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By: Robert Moore, Wednesday, April 10th, 2024

At some point, we have all had to find a notary to get a document notarized.  Ohio law requires certain documents like deeds, long-term leases and vehicle titles to be notarized.  But, have you ever thought, why do we need to have documents notarized and what are notaries?  In this article, we will discuss notaries and the important role they plan in our society.

What Does an Ohio Notary Do?

An Ohio notary is an official empowered by the state to perform various acts that add an extra layer of security and credibility to legal proceedings. Their primary duties include:

  • Verifying Signatory Identity: A notary ensures that the person signing a document is who they claim to be. This involves either personally knowing the person or requesting valid government-issued photo identification and verifying its details.
  • Witnessing Signature: The notary observes the signing of the document and attests to their presence during this act. Their signature and official seal serve as evidence of this witnessing.
  • Administering Oaths and Affirmations: Notaries can administer oaths, which are formal declarations made under penalty of perjury, and affirmations, which are non-religious oaths. This ensures the seriousness and truthfulness of statements made during legal proceedings.
  • Taking Acknowledgments: An acknowledgment is a formal statement confirming that a signer understands the content of a document and willingly signed it. The notary verifies the signer's identity, witnesses their signature, and completes a separate acknowledgment certificate.

Why Do We Need Documents Notarized?

Notarization serves several critical purposes:

  • Combating Fraud: By verifying identity and witnessing signatures, notaries help deter fraud by ensuring documents haven't been forged or signed under duress. This adds a layer of security to important transactions, protecting individuals and organizations from potential scams and financial losses.
  • Promoting Trust: A notary's seal signifies an independent and impartial witness to the signing process. This official recognition instills confidence in the document's authenticity, especially when dealing with parties unfamiliar with each other.
  • Facilitating Legal Processes: Certain legal documents, such as deeds, powers of attorney, and sworn statements, require notarization to be considered valid in court proceedings. The notary's presence strengthens the document's legitimacy and streamlines the legal process.

Who Can Be an Ohio Notary?

To be a notary, a person must meet the following requirements:

  • Be at least 18 years old and a legal resident of Ohio, or
  • Be an attorney admitted to practice law in the state with a primary practice in Ohio.
  • Have no criminal convictions.

All new notaries are required to complete a 3-hour notary class and obtain a background check.  Non-attorneys must also pass an exam. 

Conclusion

Notaries play a vital role in safeguarding the integrity of legal documents and transactions within the state of Ohio. By verifying identities, witnessing signatures, and administering oaths, they contribute to a more secure and efficient legal system. If you're interested in a rewarding role that upholds trust and protects individuals, becoming an Ohio notary public might be a perfect fit for you.

Template Contract
By: Jeffrey K. Lewis, Esq., Thursday, February 29th, 2024

In this rendition of the Ag Law Harvest, we bring you some contracts! Over the course of February, there were three Ohio cases that demonstrate the importance of having a written contract, the ability to form a contract through your actions, and the need to make sure specific terms within a contract can be enforceable. 

Handshake Agreements Can Be a Double-Edged Sword.
In this case we are introduced to two brothers (the “Plaintiffs”), who were equal partners in a farming business that included buying and selling livestock. As part of their business, Plaintiffs sold cattle to Defendants between 2009 and 2017. The parties did not have a formal contract in place and conducted business on a “handshake agreement.” 

The Plaintiffs claim that the Defendants acted as intermediaries, purchasing heifers from them, and reselling them to other dairy farmers or at market. According to Plaintiffs, it was customary for the Defendants to pay for the cattle immediately upon delivery or within 30 days. However, around 2016, Defendants allegedly wrote checks for seven transactions but asked Plaintiffs not to cash them due to insufficient funds. Plaintiffs assert that Defendants never honored these checks, resulting in an outstanding amount of $128,950. Despite Plaintiffs' attempts to collect, Defendants denied owing any money, arguing that Plaintiffs were fully paid through later payments or third-party transactions. This disagreement led to the filing of Plaintiffs' lawsuit.

In February of last year, the trial court granted Plaintiffs summary judgment and awarded them $120,150. Defendants appealed the trial court’s decision arguing that summary judgment was inappropriate because whether or not Defendants owed Plaintiffs any money was in dispute. The appellate court agreed. 

In its opinion, the appellate court stated that it was clear that “the trial court weighed the credibility of the parties. . .” The appellate court also made it clear that “[s]ince resolution of the factual dispute will depend, at least in part, upon the credibility of the parties or their witnesses, summary judgment in such a case is inappropriate.” Furthermore, the court noted that because there was no written contract between the parties, the only evidence to demonstrate the particulars and common practices of the handshake agreement comes from the personal knowledge of the Plaintiffs and Defendants. Therefore, because both parties disagree as to whether Defendants owe any money to Plaintiffs, the trial court should not have ruled in favor of Plaintiffs on summary judgment. Consequently, the case is remanded to the trial court for further proceedings, potentially including a trial.

This case shows us two things, the importance of having a written contract and the importance of recordkeeping. The parties to this lawsuit must now argue that their recollection of events is the true and accurate recollection. Both parties will likely be judged by a group of jurors and one party is bound to be out a large sum of money. A written contract could have avoided much of the dispute by including language about the process for payment, record keeping requirements, and other terms and conditions that would have governed the relationship of the parties. Now, because there is no written contract, this case becomes a case of “he said-he said.”  

Implied Contracts Can Be Formed Based on a Tacit Understanding.
The second case demonstrates that the surrounding facts and circumstances can create an implied contract even when no signed contract exists. In this case Plaintiff, a residential construction company, provided the Defendant-homeowners with two written quotes for roofing and other work at their home. The quotes included various services and specified a 30% upfront payment with the remainder due upon completion of the work. Although the Defendants did not sign or date the quotes, they paid Plaintiff $6,815, which was stated to be a 30% prepayment for the total quoted amount of $22,717. 

After completing the roof, Plaintiff submitted a bill to the Defendants for the balance due on the roof. The Defendants took issue with the invoice for two reasons: (1) the price did not match the quotes, and (2) Defendants believed that payment would not be due until all items on both quotes were completed. Ultimately, the parties parted ways and Defendants asked Plaintiff to not return to their home leaving the remainder of the work listed on the two quotes uncompleted. 

Plaintiff sued the Defendants alleging breach of contract, seeking payment for the finished roof. The matter proceeded to a bench trial where the trial court found that the two quotes and the 30% payment operated as an implied contract and not an express one. The trial court also held that Plaintiff did partially perform the agreement and should be paid for the roof installation. 

The Defendants appealed, arguing that Plaintiff could not recover in this case because Plaintiff only alleged a breach of an express contract and did not seek recovery for breach of an implied contract. The appellate court disagreed. The court noted that under Ohio law there are three types of contracts: (1) express contracts, (2) implied in fact contracts, and (3) implied in law contracts. 

The court went on further to explain when the three different kinds of contracts are created. An express contract is created when there is an offer and acceptance of written terms. An implied in fact contract requires a “meeting of the minds” and that “is shown by the surrounding circumstances which [make] it inferable that [a] contract exists as a matter of tacit understanding.” Lastly, with an implied in law contract “there is no meeting of the minds” but the law will create civil liability for a person in receipt of benefits which they are not justly entitled to retain.   

The appellate court held that the trial court correctly found there was no express contract between the parties, rather there was an implied in fact contract. The court reasoned that the two written quotes and the 30% prepayment created a tacit understanding amongst the parties. Furthermore, the court concluded that because an implied contract existed amongst the parties, Plaintiff is entitled to recover for the work they did do. Lastly, the trial court noted that Defendants should have been aware that Plaintiff’s breach of contract claim would not only apply to express contracts but also to implied contracts. 

Noncompetition Agreement Found to be Unenforceable. 
In our final case we are introduced to a salesman that was being sued by his former employer for breach of a non-competition agreement (the “NCA”) after going to work for a direct competitor. Plaintiff, Kross Acquisition Co., LLC (“Kross”), is a basement waterproofing contractor. Kross provides service in southwestern Ohio, southeastern Indiana, and northern and eastern Kentucky. Kross’s former employee Roger Kief left to work for Groundworks Ohio, LLC (“Groundworks”). Groundworks is engaged in substantially the same business as Kross and serves the entire state of Ohio as well as Kentucky, Indiana, and many other states. 

Kief began working for Kross in 2017 and signed the NCA. The NCA prohibits Kief from disclosing confidential information and from working anywhere in Ohio or Kentucky for any competing company for a period of two years after leaving Kross. In February of 2022, Groundworks offered Kief an identical position with a start date of March 2022. 

Kross filed lawsuit against Kief for failing to adhere to the NCA. The trial court found the NCA unenforceable and granted summary judgment in favor of Kief. Kross filed an appeal arguing that the trial court erred when it found the NCA unenforceable. The appellate court disagreed. The court noted that the following factors are used to analyze whether a noncompetition agreement can be enforceable: 

1. Time and space limitations: Whether the agreement specifies a reasonable duration and geographic scope for its restrictions.

2. Sole contact with the customer: Whether the employee is the primary or sole contact with the employer's customers.

3. Confidential information or trade secrets: Whether the employee has access to and possesses confidential information or trade secrets of the employer.

4. Limitation of unfair competition: Whether the covenant aims to prevent unfair competition or if it overly restricts ordinary competition.

5. Stifling of inherent skill and experience: Whether the agreement unreasonably stifles the employee's inherent skill and experience in the industry.

6. Disproportionate benefit to the employer: Whether the benefit gained by the employer from the agreement outweighs the detriment imposed on the employee.

7. Bar on sole means of support: Whether the agreement bars the employee's only means of earning a livelihood.

8. Development of restrained skills during employment: Whether the skills restricted by the agreement were actually developed during the employee's tenure with the employer.

9. Incidental nature of forbidden employment: Whether the forbidden employment is merely incidental to the employee's primary employment with the employer.

Based on the foregoing factors, the court found that the geographic and time limitations “exceeded what is necessary to protect Kross’s legitimate business interests.” Therefore, the appellate court found the NCA unenforceable.   

Thumbs up emoji
By: Jeffrey K. Lewis, Esq., Friday, July 28th, 2023

It’s getting hot! And we are here to bring you even more heat. This month’s Ag Law Harvest takes you across the country and even across our northern border as we highlight some interesting court cases, a petition to the USDA, and some legislation coming across the desks of Governors from Maine to Oregon.

Ohio Court Determines That Dairy Farm Did Not Intentionally Harm Employee. 
In 2019, a dairy farm employee sustained serious injuries after getting caught in a PTO shaft while operating a sand spreader. After his injury, the employee filed a lawsuit against his employer for failing to repair or replace the missing safety guards on the PTO shaft and sand spreader. In his lawsuit, the employee alleged that the dairy farm’s failure to repair or replace the missing safety guards amounted to a “deliberate removal” of the equipment’s safety features making the dairy farm liable for an intentional tort. In other words, the employee was accusing his employer of intentionally causing him harm. Normally, workplace injuries are adjudicated under Ohio’s workers’ compensation laws, unless an employee can prove that an employer acted intentionally to cause the employee harm. 

For an employer to be held liable for an intentional tort under Ohio law, an employee must prove that the employer acted with the specific intent to injure an employee. An employee can prove an employer’s intent in one of two ways: (1) with direct evidence of the employer’s intent; or (2) by proving that the employer “deliberately removed” equipment safety guards and/or deliberately misrepresented a toxic or hazardous substance. Because there was no direct evidence to prove the dairy farm’s intent, the employee could only try his case under the theory that the dairy farm deliberately removed the safety guards, intentionally causing him harm. 

The case went to trial and the jury found the dairy farm liable and ordered it to pay over $1.9 million in damages. The dairy farm appealed to the Twelfth District Court of Appeals arguing that its failure to repair or replace does not amount to a “deliberate removal” of the safety guards from the PTO shaft and sand spreader. The appellate court agreed

The Twelfth District decided to apply a narrow interpretation of the term “deliberate removal.” The court held that a “deliberate removal” is defined as the “deliberate decision to lift, push aside, take off, or otherwise eliminate.” The evidence presented at trial showed that the shaft guard may have simply broken off because of ordinary wear and tear. Additionally, the evidence could not establish who removed the connector guard or if the connector guard did not also break off due to ordinary wear and tear. Thus, the Twelfth District found that the evidence presented at trial did not support a finding that the dairy farm made “a careful and thorough decision to get rid of or eliminate” the safety guards. Furthermore, the Twelfth District reasoned that an employer’s “failure to repair or replace a safety guard is akin to permitting a hazardous condition to exist” and that the “mere knowledge of a hazardous condition is insufficient to show intent to injure. . .” The Twelfth District vacated and reversed the $1.9 million judgment and entered summary judgment on the dairy farm’s behalf.  

USDA Receives Petition Over “Climate-friendly” Claims. 
The Environmental Working Group (EWG) has petitioned the U.S. Department of Agriculture (“USDA”), asking the USDA to: (1) prohibit “climate-friendly” claims or similar claims on beef products; (2) require third-party verification for “climate-friendly” and similar claims; and (3) require a numerical on-pack carbon disclosure when such claims are made. The core legal issue is whether such “climate-friendly” labels and numerical carbon disclosures are protected and/or prohibited by the legal doctrine of commercial speech, which is protected under the First Amendment of the U.S. Constitution. EWG argues that the USDA has the authority to regulate such speech because commercial speech is only protected if it is not misleading. Additionally, EWG claims that requiring numerical carbon disclosures advances a substantial governmental interest by protecting consumers from fraud and deception. Although EWG has the legal right to petition the USDA, the USDA does not have to grant EWG’s petition, it must only consider the petition and respond within a reasonable time. 

Maine Governor Vetoes Ag Wage Bill.
Earlier this month Maine Governor, Janet Mills, vetoed Legislative Document 398 (“LD 398”) which required agricultural employers to pay their employees a minimum wage of $13.80 and overtime pay. Governor Mills stated that she supports the concept of LD 398 but was concerned about some of the bill’s language. The Maine legislature had the opportunity to override the Governor’s veto but failed to do so. After the legislature sustained her veto, Governor Mills signed an executive order establishing a formal stakeholder group to develop legislation that will establish a minimum wage for agricultural workers while also addressing the impacts the future legislation will have on Maine’s agriculture industry. 

A Big Thumbs Up! 
A Canadian judge recently found that a “thumbs-up” emoji is just as valid as a signature to a contract. In a recent case, a grain buyer, South West Terminal Ltd. (“SWT”), sent through text message, a deferred grain contract to a farming corporation owned and operated by Chris Achter (“Achter”). The contract stated that Achter was to sell 86 metric tonnes of flax to SWT at a price of $17 per bushel. SWT signed the contract, took a picture of the contract, and sent the picture to Achter along with a text message: “Please confirm flax contract”. Achter texted back a “thumbs-up” emoji. When the delivery date came and passed, Achter failed to deliver the flax to SWT which prompted SWT to file a lawsuit for breach of contract. SWT argued that Achter’s “thumbs-up” meant acceptance of the contract. Achter, on the other hand, claimed that the use of the emoji only conveyed his receipt of the contract. 

The Canadian court ultimately ruled in favor of SWT. The court relied on evidence that Achter and SWT had a pattern of entering into binding contracts through text message. In all previous occurrences, SWT would text the terms of the contract to Achter and Achter would usually respond with a “looks good”, “ok”, or “yup”. This time, Achter only responded with a “thumbs-up” emoji and the court concluded that an objective person would take that emoji to mean acceptance of the contract terms. Achter was ordered to pay over C$82,000 ($61,442) for the unfulfilled flax delivery. As the old saying goes: “a picture is worth a thousand words or tens of thousands of dollars.”  

Oregon Governor Signs Agriculture Worker Suicide Prevention Bill into Law. 
Earlier this month, Oregon Governor Tina Kotek signed a bill that creates a new suicide prevention hotline for agricultural producers and workers into law. Senate Bill 955 (“SB 955”) provides $300,000 to establish an endowment to fund an AgriStress Helpline in Oregon. Proponents of the bill believe the AgriStress Helpline will be able to specifically address the needs of agricultural producers and workers which “[s]tatistically . . . have one of the highest suicide rates of any occupation.” Oregon becomes the 7th state to establish an AgriStress Hotline joining Connecticut, Missouri, Pennsylvania, Texas, Virginia, and Wyoming. 

Oil and gas well pump.
By: Jeffrey K. Lewis, Esq., Monday, April 25th, 2022

One of the core principles of the American legal system is that people are free to enter into contracts and negotiate those terms as they see fit.  But sometimes the law prohibits certain rights from being “signed away.”  The interplay between state and federal law and the ability to contract freely can be a complex and overlapping web of regulations, laws, precedent, and even morals.  Recently, the Ohio Supreme Court ruled on a case that demonstrates the complex relationship between Ohio law and the ability of parties to negotiate certain terms within an oil and gas lease.     

The Background.  Ascent Resources-Utica, L.L.C. (“Defendant”) acquired leases to the oil and gas rights of farmland located in Jefferson County, Ohio allowing it to physically occupy the land which included the right to explore the land for oil and gas, construct wells, erect telephone lines, powerlines, and pipelines, and to build roads.  The leases also had a primary and secondary term language that specified that the leases would terminate after five years unless a well is producing oil or gas or unless Defendant had commenced drilling operations within 90 days of the expiration of the five-year term. 

After five years had passed, the owners of the farmland in Jefferson County (“Plaintiffs”) filed a lawsuit for declaratory judgment asking the Jefferson County Court of Common Pleas to find that the oil and gas leases had expired because of Defendant’s failure to produce oil or gas or to commence drilling within 90 days.  Defendant counterclaimed that the leases had not expired because it had obtained permits to drill wells on the land and had begun constructing those wells before the expiration of the leases.  Defendant also moved to stay the lawsuit, asserting that arbitration was the proper mechanism to determine whether the leases had expired, not a court. 

What is Arbitration and is it Legal?  Arbitration is a method of resolving disputes, outside of the court system, in which two contracting parties agree to settle a dispute using an independent, impartial third party (the “arbitrator”).  Arbitration usually involves presenting evidence and arguments to the arbitrator, who will then decide how the dispute should be settled.  Arbitration can be a quicker, less burdensome method of resolving a dispute. Because of this, parties to a contract will often agree to forgo their right to sue in a court of law, and instead, abide by any arbitration decision.   

Ohio law also recognizes the rights of parties to agree to use arbitration, rather than a court, to settle a dispute.  Ohio Revised Code § 2711.01(A) provides that “[a] provision in any written contract, except as provided in [§ 2711.01(B)], to settle by arbitration . . . shall be valid, irrevocable, and enforceable, except upon grounds that exist at law or in equity for the revocation of any contract.”  What this means is that Ohio will enforce arbitration clauses contained within a contract, except in limited circumstances.  One of those limited circumstances arises in Ohio Revised Code § 2711.01(B).  § 2711.01(B)(1) provides that “[s]ections 2711.01 to 2711.16 . . . do not apply to controversies involving the title to or the possession of real estate . . .”  Because land and real estate are so precious, Ohio will not enforce an arbitration clause when the controversy involves the title to or possession of land or other real estate.  

To be or not to be?  After considering the above provisions of the Ohio Revised Code, the Jefferson County Court of Common Pleas denied Defendant’s request to stay the proceedings pending arbitration.  The Common Pleas Court concluded that Plaintiffs’ claims involved the title to or possession of land and therefore was exempt from arbitration under Ohio law.  However, the Seventh District Court of Appeals disagreed with the Jefferson County court.  The Seventh District reasoned that the controversy was not about title to land or possession of land, rather it was about the termination of a lease, and therefore should be subject to the arbitration provisions within the leases.   

The case eventually made its way to the Ohio Supreme Court, which was tasked with answering one single question: is an action seeking to determine that an oil and gas lease has expired by its own terms the type of controversy “involving the title to or the possession of real estate” so that the action is exempt from arbitration under Ohio Revised Code § 2711.01(B)(1)? 

The Ohio Supreme Court determined that yes, under Ohio law, an action seeking to determine whether an oil and gas lease has expired by its own terms is not subject to arbitration.  The Ohio Supreme Court reasoned that an oil and gas lease grants the lessee a property interest in the land and constitutes a title transaction because it affects title to real estate.  Additionally, the Ohio Supreme Court found that an oil and gas lease affects the possession of land because a lessee has a vested right to the possession of the land to the extent reasonably necessary to carry out the terms of the lease.  Lastly, the Ohio Supreme Court provided that if the conditions of the primary term or secondary term of an oil and gas lease are not met, then the lease terminates, and the property interest created by the oil and gas lease reverts back to the owner/lessor.  

In reaching its holding, the Ohio Supreme Court concluded that Plaintiffs’ lawsuit is exactly the type of controversy that involves the title to or the possession of real estate.  If Plaintiffs are successful, then it will quiet title to the farmland, remove the leases as encumbrances to the property, and restore the possession of the land to the Plaintiffs.  If Plaintiffs are unsuccessful, then title to the land will remain subject to the terms of the leases which affects the transferability of the land.  Additionally, the Ohio Supreme Court concluded that if Plaintiffs were unsuccessful then Defendant would have the continued right to possess and occupy the land.  Therefore, the Ohio Supreme Court found that Plaintiffs’ controversy regarding the termination of oil and gas leases is the type of controversy that is exempt from arbitration clauses under § 2711.01(B)(1). 

Conclusion.  Although Ohio recognizes the ability of parties to freely negotiate and enter into contracts, there are cases when the law will step in to override provisions of a contract.  The determination of title to and possession of real property is one of those instances.  Such a determination can have drastic and long-lasting effects on the property rights of individuals.  Therefore, as evidenced by this Ohio Supreme Court ruling, Ohio courts will not enforce an arbitration provision when the controversy is whether or not oil and gas leases have terminated.  To read more of the Ohio Supreme Court’s Opinion visit: https://www.supremecourt.ohio.gov/rod/docs/pdf/0/2022/2022-Ohio-869.pdf.

 

 

By: Peggy Kirk Hall, Monday, October 21st, 2019

Unfortunately, the death of a farmland owner can create conflict within a family.  Often,  transition planning by the deceased could have prevented the conflict.  Such is the case in a family disagreement that ended up before Ohio’s Third District Court of Appeals.  The case pitted two brothers against one another, fighting over ownership of the family farm.

When their mother passed away in 2006, the five Verhoff siblings decided to sell the family farm.  Two of the brothers wanted to purchase the farm, but one of them was also the executor of the estate.  The estate’s attorney advised the executor brother that he should not buy the land directly from the estate due to his fiduciary duties as executor.  The attorney recommended that the executor wait and purchase one-half of the farm from the other brother after it was transferred from the estate to the other brother. 

Following a series of discussions between the two brothers, the executor brother sent half of the farm’s purchase price to the other brother and issued the farm’s deed to the other brother.  Over the next eight years, the two brothers shared a joint checking account used to deposit rental income from the farmland and to pay for property taxes and utilities on the property.  But when the executor brother asked the other brother for a deed showing the executor brother’s half-interest in the farm, the other brother claimed that the executor brother did not have an ownership interest.  The money rendered by the executor brother was a loan and not a purchase, claimed the other brother.  The other brother then began withholding the farm rental payments from the joint checking account. The relationship between the two brothers broke down, and in 2016, the executor brother filed a lawsuit to assert his half-ownership of the farm and his interest in the rental payments.

At trial, a jury found that the brothers had entered into a contract that gave the executor brother half ownership of the farm upon paying half of the purchase price to the other brother.  The trial court ordered the other brother to pay the executor brother half of the current value of the farm and half of the rental income that had been withheld from the executor brother.  The other brother appealed the trial court’s decision. The court of appeals did not agree with any of the other brother’s arguments, and upheld the trial court’s decision that a contract existed and had been violated by the other brother.   Two of the arguments on appeal raised by the other brother are most relevant:  that Ohio’s statute of frauds required that the contract be in writing and that the contract was illegal because an executor cannot purchase land from an estate. 

A contract for the sale of land should be in writing, but there are exceptions

Ohio’s “Statute of Frauds” provides that a contract or sale of land or an interest in land is not legally enforceable unless it is in writing and signed by the party to be charged.   The other brother argued that because there was no written agreement about the ownership of the farm, the situation did not comply with the Statute of Frauds and could not be enforceable.  However, the court focused on an important exception to the Statute of Frauds:  the doctrine of partial performance.  The doctrine removes a verbal contract from the writing requirement in the Statute of Frauds if there are unequivocal acts of performance by one party in reliance upon a verbal agreement and if failing to enforce the verbal agreement would result in fraud, injustice, or hardship to that party who had partly performed under the agreement. 

Based upon evidence produced by the executor brother, the appeals court agreed with the trial court in determining that an oral contract did exist between the two brothers and that the executor brother had performed unequivocal acts in furtherance of the verbal contract.   The court explained that the executor brother had endured “risks and responsibility” by giving the other brother money with the expectation that he would receive rental income from the farm and own a one-half interest in the property.  An injustice would occur if the verbal contract was not enforced because of the Statute of Frauds, as the other brother would receive a windfall at the executor brother’s expense, said the court.  The court concluded that because the doctrine of partial performance had been met, the writing requirement in the Statute of Frauds should be set aside.

Did the executor brother violate his fiduciary duties by purchasing the land?

The other brother also claimed that the verbal contract was illegal because the executor brother made a sale from the estate to himself.  According to the other brother, the sale violated Ohio Revised Code section 2109.44, which prohibits fiduciaries from buying from or selling to themselves or having any individual dealings with an estate unless authorized by the deceased or the heirs. 

The court pointed out, however, that the executor brother did not buy the farm from the estate.  Instead, the executor brother purchased the farm through a side agreement with the other brother who purchased the farm from the estate.  The court noted that this type of arrangement could be voidable if other heirs challenged it.  But since no other heirs did so, the court determined that the executor brother had not violated his fiduciary duties to the estate and allowed the side agreement to stand.

Estate and transition planning can help prevent family disputes

Imagine the toll this case took on the family.  It’s quite possible that parents can prevent these types of conflicts over what happens to the farm when they pass on.  An initial step for parents is to determine which heirs want to transition into owning and managing the farm, and what their future roles with the farm might be.  This often raises other tough questions parents must face:  how to provide an inheritance to children who don’t want the farm when other children do want the farm? Must or can the division of assets be equal among the heirs?  What about other considerations, such as children with special issues or not having heirs who do want to continue the farm?  These are difficult but important questions parents can answer in order to prevent conflict and irreparable harm to the family in the future.

The good news is that there are legal tools and solutions for these and the many other situations parents encounter when deciding what to do with the farm and their assets.   An attorney who works in transition planning for farmers will know those solutions and can tailor them to a family’s unique circumstances.  One agricultural attorney I know promises that there’s a legal solution for every farm family’s transition planning issues.   Working through the issues is difficult, but identifying tools and a detailed plan for the future can be satisfying.  And it will almost certainly prevent years of litigation.

The text of the opinion in Verhoff v. Verhoff, 2019-Ohio-3836 (3rd Dist.) is HERE.  For more information about farm estate and transition planning, be on the lookout for our soon-to-be released Farm Transition Matters law bulletin series or catch us at one of our Farm Transition Planning workshops this winter.

By: Evin Bachelor, Wednesday, May 29th, 2019

With all the rain and delayed planting that Ohio farmers have experienced this spring, signing a solar lease has been a very appealing prospect for many farmland owners.  While this may be the right decision for a farm, it is very important that the farmland owner understand exactly what he or she is signing.  Once an energy developer offers to pay you to enter into an agreement, and you sign that agreement, its terms will be legally binding.

In our recent blog post on solar leasing, we discussed some of the early documents that a farmland owner is likely to receive from an interested solar energy developer.  Further, we gave some general advice on what farmland owners should do if an energy developer wants to discuss leasing his or her land.  One of our main suggestions was to take the time to fully understand what the farmland owner is getting into, and that is where this post comes in.

In this blog post, we highlight some of the important provisions of a solar lease that you as a farmland owner should look for in your solar lease, and understand what they mean.  A good solar lease will be very thorough, and include a lot of legalese.  Our upcoming Ohio Farmland Owner’s Guide to Solar Leasing, due out in the next month, will go more in depth than this blog post on the terms below and more.  It would also be a wise decision to consult with an attorney to ensure that your understanding of your solar lease reflects what the documents say.

For now, here are a few provisions to be on the lookout for in your solar lease:

The term.  How long does this lease last?  Most solar leases last for 20 to 30 years.  This is the time during which solar energy is being collected and sold.  Solar energy developers like this multi-decade duration because it allows them to use of the solar panels for their expected productive lifespan.

Thirty years is a long time.  Many careers are retirement-eligible after that period, and many farms will transition to the next generation in that amount of time.  This long of a term is not necessarily a bad thing.  It just means that a farmland owner should look back and look ahead.  Think back 30 years to 1989.  What all has changed on your farm?  What would it have looked like to not be able to use this ground for the past 30 years?  Now look ahead.  What do you expect your needs and those of your family to look like when this lease ends in 2049?  Only you can determine if not being able to use your land for that long is a good thing.

Phases.  How is this lease broken up?  We just explained that most solar leases will last for 20 to 30 years, but that clock usually starts ticking once construction has started on the project.  Solar energy developers will often reserve a year or two during which they can conduct their final feasibility studies and obtain necessary permits.  Some leases structure this pre-construction phase as merely an option phase, meaning that the energy developer will pay a small amount of rent to keep its option alive for that one or two-year period, but it does not necessarily have to commence construction.

Further, toward the end of the term, the energy developer may have written in an option to renew for another 5 or 10 years.  These renewals are often structured as a right that the energy developer may exercise merely by giving notice to the landowner.  Additionally, in the middle, if there is a natural disaster that puts the operation out of service for any period of time, a solar lease may stop the clock from ticking until the project is operational again and solar energy is being collected.

The important take-away for the phases is being able to know when each phase begins and ends.  When all of the different phases are combined, instead of just a 30-year lease, you could be looking at a 42-year agreement.  The only way to know how long it could last is to thoroughly read the entire lease.

A description of the premises.  Every solar lease will contain a description of the premises.  If an entire parcel is being leased, then this part is fairly easy.  However, if only a portion of the parcel is being lease, the farmland owner will want to make sure that the lease provides an adequate description so that the leased portion can be easily determined on the ground.  Often, this will include a survey and maps.  Knowing the boundaries is important because these leases are often exclusive, such that the farmland owner has little or no use or access of the leased land throughout the term.

Easements.  What rights are being granted to the solar energy developer?  Solar leases include a series of easements that give the solar energy developer the right to use your land.  Some of the common easements include a:

  • Construction easement: a right to cross over portions of the farmland owner’s property in order to construct the solar facility
  • Access easement: a right to cross over portions of the farmland owner’s property to reach the solar facility
  • Transmission easement: a right to install power lines, poles, and other equipment to transmit the energy produced by the solar panels to the grid
  • Solar easement: a right to unobstructed access to the sun without interference from structures or other improvements
  • Catch-all easement: a general right to do whatever is necessary for the benefit of the project

Solar energy developers want their easements to be as broad and generous as possible in order to maximize their flexibility with the project.  This is not always to the advantage of the farmland owner.  If the lease is general enough to allow the solar energy developer to sub-lease to another entity such as a telecommunications company, the landowner will have a difficult time preventing the solar energy developer from doing so.  The farmland owner wants to make sure that the easements being granted are specific enough to not result in any surprises.

Landowner obligations and rights.  What does the lease require of you as the farmland owner?  Usually private solar energy developers include a non-interference provision, a quiet enjoyment provision, and an exclusivity provision.  All combined, these provisions are a promise by the farmland owner to not enter the solar facilities without prior permission, not interfere with the solar facilities, and not allow anyone else to do so for the duration of the term.

Further, solar leases often include a confidentiality provision that courts will enforce as legally binding.  These provisions allow the solar energy developer to control the flow of its proprietary information, and also prevent landowners from talking with one another about topics such as rent rates.  It is important to understand:

  • What information is protected
  • If there are any exceptions
  • When consent might be granted
  • If specific penalties apply
  • How long confidentiality lasts

The solar lease may also include a provision about farmland owner improvements.  These explain if and when the landowner needs to obtain prior approval of the solar energy developer in order to build a structure or plant something that may interfere with the solar project.

Property maintenance.  Who is going to mow?  Ohio landowners have a legal duty to cut noxious weeds, and a well drafted lease will cover which party to the lease bears responsibility for keeping the leased land clear.  Usually, the solar energy developer will take this responsibility, but it helps to have this in writing.

Cleanup terms.  Cleanup involves a lot of questions.  Does the solar lease require the solar energy developer to restore the land to its previous state?  If so, how is this measured?  Will all stakes and foundations be removed?  Will all improvements, like roadways, be removed?  How will the solar energy developer guarantee that it will be able to pay for this cleanup in 30 years?  Does it post a security, and if so, when?  A thorough lease will answer these questions.

Tax and conservation penalties.  Tax and conservation also involves a lot of questions because constructing and operating a solar facility will make the property ineligible for the full benefits of CAUV and most conservation programs.  Does the lease require the solar energy developer to cover real estate taxes?  Does the lease require the solar energy developer to cover the three-year lookback penalty for removing land from CAUV?  What will the solar energy developer do toward the end of the lease so that the land can be put back into production and made CAUV eligible again?  Similar questions must be asked for conservation programs.

Compensation.  It’s not that we saved the fun and best part for last.  We just wanted to make sure that compensation is not the first and only thing considered when deciding whether or not to enter into a solar lease.  While it certainly is important, some of the issues discussed above must be just as carefully understood.

The solar leases that we have seen involve cash rent that increases over time based upon a fixed escalator.  The escalator is a percent increase.  If the escalator increases at a rate greater than inflation, then the farmland owner will receive more bang for his or her land.  However, if the escalator increases at a rate lower than long-term inflation, then the solar energy developer will have to pay less over time.

Another point of compensation to consider is how damages will be calculated for harm to property and crops.  When the solar energy developer decides it is time to start construction, its option and easements grant it the right to begin construction even if there is a crop already in the ground.  This makes it in a farmland owner’s best interest to have this issue addressed up front.  These damages will often be calculated my multiplying the number of acres by the average county yield for that crop by that crop’s commodity future price with the Chicago Board of Trade for a given date.  This provides an objective calculation for damages.

Verbal promises.  A note of caution: if the solar energy developer makes you a verbal promise, ask for that promise to be included in the written lease.  If there is a conflict between what a representative of the solar energy developer tells you and what is written in the lease, the terms in the written lease are likely to prevail.

The activity we are seeing across Ohio right now with solar reminds us of the early stages of the recent wind and shale energy booms.  Some of the biggest regrets that we hear about are from landowners who thought they were getting a better deal than they actually did.  Reading through, understanding, and thinking about the lease is an essential part of calculating whether or not the lease being offered is actually a good deal for a farmland owner and his or her family.  Don’t be afraid to reach out to your team of professionals in this process.  Your attorney, tax professional, extension educator, and others can be a great resource.

By: Peggy Kirk Hall, Thursday, May 23rd, 2019

We haven’t seen much sun in Ohio lately, but that hasn’t stopped the growth of solar energy development.  In the past two years, the Ohio Power Siting Board has approved six large scale solar projects with generating capacities of 50MW or more, and three more projects are pending approval.   These “solar farms” require a large land base, and in Ohio that land base is predominantly farmland.   The nine solar energy facilities noted on this map will cover about 16,500 acres in Brown, Clermont, Hardin, Highland and Vinton counties.  About 12,300 of those acres were previously used for agriculture. 

We’re hearing that solar energy developers are on the lookout for more land in these and several other counties across the state.  As the markets fluctuate and weather continues to prevent planting, leasing farmland to a solar energy developer might look pretty appealing.  But we always urge caution and due diligence for any leasing situation, and solar energy is no exception. 

What should you do if an energy developer wants to discuss leasing your farmland for a large scale solar energy facility?  Our best advice is not to jump too quickly.  Instead, take the time to fully understand what you’re getting into.  A typical solar lease can last for 30 years and thus can have long term legal, financial and social implications for a farmland owner.  An important initial question is how does this type of land use fit into your future vision for your land, your farm operation, and your family?  If you don’t yet know much about large scale solar development and what it means for your land, give a listen to this webinar from our partner, the National Agricultural Law Center.

In this post, we’ll focus on the beginning of the solar leasing legal process.   The large scale solar projects in Ohio range from 600 to 3,300 acres of land, so a developer first has to assemble the land base once it identifies an area for a solar development project.   Leasing the land is the typical mechanism used for the solar projects in Ohio.  If a developer is interested in leasing your land, the first documents you may receive from the developer are a letter of intent and/or an option to lease.  These documents are the precursors to a solar lease but, like a lease, are written in favor of the developer and establish legal rights for the developer.  Careful review is critical, as these documents can tie up the land and the landowner for several years or more.

The letter of intent Some developers use a written letter of intent to notify a landowner of the developer’s interest in a parcel of land.  The purpose of the letter is to begin the process of considering the land for a long term solar lease.   Note, however, that a letter of intent might also contain a confidentiality clause that would prevent the landowner from talking with other developers about the land or sharing details of the developer’s interest with anyone.   Be aware that courts will generally enforce a signed letter of intent as a legally binding contract if the developer has offered the landowner a payment or similar benefit for signing the letter.   By signing confidentiality provisions in a letter of intent, a landowner can be foreclosed from considering other solar leasing opportunities.

The option to leaseMore commonly, the first document a solar developer will ask a landowner to sign is an option to lease.  Don’t be fooled by the name of this document and think that it’s not a legally binding agreement.  While an option is not the same as a lease, it can have the same legal effect of tying up the land for a certain period of time and might also dictate many of the terms of the lease if the developer decides to move forward on the project.

An option to lease grants the solar developer rights to explore the possibility of using the land for a solar project, but the developer may choose not to lease the land or develop the project.  The option period, typically up to five years, gives the developer time to conduct due diligence on the property, assemble other land parcels, secure financing, and obtain government approval for the project.  At the end of the option period, the developer should decide whether or not to proceed with the project.  An option also can give the developer the right to terminate and back out of the option at any time prior to the end of the option period. 

On the other hand, a landowner doesn’t have an option to back out once he or she signs an option to lease.  The landowner is bound for the entire option period.   Like a letter of intent, an option can contain confidentiality and “exclusive dealing” provisions that prevent the landowner from sharing details or entering into leasing opportunities with other developers during the option period.  The option might also require the landowner to cooperate with the developer’s due diligence and help the developer obtain approvals and permits.  Many options also include language that allows the developer to assign the option to another solar developer.

Be aware that an option can also contain significant leasing terms that carry over if the developer proceeds with the project.  For example, in addition to allowing the developer to consider the land for a project, the option to lease could also include provisions for the period of the actual long term solar lease, the lease payment amount, easement rights, and landowner obligations.  Landowners might think that such terms could be negotiable later if the parties sign an “official” solar lease, but the option language may bind the landowner to the leasing terms that are presented in the option.  Sometimes, the option itself becomes the lease.  The net effect:  a landowner who thinks he or she is just signing a five year option agreement might also be committing to a 30 year solar lease and a predetermined lease payment.

What about crop production during the option period?  An option might contain language stating that the landowner may continue managing and operating the property in the same way after agreeing to the option.  But the option might also allow the developer to enter the property and proceed with the project at any time, including when crops are in the ground, although the option might not provide the landowner payment for the lost production.  In that case, the landowner simply loses out on the crop if the option doesn’t contain provisions for lost production.

As for payment for the option, a landowner usually receives an initial payment for signing the option, perhaps several thousand dollars or more.  During the option period, the landowner also typically receives an annual payment that is based on number of acres, perhaps $20 dollars per acre or more. 

Should you have an attorney review an option to lease?  Yes.  Option language can vary and we surely haven’t addressed all potential issues in this post.   A close examination by an attorney shouldn’t take much time or cost a lot and will ensure that you fully understand the legal implications of entering into the option to lease. 

Are the terms of an option negotiable?  That’s up to the landowner and the developer, but don’t assume that the developer won’t negotiate.  If you’re faced with an option to lease and don’t like the terms, try negotiating.  An attorney can be helpful here, also.

In our next solar leasing post, we’ll review the terms of a solar lease and consider how the lease can impact agricultural landowners over the typical 30 year lease period.  Watch also for our upcoming Ohio Farmland Owner’s Guide to Solar Leasing, due out in the next month, which will provide a detailed examination of the solar leasing process.

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