which the State will then sell. The purpose of the law, according to the legislature, is “to recognize that Ohio has substantial and compelling interests in protecting its agricultural production.”
Who the law restricts from owning agricultural land in Ohio
The law is not an absolute restriction on foreign ownership of land. Instead, the law prohibits agricultural land ownership by any “person” listed on a registry compiled by Ohio’s Secretary of State. A “person” can include an individual, firm, company, trust, business or commercial entity, organization, joint venture, non-profit, or non-U.S. government. The prohibition applies not just to the person listed on the registry, but also to any agent, trustee, or fiduciary of the person.
The Ohio Secretary of State must compile the “registry” by identifying and including any person that constitutes a threat to the agricultural production of the state. To develop the registry, the Secretary of State must consult several federal sources, including the list of foreign adversaries, terrorist exclusion list, list of countries that have provided support for acts of international terrorism, and persons designated by two presidential Executive Orders. In accordance with the law, Ohio’s Secretary of State has compiled the registry and published it online at https://www.ohiosos.gov/publicintegrity/save-our-farmland/.
Exceptions to the ownership restrictions
The ownership restriction does not apply to any agricultural land a person acquired before the act’s effective date of October 3, 2023. There is also a limited exception that applies when a person on the registry recieves the land through inheritance, a gift, collection of a debt, a foreclosure, or enforcement of a lien on or after the law's effective date. In those cases, the person can recieve the land but must divest itself of the title and any interest in the land within two years of receiving it. And while holding the land until divestiture, the person cannot use it for any purpose other than agriculture or lease it to any person on the registry.
Enforcement of the law
Enforcement involves both the Secretary of State and the Ohio Attorney General. If the Secretary of State finds that a person listed on the registry has acquired title or an interest in land in violation of the law, the Secretary of State must report the violation to the Attorney General. Others can report land ownership by a person on the registry via the Secretary of State’s web page for the registry, https://www.ohiosos.gov/publicintegrity/save-our-farmland/.
Upon learning of the violation, the Attorney General must initiate a legal action in the county where the land is located. If the court agrees that the ownership violates the law, it shall file an order allowing the state to take ownership of the land and ordering the land to be sold at public auction, following required legal procedures. Proceeds from the sale are to be applied first to any court costs and expenses, then to the registered person. That amount is limited, however, to the actual cost paid by the registered person for the land. If any sale proceeds remain, the funds are to be paid to the general fund of each county where the land is located, proportionate to the acreage in the county.
Learn more on our next Farm Office Live!
Join us on our next Farm Office Live webinar as we discuss Ohio’s new foreign ownership law and talk with Micah Brown, staff attorney with the National Agricultural Law Center, about foreign ownership restrictions in the U.S. and what they mean for agriculture. The Farm Office team will also cover Using Charitable Remainder Trusts, Ohio’s Role in Organic Grain Production, Farm Business Analysis Update, and Farmer Mental Health Concerns and Resources. Farm Office Live takes place on November 17 at 10 a.m.-- registration is necessary at https://farmoffice.osu.edu/farmofficelive.
Read the primary provisions of Ohio’s Save Our Farmland and Protect Our National Security Act in Ohio Revised Code Section 5301.256. The Ohio Legislature enacted the law in House Bill 33, the biennial budget bill.
Tags: foreign land ownership, save our farmland and protect our national security act, foreign land restriction
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An agricultural easement is a legal instrument that can protect farmland from non-farm development and preserve the legacy of family land for the future. An earlier blog post explains how an agricultural easement works and answers common questions about agricultural easements. As we explained, an agricultural easement not only preserves farmland but can also be a valuable financial and tax tool that can enable a transition of the farm to the next generation. But are there drawbacks to agricultural easements? Here's a summary of potential negative implications of easements that landowners should also consider.
It's difficult to forecast the future of a farm. The very nature of the easement requires a best estimate of how the farmland might be used for agriculture into the future--a challenging task. The Deed of Agricultural Easement the parties agree to must predict agricultural activities that are consistent with the easement and those that would violate the easement. There could be future problems if the predictions and forecasting aren’t flexible enough to accommodate agriculture in the future.
The “perpetuity” requirement. While it’s possible to draft an easement that lasts only for a certain term of years, most agricultural easements remain on the land “in perpetuity,” or permanently. The programs that pay a landowner to grant an agricultural easement and the federal income and estate tax benefits for donating all or part of an easement require that the easement is perpetual. This differs from the conservation programs we’re accustomed to in agriculture that require shorter term commitments, and it can be a deterrent to a landowner who wants future generations to have a say in what happens to the land. These concerns might be addressed in the deed of agricultural easement, however, which may provide sufficient flexibility to address those future concerns.
Termination can be difficult and costly. Hand in hand with the perpetuity issue is the difficulty of terminating an agricultural easement once it’s in place. Typically, both parties must agree on a termination and a court of law must determine that conditions on or surrounding the land make it impossible or impractical to continue to use the land for agricultural purposes. Attempts to terminate without following the stated procedures can result in penalties for the current landowner. If there was a payment for the agricultural easement, a deed of easement will likely require the landowner to reimburse the paying party for the proportionate share of the fair market value of the land with the easement removed and will also require the party receiving the reimbursement to use the funds only for similar conservation purposes.
Eminent domain can be an issue. As one Ohio farm family has learned, an agricultural easement might not protect the farmland from an eminent domain proceeding. In Columbia Gas v. Bailey, 2023-Ohio-1245, the Bailey family was forced to litigate an attempt by Columbia Gas to use eminent domain for the construction of a gas pipeline across their farmland. Their predecessor had placed an agricultural easement on the farmland in 2003, and the family argued the easement prevented the taking of land for the pipeline under the doctrine of “prior public use.” That doctrine prohibits an eminent domain action that would destroy a prior public use. The court agreed that the agricultural easement did create a prior public use on the land, and the court shifted the burden to Columbia Gas to prove that the pipeline would not destroy the established prior public use. Rather than doing so, Columbia Gas withdrew its eminent domain proceeding and moved the location of the pipeline. The court's decision to recognize an agricultural easement as a prior public use might provide some protection from eminent domain for future owners of agricultural easement land but, like the Baileys, landowners may have to fight a long, expensive battle to prove that an eminent domain action would destroy an established prior public use.
Lenders and other interests must be on board. A landowner must deal with any existing mortgages, liens, leases, or easements on the farmland before entering into an agricultural easement. The State of Ohio’s agricultural easement, for example, requires a lender to subordinate a mortgage to the rights of the easement holder. Renegotiation of the mortgage might be necessary, and the lender might require a paydown of the outstanding mortgage if the property’s value could reduce below that amount. Without subordination and other approvals, a landowner will not be able to enter into an agricultural easement.
Local governments must be on board. Ohio’s program for purchasing agricultural easements requires a landowner to submit a resolution of support from the township and county where the land is located. This means the local governments must agree that committing the land to agriculture is consistent with local land use plans. An early conversation with local officials is necessary to ensuring consistency with the community’s future plans.
There will be monitoring. An easement holder has the responsibility of ensuring there is not a violation of the easement or conversion of the land to non-agricultural uses. This means there will be a baseline or “present condition” report of the easement property upon easement creation and monitoring of the property “in perpetuity.” An annual visit to the property and completion of an annual monitoring report by the easement holder is common.
It's a lengthy process. Agricultural easements don’t pop up overnight. Especially when applying for funding from competitive programs like Ohio’s Local Agricultural Easement Purchase Program or the NRCS Agricultural Land Easements Program, it can be a year or more before an agricultural easement is in place.
Planning and integration with plans is necessary. An agricultural easement is one piece of what can be a complex plan addressing a landowner’s expansion, retirement, estate, and transition needs. A landowner would be wise to work with a team of professionals—financial planner, tax professional, attorney—to ensure that an agricultural easement integrates with all other parts of the plan.
Still interested? Ohio landowners interested in learning more about agricultural easements may want to consider these steps:
- Review the resources on the Ohio Department of Agriculture’s Office of Farmland Preservation.
- Talk with other landowners who have entered into easements. Refer to the Coalition of Ohio Land Trusts landowner resources and landowner stories.
- Visit American Farmland Trust’s Farmland Information Center.
- Talk with a “local sponsor” or land trust in your area. The Office of Farmland Preservation provides a list of local sponsors for the Clean Ohio Agricultural Easement Purchase Program on its website.
- Talk with your attorney, financial planner, and accountant about the implications of entering into an agricultural easement.
Questions from farmers and farmland owners about agricultural easements are on the rise at the Farm Office. Why is that? From what we’re hearing, the questions are driven by concerns about the loss of farmland to development as well as desires to keep farmland in the family for future generations. An agricultural easement is a unique tool that can help a farmland owner and farming operation meet goals to protect farmland from development or transition that land to the next generation. Here are answers to some of the questions we’ve been hearing.
What is an agricultural easement? An agricultural easement is a voluntary legal agreement by a landowner to use land primarily for agricultural purposes and forfeit the right to develop the land for other purposes, either permanently or, less often, for a term of years. In an agricultural easement, a landowner grants an easement “holder” the legal right to enforce the easement against a landowner or other party who attempts to convert the land to a non-agricultural use. A written legal instrument details and documents this agreement between a landowner and the easement “holder.” The agricultural easement instrument must be recorded in the county land records, and the agricultural easement is binding on all future landowners for the duration of its term.
A state legislature must authorize the use of the agricultural easement instrument, and Ohio’s legislature did so in 1999. At that time, the legislature adopted a detailed legal definition of “agricultural easement” in Ohio Revised Code 5301.67(C):
"Agricultural easement" means an incorporeal right or interest in land that is held for the public purpose of retaining the use of land predominantly in agriculture; that imposes any limitations on the use or development of the land that are appropriate at the time of creation of the easement to achieve that purpose; that is in the form of articles of dedication, easement, covenant, restriction, or condition; and that includes appropriate provisions for the holder to enter the property subject to the easement at reasonable times to ensure compliance with its provisions.
The legislature also required in Ohio Revised Code 5301.68 that a landowner may only grant an agricultural easement on land that qualifies for Ohio’s Current Agricultural Use Valuation (CAUV) program under Ohio Revised Code 5713.31.
Is an agricultural easement the same as a conservation easement? No, not in Ohio, but they share the same legal concept of dedicating land to a particular use. Ohio also allows a landowner to grant a conservation easement, which is a promise to retain land predominantly in its natural, scenic, open, or wooded condition and forfeit the right to develop the land for other purposes. A conservation easement might allow agricultural land uses, and an agricultural easement might allow some conservation uses. The terms used in federal law and some other states vary from Ohio, and include “agricultural conservation easement” or “agricultural land easement.”
Who can be a “holder” of an agricultural easement? Ohio law answers this question in Ohio Revised Code 5301.68, which authorizes only these entities to enter into an agricultural easement with a landowner:
- The director of the Ohio Department of Agriculture;
- A municipal corporation, county, or township;
- A soil and water conservation district;
- A tax exempt charitable organization organized for the preservation of land areas for public outdoor recreation or education, or scenic enjoyment; the preservation of historically important land areas or structures; or the protection of natural environmental systems (generally referred to as a “land trust” or a “land conservancy.”)
What kinds of land uses would be inconsistent with keeping the land in agricultural use? That depends on the terms in the written deed for the agricultural easement. Activities that might violate the agreement to maintain the land as agricultural include subdivision of the property, commercial and industrial uses, major surface alterations, and oil and gas development. It’s typical to identify the homestead or “building envelope” area and allow new buildings, construction and similar activities within that area, but those activities might not be permitted on other parts of the land. Review the Ohio Department of Agriculture’s current Deed of Agricultural Easement through the link on this page: https://agri.ohio.gov/programs/farmland-preservation-office/landowners.
Can a landowner transfer land that is subject to an agricultural easement? Yes. An agricultural easement does not restrict the right to sell or gift land, but it does carry over to the new landowner. That landowner must abide by the terms of the agricultural easement.
Are there financial incentives for entering into an agricultural easement? Yes. There are several financial incentives:
- The Ohio Department of Agriculture’s Office of Farmland Preservation oversees the Local Agricultural Easement Purchase Program, which provides Clean Ohio grant funds to certified local sponsors to purchase permanent agricultural easements in their communities. It’s a competitive process that requires a landowner to work with an approved local sponsor to apply for the program and to donate at least 25% of the agricultural easement’s value if selected. A landowner can receive up to 75% of the appraised value of the farm’s “development rights,” with a payment cap of $2,000 per acre and $500,000 per farm per application period.
- Federal funds are also available through the Natural Resource Conservation Service’s Agricultural Conservation Easement Program. This program is also competitive and requires a landowner to work with an approved partner to determine eligibility and apply for easement funding. NRCS may contribute up to 50 percent of the fair market value of the agricultural land easement.
- There are also federal income tax incentives for donating a portion or all of an agricultural easement’s value to a qualified charitable organization. Internal Revenue Code section 170(h) allows a landowner to deduct the value of the easement up to 50 percent of their adjusted gross income (AGI) in the year of the gift, with a 15-year carryover of excess value. That AGI percentage increases to 100% for a “qualified farmer” who earns more than 50% of their gross income from farming.
- There can also be federal estate tax benefits for land subject to a permanent agricultural or conservation easement. The land is valued at its restricted value, which lowers the estate value. Additionally, Section 2055(f) of the Internal Revenue Code allows donations of qualifying easements to a public charity to be deducted from the taxable value of an estate. Up to 40% of the value of land restricted by an agricultural or conservation easement can be excluded from the value of an estate if the easement meets Internal Revenue Code section 2031(C) provisions, limited to $500,000.
How can a family use an agricultural easement to enable farm transition goals? Here’s an example. John and Sue are fourth generation owners of 250 acres of farmland they plan to leave to their child Lee, and they want the land to remain as farmland into the future. Lee is committed to farming and wants to farm, and John and Sue would like Lee to have more land to improve the viability of the farming operation. They find a local sponsor and apply to Ohio’s Local Agricultural Easement Purchase Program, offering to donate 25% of the agricultural easement value to the program. They are selected for the funding and receive a payment of $2,000 per acre for the agricultural easement. They use the $500,000 in easement proceeds to purchase additional farmland for Lee. John and Sue receive a federal income tax credit for the portion of the easement value they donated to qualify for the program, and carryover the amount until it is fully used, up to 15 years.
What are the drawbacks of agricultural easements? There are challenges and drawbacks of agricultural easements, and we’ll discuss those in our next blog post.
Agricultural easements require legal and tax advice and careful planning. Our short Q&A doesn’t address all of the nuances of agricultural easements. It’s a big decision, and one that should align with current goals and estate and transition plans. To determine if an agricultural easement works for your situation, seek the advice and planning assistance of knowledgeable legal and tax professionals.
Two separate, but very similar, pieces of legislation are working their way through the Ohio Legislature and could end up affecting your farmland’s current agricultural use value (“CAUV”). House Bill 187 (“HB 187”) and Senate Bill 153 (“SB 153”) both seek to adjust how property values are assessed in Ohio and some of those proposed changes specifically affect CAUV.
Both proposed bills aim to make temporary adjustments to CAUV for farmland. These changes will impact farmland that undergo reappraisal or triennial updates in 2023, 2024, or 2025. The adjustment does not alter the CAUV formula itself but rather calculates a farm's CAUV at its next reappraisal or update as the average between the CAUV for that year and the CAUV it would have if it were in a county that had reappraisals or updates in the two previous years.
The Ohio Legislature has provided the following example: “[C]onsider a farm located in a county that undergoes a reappraisal in 2023. If the formula were applied for that year, the farm’s CAUV would be $200 per acre. However, if the farm had been reappraised in 2022, its value would have been $190 per acre, and if it had been reappraised in 2021, its value would have been $180 per acre. Under the bill, the farm’s reappraisal value will be $190 per acre (the average of $180, $190, and $200).”
Again, these proposals for CAUV adjustments are only temporary, and the current valuation rules will be reinstated starting in 2026. For example, if the farm mentioned above undergoes a triennial update in 2026, its value will be determined without averaging, following the currently existing rules. Furthermore, if the 2023 CAUV tables, which prescribe the per-acre value of each soil type, have already been published before the proposed legislation takes effect, the Ohio Department of Taxation must update these tables within 15 days after the bill becomes effective to reflect the changes introduced by the Legislature.
As of the morning of October 5, 2023, HB 187 has gone through committee and is ready to be voted on by the House. The Ohio Senate had its third hearing on SB 153 on October 3, 2023, but has yet to report the bill to the floor for a vote. Some County Auditors have come out in “indirect opposition” to both bills, arguing that the proposed legislation would create a logistical nightmare for tax billing purposes. Lastly, there are some differences between the two pieces of legislation - unrelated to CAUV - that would have to be worked out between the House and Senate before we have a final bill that could take effect. We will continue to monitor the situation and keep you up to date on any changes.
In the world of real estate transactions, deeds play a crucial role in transferring property ownership from one party to another. Ohio, like many other states, offers several types of deeds, each with its own set of characteristics and implications. Understanding the differences between these deeds is essential for both buyers and sellers. In this article, we will explore four common types of deeds in Ohio: General Warranty Deed, Limited Warranty Deed, Quitclaim Deed, and Fiduciary Deed, and highlight the distinctions between them.
General Warranty Deed
A General Warranty Deed is one of the most comprehensive and protective deeds available in Ohio. When a property is conveyed through a General Warranty Deed, the seller (grantor) provides an extensive set of warranties and assurances to the buyer (grantee). These warranties include:
a. Warranty of Title: The seller guarantees that they hold clear and marketable title to the property and will defend the buyer against any claims or defects in title that may arise before or during their ownership.
b. Covenant of Quiet Enjoyment: The seller promises that the buyer will have peaceful and undisturbed possession of the property, free from interference or claims by others.
c. Covenant Against Encumbrances: The seller assures the buyer that there are no outstanding liens or encumbrances on the property, except as specified in the deed.
General Warranty Deeds provide the highest level of protection to buyers and are typically used in traditional real estate transactions. They are considered the gold standard of deeds.
Example: Farmer buys a farm from Seller. Later, Farmer tries to use the farm as collateral and discovers there is an unpaid contractor's lien from the previous owner to Seller. With a General Warranty Deed, Seller is responsible for addressing and clearing the lien so that Farmer can proceed with their plans.
Limited Warranty Deed
A Limited Warranty Deed, also known as a Special Warranty Deed, offers a more limited set of warranties compared to a General Warranty Deed. In a Limited Warranty Deed, the seller guarantees that they have not caused any defects in title during their ownership, but they do not warrant against defects that may have existed before their ownership. Essentially, the seller is only responsible for title issues that occurred while they owned the property.
Limited Warranty Deeds are commonly used in commercial real estate transactions and can offer some protection to buyers while limiting the seller's liability.
Example. Using the previous example with a Limited Warranty Deed, Seller would not be liable to Farmer because the title issue was created prior to Seller owning the property. Seller would only be liable to Farmer if the title issue was created while Seller owned the farm.
Quitclaim Deed
A Quitclaim Deed is a deed that conveys the seller's interest in a property without making any warranties or guarantees about the quality of title. Essentially, the seller is saying, "I'm giving you whatever interest I have in this property, if any." Quitclaim Deeds are often used in situations where property is transferred between family members, in divorce settlements, or to clear up questions about property ownership.
It's important to note that while Quitclaim Deeds provide no warranties, they can be a quick and straightforward way to transfer property interests when the parties involved trust each other.
Example: Sarah and her sibling, David, jointly inherited a farm. Sarah decides to buy out David's share, and they use a Quitclaim Deed for the transfer. David, by signing the Quitclaim Deed, is essentially relinquishing any interest he may have in the farm without making any claims or guarantees about the farm's title. This allows Sarah to take sole ownership.
Fiduciary Deed
A Fiduciary Deed is used when the person transferring the property is acting as a fiduciary, such as an executor of an estate or a trustee of a trust. These deeds convey the property interest held by the estate or trust to the designated beneficiaries. A fiduciary deed warrants that the fiduciary is acting in the scope of their appointed authority, but it does not guarantee title of the property. This deed relieves the executor or trustee of liability for title defects so that people will be more willing to serve in a fiduciary capacity.
Example. Sarah's father passed away and she is the trustee of his trust. As part of the trust administration, she needs to transfer ownership of her father's farm to herself and her siblings. Sarah would use a Fiduciary Deed to convey the property to the beneficiaries. If a title defect is later discovered, Sarah will not be liable to the beneficiaries.
Conclusion
In Ohio, the choice of deed in a real estate transaction is a critical decision that can have significant legal and financial implications for both buyers and sellers. General Warranty Deeds offer the highest level of protection, while Limited Warranty Deeds limit the seller's warranties to their period of ownership. Quitclaim Deeds provide no warranties at all but can be useful in certain situations. Fiduciary Deeds are used in trust and estate scenarios, recognizing the grantor's fiduciary role.
Before entering into any real estate transaction in Ohio, it is advisable to consult with legal professionals who can provide guidance on the most appropriate type of deed for your specific situation. By understanding the differences between these deeds, you can make informed decisions and ensure a smooth and legally sound property transfer process.
The term “Land Contract” is often used as a generic name for any land installment sale where the buyer makes payments to the seller over time. However, a land contract has a specific meaning under the law and does not apply to all installment sales. A land contract is one type of land installment sale while seller-financed is another. While the land contract and seller-financed option allow buyers to acquire property without traditional bank financing, they differ significantly in terms of legal implications and practical considerations. In this article, we will discuss the difference between a land contract installment sale and a seller-financed installment sale.
Land Contracts: An Overview
A land contract is a legal agreement between a property seller and a buyer. In this arrangement, the buyer agrees to purchase the property over time by making regular payments to the seller, who retains legal title to the property until the contract is fully paid off. After the final payment is made, the seller signs the deed over to the buyer. Land contracts are a popular choice for buyers who may not qualify for traditional financing due to credit issues or other reasons.
Key Characteristics of Land Contracts in Ohio:
Legal Title: In Ohio, the seller retains legal title to the property until the contract is satisfied, while the buyer obtains equitable title, allowing them to possess and use the property.
Payment Structure: Buyers make monthly or annual payments to the seller, including principal, interest, and sometimes taxes and insurance. The specific terms are negotiable and outlined in the contract.
Default Consequences: If the buyer defaults on payments and the contract has been in effect for less than five years or less than 20% of the payment has been made, the seller can terminate the contract and retake possession of the property. If the contract is older than five years or more than 20% of the purchase price has been paid, the seller must foreclose and will be paid from the proceeds of a judicial sale.
Legal Requirements: Ohio Revised Code Section 5313.02 requires sixteen specific requirements for a land contract. If entering a land contract, be sure all requirements are met so that the land contract is enforceable for both buyer and seller.
Seller-Financed Land Sales: An Overview
Seller-financed land sales involve the property seller acting as the lender, providing financing to the buyer for the purchase. Legal title to the property is transferred to the buyer at the time of sale. This method allows buyers to acquire the property without the need for a traditional bank loan.
Key Characteristics of Seller-Financed Land Sales in Ohio:
Title Transfer: Unlike land contracts, seller-financed land sales typically involve the immediate transfer of both legal and equitable title to the buyer upon the completion of the sale.
Payment Structure: Buyers make regular payments to the seller, which include principal and interest, similar to a traditional mortgage. These terms are negotiated between the parties and documented in a promissory note and mortgage. The mortgage provides security to the seller in the event the buyer defaults.
Default Consequences: If the buyer defaults on payments, the seller can initiate a foreclosure proceeding, similar to traditional lenders, to ensure payment is made.
Legal Requirements: There are no specific legal requirements for a seller-finance sale. However, a promissory note should be provided to the seller that includes the amount owed, interest rate and payment schedule. A mortgage should also be executed and recorded to provide security to the seller in the event of buyer’s default.
Key Considerations
Title Transfer: The most significant difference between land contracts and seller-financed land sales in Ohio is the timing of title transfer. In a land contract, the seller retains legal title until the contract is fully satisfied, while in seller-financed land sales, both legal and equitable title transfer to the buyer upon sale completion.
Negotiability: Both methods offer flexibility in negotiating terms, including interest rates, down payments, and property responsibilities. Buyers and sellers should carefully consider and document these terms to avoid future disputes.
Legal Assistance: Given the complexities of real estate transactions, it is advisable for both buyers and sellers to seek legal counsel to ensure that the chosen method aligns with their interests and complies with Ohio law.
Which is Better?
It depends. For the seller, a land contract is often better because the deed is not transferred until the final payment is made. This allows the seller to keep legal title and potentially have more protection if the buyer defaults. For the buyer, the seller-financed option is usually better. The seller will prefer to have the legal title throughout the transaction so that they have full control over the property. Tax consequences are similar for both a land contract and seller-financed sale.
Conclusion
When it comes to land transactions in Ohio, understanding the difference between land contracts and seller-financed land sales is crucial. These methods provide alternatives to traditional financing, but they come with distinct legal and practical implications. Buyers and sellers should carefully evaluate their options, negotiate terms diligently, and consider consulting legal professionals to ensure a smooth and legally compliant transaction. Ultimately, a well-informed decision can lead to a successful and mutually beneficial real estate transaction.
Barry Ward, Leader, Production Business Management
Continued high crop prices, reasonable crop margins and relatively healthy farm balance sheets over the last 2 years have given strength to farmland markets. Higher input costs over the last two years together with rising interest rates have offset some of this support but farmland values continue to increase. Many of these same factors have given support to the farmland rental markets which have also seen increases last year and are expected to see additional increases in 2023.
Results from the Western Ohio Cropland Values and Cash Rents Survey show cropland values in western Ohio are expected to increase in 2023 by 6.1 to 10.7 percent depending on the region and land class. This follows increases ranging from 6.9 to 13.8 percent from ’21 to ’22.
Cash rents are expected to increase from 5.0 to 6.7 percent in 2023 depending on the region and land class. This is on top of rental increases of 1.3 to 3.8 percent from 2021 to 2022.
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 2023. This 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.
The study results are based on 190 surveys. Respondents were asked to group their estimates based on three land quality classes: average, top, and bottom. 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 below 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 at our Farm Management Page:
https://farmoffice.osu.edu/farm-management-tools/farm-management-publications/cash-rents
With just over a week left until echoes of “Hang on Sloopy” and chants of “O-H” and “I-O” can be heard from Buckeye faithful across the nation, we thought we would provide you with some light reading to hold you over until that long awaited 3:30 kick off. In this edition of our Ag Law Harvest, we focus on three recent Ohio Supreme Court cases that could potentially impact business owners, Northern Ohio landowners, and Ohio taxpayers.
Assault and Battery: Is it Covered Under an Insurance Policy?
A victim of a stabbing at an Ohio adult care facility is unable to collect judgment from the facility’s insurance company after a recent decision by the Ohio Supreme Court. The victim was living at the facility when another resident stabbed him. The perpetrator was later indicted on criminal charges but found not guilty by reason of insanity.
The victim then filed a civil lawsuit against the perpetrator and the facility to recover for damages resulting from the stabbing injuries. The victim ultimately dropped his lawsuit against the perpetrator and entered into a settlement agreement with the facility. As part of the settlement agreement, the victim agreed not to pursue the judgment against the facility, and instead, sought to collect his judgment from the facility’s insurance company.
At the time of the stabbing, the adult care facility had a commercial general liability policy. When the victim sought judgment from the facility’s insurance company, the insurance company refused to provide coverage. The insurance company explained that the insurance policy contained a provision that specifically excluded coverage for any bodily injury resulting from an assault or battery. The specific provision at issue stated:
The victim argued that because the perpetrator was found to be not guilty by reason of insanity in the criminal trial, the exclusion provision was nullified because the perpetrator lacked the subjective intent to commit any assault or battery.
The Ohio Supreme Court disagreed. The Court explained that the plain language of the exclusion provision of the insurance policy at issue is clear – there is no intent requirement included in the exclusion language. Therefore, the Court held that coverage did not exist for the willful assault on the victim. The Court sympathized with the victim but ultimately could not interpret the insurance policy language to include a subjective intent requirement where none existed.
This case demonstrates the importance of reading and understanding your business insurance policy. Insurance policies are, at the core, contracts between two parties and the language contained within the policy will usually govern that contractual relationship. What you assume is covered under your policy may not necessarily be the case. Furthermore, not all insurance policies are the same. We have seen Ohio cases where an insurance policy does require the presence of some subjective intent in order for an assault and battery exclusion to apply. Speak with your insurance agent and/or attorney to make sure you understand when and where coverage exists, knowing this can be critical to protecting you, your farm, and/or your business.
Ohio Supreme Court Approves Northern Ohio Wind Farm.
Residents of Huron and Erie Counties along with Black Swamp Bird Conservatory (the “Plaintiffs”) recently lost their battle in court to prevent the construction of a new wind farm in Northern Ohio. The Plaintiffs argued that the Ohio Power Siting Board (the “Board”) failed to satisfy Ohio law before granting the new wind farm its certificate of environmental compatibility and public need. Specifically, the Plaintiffs assert that the wind farm could “disrupt the area’s water supply, create excessive noise and ‘shadow flicker’ for residents near the wind farm, and kill bald eagles and migrating birds.”
The Ohio Supreme Court found otherwise. The Court concluded that the Plaintiffs failed to establish that the Board’s granting of the certificate was unlawful or unreasonable. As approved, the new wind farm will consist of up to 71 turbines and cover 32,000 acres of leased land. To read more about the Ohio Supreme Court’s decision visit: In re Application of Firelands Winds, L.L.C.
Ohio Supreme Court Sets New Precedent on Interpreting Ohio Tax Law.
In Ohio, most retail sales are subject to sales tax unless a certain exemption applies. Ohio law does have a sales tax exemption for equipment used directly in the production of oil and gas. A fracking business recently challenged a decision by Ohio’s Tax Commissioner and Board of Tax Appeals that levied the sales tax on certain equipment purchased by the business. The fracking equipment at issue included: a data van, blenders, sand kings, t-belts, hydration units, and chemical-additive units.
The Tax Commissioner concluded that the fracking equipment was not used directly in the extraction of oil and gas, only indirectly, and therefore, did not qualify for the tax exemption. The Ohio Supreme Court felt differently.
The Court found that all the equipment, except the data van, is used in unison to expose the oil and gas. Because the equipment is used to expose the oil and gas – a necessary part of fracking – the Court had little difficulty concluding that the equipment is being used directly in the production of oil and gas.
In addition to the equipment’s direct use in the production of oil and gas, the Court also recognized that the fracking equipment may also have a storage or delivery function/purpose. However, the Court reasoned that a piece of equipment’s function must be viewed through the “primary purpose” lens. For example, the Court held that although the blender equipment in this case performs a holding function, the primary use of the blender is to mix “the critical ingredients in the fracking recipe seconds before the mixture is inserted into the well.” Therefore, the Court found that the blender’s holding function did not disqualify it from Ohio’s sales tax exemption.
Additionally, in this case, the Court also issued an opinion on how Ohio courts should interpret tax law moving forward. Normally, courts use the ever-important legal principal of stare decisis to help it decide on new cases. Stare decisis is the principal that courts and judges should honor the decisions, rulings, and opinions from prior cases when ruling on new cases. Here, the Court took its opportunity to acknowledge that in the past the Court interpreted tax exemptions against the taxpayer, favoring tax collection. But the Court made clear that from here on out, the Court “will apply the same rules of construction to tax statutes that [it applies] to all other statutes” without a slant toward one side or the other. The Court concluded that its task “is not to make tax policy but to provide a fair reading of what the legislature has enacted: one that is based on the plain language of the [law].”
To read the Ohio Supreme Court’s decision visit: Stingray Pressure Pumping, L.L.C. v. Harris
Tags: Ohio Supreme Court, Ohio Sales Tax, Ohio Sales Tax Exemption, Insurance, Commercial General Liability Policy, Wind Farm, Stare Decisis
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