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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.
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.
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.
Here we are at the onset of Fall! With it comes OSU's annual Farm Science Review show and the kick off of our Farm Office Live season. We'll return to our monthly Farm Office Live webinars with a live broadcast from the Firebaugh Building at Farm Science Review this Thursday, September 21 beginning at 10:00 a.m. Our season will continue from 10--11:30 a.m. on these dates:
October 20, 2023
November 17, 2023
December 15, 2023
January 19, 2024
February 16, 2024
March 15, 2024
April 19, 2024
Farm Office Live is a monthly webinar bringing current news and updates from our team of legal and farm management experts. The September webinar at Farm Science Review will cover:
- Farm succession planning update -- Robert Moore and David Marrison
- Budget outlook and land survey information -- Barry Ward
- Beginning Farmer Tax Credit Program update -- Eric Richer
- OSU Farm Business Analysis Program -- Clint Schroeder
- Tax law news -- Jeff Lewis
Join us on October 20 for these topics:
- State and federal legislation -- Peggy Hall
- Federal farm program information -- David Marrison
- Farm inputs outlook -- Barry Ward
- Farm Bill update -- Farm Office team
- Upcoming Farm Office Programs -- Bruce Clevenger
We hope you'll join us! There is no cost to attend the Zoom webinars, but registration is necessary. Learn more, catch archived webinars and register for the upcoming fall and winter webinars through this page: https://farmoffice.osu.edu/farmofficelive.
Your residence is one of the few assets that can be sold for a gain without creating tax liability. The IRS rules allow $250,000/person of gain from the sale of a residence to be excluded from income. This rule is why most people do not need to worry about capital gains taxes when they sell one residence to buy another. This exception to capital gains taxes is important when considering business structures for the farming operation and when buying/selling a farm with a residence.
To qualify for the $250,000 residence exemption, the residence being sold must have been owned and used as the primary residence for two of the last five years. Houses that have not been used as the residence or that were acquired through a like-kind exchange are not eligible. For married couples, each spouse is eligible for the $250,000 deduction for a total of $500,000.
Consider the following example:
Andy and Betty purchased a house in 2000 for $200,000. They used the house as their residence until 2023 when they sold it and moved into a retirement community. The sale price for their house as $500,000. Assuming they otherwise qualify, there will be no tax on the sale of the house. The transaction creates a $300,000 gain but Andy and Betty may reduce their income by $300,000 to match the gain. Therefore, there is effectively no tax on the gain and Andy and Betty will receive the entire $500,000 sale price free of capital gain taxes.
The residence exemption has many implications but for farm families two come to the forefront. The first involves the sale of a farm that includes the residence. The $250,000 exemption only applies to the residential “curtilage” – the land immediately surrounding the residence and any closely associates buildings or structures. Generally, this means that the residence can include a lawn area, garage, storage shed and similar structures. The exemption does not apply acreage adjacent to the residence that is used to grow crops.
When selling a farm with the residence, the sale price should be allocated between the residence and farmland. As much of the sale price as can be legitimately justified should be allocated to the residence because this amount, up to $250,000, will not be taxed. Again, the allocation should be consistent with the true value of the residence.
Consider the following example:
Carl and Diane decide to sell their 80-acre farm for $1,000,000. The farm includes their residence and 80 acres. When negotiating with the buyer, they agree to allocate $300,000 of the sale price to the residence and 1 acre and $700,000 to the 79 acres used as farmland. Provided the residence otherwise qualifies, the $300,000 will not be taxed but the $700,000 will likely have capital gain taxes.
Carl and Diane may be tempted to try to use their entire $500,000 exemption on the sale. They should only take the entire exemption if they can justify valuing the residence and curtilage at $500,000. An appraisal may be appropriate if using the maximum exemption. Also, Carl and Diane cannot include 20 acres of the farmland with the residence to justify using a $500,000 value. Any part of the 80 acres that is used to plant crops will not be considered part of the curtilage and will not be eligible for the residential exemption.
Another situation where the residential exemption may arise involves establishing land LLCs. Many farm operations have an LLC or other business entity to hold the farmland and/or farm facilities. Land LLCs provide many benefits including liability protection and preventing land transfers outside of the family. The issue that arises with land LLCs is that LLCs do not live in homes so are not eligible for the residence deduction. That is, only people can receive the residence deduction, not business entities.
A farmer’s residence is often part of a larger parcel that includes farmland and/or farm facilities. Before transferring the parcel with the residence to an LLC, careful consideration should be made as to the implications to the residence tax exemption. In some cases, the residence should be surveyed off and remain owned by the original owners. In other cases, it may not be feasible to survey the residence from the farm and/or it may be very unlikely that the residence is ever sold. The decision to transfer or not transfer the residence to an LLC should be made on a case-by-case basis.
Consider the following example:
Earl and Fran own 500 acres of farmland. As part of their farm succession planning, they decide to transfer their land to an LLC. The 500 acres include their residence and their “home base” – shop, bins and other buildings used in the farming operation. Their residence sits in the middle of home base and would not be feasible to survey it from the rest of the farm. Also, Earl and Fran are unlikely to ever sell the residence because their children will be taking over the farm and the residence is likely to stay within the family for at least another generation.
In this situation, Earl and Fran decide to transfer their residence to the LLC. They will lose the residential exemption but because it is not feasible to survey off and they are unlikely to ever sell the residence, they are willing to forgo the exemption.
Let’s change the scenario a bit to see how the residential exemption can be preserved. Earl and Fran’s residence is located in the corner of a parcel away from home base. Before Earl and Fran transfer the land to an LLC, they survey off their residence and one acre. They keep the residence and one acre in their name and transfer the remaining 499 acres to the LLC.
In this scenario, Earl and Fran have preserved the residential exemption. If they sell their home in the future, they will be eligible to deduct up to $500,000 of gain. The extra cost of a survey is worth preserving the exemption.
It should be noted that it is possible to transfer a residence to a single-member LLC and maintain the residential tax exemption. The IRS considers most single-member LLCs to be the same as the owner. So, in the above example, the residence could be transferred to an LLC and the residential exemption kept as long as only Earl or Fran is the owner of the LLC – although the exemption may be limited to only a single, $250,000 exemption.
The residential exemption for sales can save considerable taxes when selling a home. When selling the residence with a farm, as much of the purchase price as reasonable should be allocated to the residence. If transferring farmland to an LLC, the residence should remain outside of the LLC if possible and/or if the residence is likely to be sold in the future. Like most tax and legal issues, there are exemptions, exemptions to the exemptions and nuances that must be addressed for each individual situation. Be sure to consult with a tax and legal professional for guidance on the rules and regulations regarding the sale or transfer of your residence.
What type of business entity is your farm? A common answer to that question is unfortunately the wrong answer: "I don't have a business entity for my farm." That's not a correct answer because every farm engaged in the business of farming is a business entity in the eyes of the law. Our new law bulletin series on "Structuring Your Farm Business" explains the different types of business entities available to farm businesses. The series also addresses tax and liability characteristics of different business entities, how business entities affect Farm Service Agency programs, how to start and manage an entity, and the important role business entities can play in protecting a farming operation for the future.
- A Comparison of Business Entities Available to Ohio Farmers
- Tax Characteristics of Business Entities Available to Ohio Farmers
- Farm Service Agency Programs and Business Entities
- Using Business Entities to Manage Farm Liability Risk
- Using Multiple Business Entities for a Farm Operation
- Starting, Organizing, and Managing an LLC for a Farm Business
Authors of the Structuring Your Farm Business bulletins are Robert Moore, Attorney and Sr. Research Specialist for the OSU Agricultural Law Program, Zachary Ishee, Law Fellow with the National Agricultural Law Center (now in private practice) and Barry Ward, OSU Extension's Leader of Production Business Management and Income Tax Schools Director.
The road to building a 175 MW 1,200 acre solar development project in Greene County just became a bit longer for Vesper Energy, the company behind the project. On September 6, the Ohio Supreme Court dismissed the company’s appeal of a ruling by the Ohio Power Siting Board (OPSB) that denied a certificate of approval for the project. The Supreme Court dismissed the case for “lack of jurisdiction.”
The Ohio Power Siting Board denied the Kingwood Solar application last December on grounds that the project would not serve the “public interest, convenience, and necessity” due to general opposition from the community, and especially the clear opposition of the Greene County commissioners and the three townships where the project would locate. As permitted by Ohio law, Kingwood Solar and several other parties to the case requested a rehearing on the OPSB’s decision.
The OPSB granted the rehearing request on Feb. 7 “for the purpose of affording more time to consider the issues raised.” However, Kingwood Solar appealed the board’s decision, stating that the OPSB failed to issue its decision on the rehearing request within the thirty days required by Ohio Revised Code 4903.10. Kingwood Solar raised ten arguments against the OPSB’s denial of the project, asking the Ohio Supreme Court to declare that denial to be “unlawful or unreasonable.”
The OPSB asked the Court to dismiss the Kingwood appeal, arguing that until the OPSB issued a decision on the rehearing, the Court did not have jurisdiction to hear the case. The Supreme Court granted the OPSB’s motion to dismiss. The Court did not issue a full opinion in support of its decision to dismiss the case, but referred to a 1988 Ohio Supreme Court opinion holding that the Supreme Court does not have jurisdiction over a case while a rehearing request is pending with the OPSB,
What does the dismissal mean for Kingwood Solar? Vesper Energy must now wait for the OPSB to make a decision on the rehearing requests. The OPSB could affirm its earlier decision to deny the permit or could reverse that decision. Currently, the OPSB has not scheduled a new hearing for the application.
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.
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:
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
The summertime slowdown hasn't affected the number of agricultural law questions we've received from across Ohio. Here's a sampling of recent questions and answers:
Is a tree service business considered “agriculture” for purposes of Ohio rural zoning?
No, tree trimming and tree cutting activities are not listed in the definition of agriculture in Ohio’s rural zoning laws, although the definition does include the growing of timber and ornamental trees. The definition ties to the “agricultural exemption” and activities that are in the “agriculture” definition can be exempt from county and township zoning. Here is the definition, from Ohio Revised Code sections 303.01 and 519.01:
"agriculture" includes farming; ranching; algaculture meaning the farming of algae; aquaculture; apiculture; horticulture; viticulture; animal husbandry, including, but not limited to, the care and raising of livestock, equine, and fur-bearing animals; poultry husbandry and the production of poultry and poultry products; dairy production; the production of field crops, tobacco, fruits, vegetables, nursery stock, ornamental shrubs, ornamental trees, flowers, sod, or mushrooms; timber; pasturage; any combination of the foregoing; and the processing, drying, storage, and marketing of agricultural products when those activities are conducted in conjunction with, but are secondary to, such husbandry or production.
What are the benefits of being enrolled in the “agricultural district program” in Ohio, and is there a penalty for withdrawing from the program?
There are three benefits to enrolling farmland in the agricultural district program:
- The first is the nuisance protection it offers a landowner. A landowner can use the defense the law provides if a neighbor who moves in after the farm was established files a lawsuit claiming the farm is a “nuisance” due to noise, odors, dust, etc. Successfully raising the defense and showing that the farm meets the legal requirements for being agricultural district land would cause the lawsuit to be dismissed.
- The second benefit is that the law also exempts agricultural district land from assessments for water, sewer and electric line service extensions that would cross the land. As long as the land remains in agricultural district program, the landowner would not be subject to the assessments. But if the land is changed to another use or the landowner withdraws the land from the agricultural district program, assessments would be due. The assessment exemption does not apply to a homestead on the farmland, however.
- A third benefit of the agricultural district program law is that it requires an evaluation at the state level if agricultural district land is subject to an eminent domain action that would affect at least 10 acres or 10% of the land. In that case, the Director of the Ohio Department of Agriculture must be notified of the eminent domain project and must assess the situation to determine the effect of the eminent domain on agricultural production and program policies. Both the Director and the Governor may take actions if the eminent domain would create an unreasonably adverse effect.
As for the question about a withdrawal penalty, the law does allow the county to assess a penalty when a landowner withdraws land from the agricultural district program during the agricultural district enrollment period, which is a five-year period. If a landowner removes the land from the agricultural district, converts the land to a purpose other than agricultural production or an agricultural conservation program, or sells the land to another landowner who does not elect to continue in the agricultural district program, the landowner must pay a withdrawal penalty. The amount of the penalty depends on whether the land is also enrolled in the Current Agricultural Use Value program. See the different penalty calculations in Ohio Revised Code 929.02(D(1).
Read the agricultural district program law in Chapter 929 of the Ohio Revised Code and contact your county auditor to learn about how to enroll in the program.
My farmland is within the village limits and the village sent me a notice that I must cut a strip of tall grass on my land. Do I have to comply with this?
Yes. Ohio law allows a municipality such as a village to have vegetation, litter, and “noxious weeds” laws. These laws can set a maximum limit for the height of grass, require removal of litter on the property, and require ridding the land of “noxious weeds.” The purpose of the laws is to protect property values, protect public health by preventing pests and nuisances from accumulating, and keep noxious weeds from spreading to other properties. The village is within its legal authority to enforce its grass, litter, and noxious weeds laws on a farm property that is within the village limits. Failing to comply with an order by the village can result in a fine or financial responsibility for all expenses incurred by the village to remedy the problem.
Is it legal to pull water from a river or stream to irrigate land in Ohio?
Yes, as long as the withdrawal occurs on private land or with the consent of the public or private landowner. Registration with the Ohio Department of Natural Resources is required, however, if the amount withdrawn exceeds 10,000 gallons per day and the State has the ability to scale the 10,000 gallon amount back if the withdrawal is within an established groundwater stress area. Withdrawal registration information is available on the Division of Water Resources website.
Note that according to Ohio’s “reasonable use” doctrine, if a water withdrawal causes “unreasonable” harm to other water users, a legal action by harmed users could stop or curtail the use or allocate liability for the harm to the person who withdrew the water. To avoid such problems, a person withdrawing the water should ensure that the withdrawal will not cause “unreasonable” downstream effects.
An urban farmer wants to build a rooftop greenhouse to grow hemp and then wants to make and sell cannabis-infused prepared foods at a market on her property. Who regulates this industry and where would she go for guidance on legal and regulatory issues for these products?
Regulation and oversight of food products that contain cannabis is a combination of federal and state authority. Federal regulation is through the U.S. Food and Drug Administration and state regulation is via the Ohio Department of Agriculture’s Food Safety Division. She should refer to these resources:
- U.S. - https://www.fda.gov/news-events/public-health-focus/fda-regulation-cannabis-and-cannabis-derived-products-including-cannabidiol-cbd#legaltosell
- Ohio - https://agri.ohio.gov/divisions/food-safety/resources/Hemp-Products
As for the growing of hemp, the Ohio Department of Agriculture (ODA) regulates indoor hemp production in Ohio. There is a minimum acreage requirement for indoor production—she must have at least 1,000 square feet and 1,000 plants. See these resources from ODA:
New legislation was recently introduced in the US Senate potentially affecting USDA-FSA program payment limitations. The Farm Program Integrity Act, co-sponsored by Senator Grassley from Iowa and Senator Brown from Ohio, seeks to limit FSA payment limitations to partnerships. If passed, the new law could have significant impacts on many larger farms.
Most FSA programs include payment limitations which limit the number and amount of payments any individual and some type of business entities may receive. See the table below for programs and their respective payment limitations. The limitations mean that no person, corporation or LLC may receive more than the designated limitation for the corresponding program in a single year. However, there is a notable exception to the payment limitation rule – general partnerships. Currently, a general partnership may have as many payment limitations as it does eligible partners. The Farm Program Integrity Act would limit general partnerships to just two payment limitations.
Let’s look at some examples using the ARC program ($125,000 payment limitation):
Farmer is a sole proprietor and is enrolled in ARC. Farmer is eligible for one payment limitations may not receive more than $125,000 in ARC payments in any year.
Farmer is married and Spouse owns 50% of the farm assets. Both Farmer and Spouse are likely eligible for a payment limitation and could receive up to $250,000 in ARC payments each year.
Ohio Grain Farms LLC is a farm operation with 4 owners, all of whom are actively engaged in the farming operation. Because this entity is an LLC, it is only eligible for one payment limitation. The LLC cannot receive more than $125,000 in ARC payments in any year.
Ohio Grain Farms Partnership is a general partnership with 4 equal partners, all of whom are actively engaged in the farming operation. The partnership is currently eligible for four payment limitations and could receive up to $500,000 of ARC payments in any year. The Farm Program Integrity Act would limit the partnership to two payment limitations or $250,000.
As the examples show, the number of payment limitations can have a significant impact on farm income.
According to a news release from Senator Grassley’s office, the legislation is meant to “rein in abuse of the farm payment system and ensure taxpayer support is targeted to those actively engaged in farming”. The same news release states that just 10 percent of farm operations receive 70 percent of all yearly farm payment subsidies. Senator Brown is quoted as saying “For years we’ve seen big farms get bigger while small and mid-sized family farmers in Ohio get squeezed. Too often, farm program payments have gone to producers who do not need the support, or to people who aren’t even involved in farming. With this commonsense bill we can ensure assistance is directed toward working Ohio farmers.”
The entire press release can be viewed here. We will continue to monitor this proposed legislation as well as other state and federal legislation initiatives.
A new Ohio law took effect last year that impacts some landowners who want to terminate their farm crop leases. If a farm lease does not include a termination date or a termination method, the law requires a landowner to provide termination notice to the tenant by September 1. The law was adopted to prevent late or otherwise untimely terminations by landowners that could adversely affect tenants.
It is important to note that the law only applies to verbal leases or written leases that do not include a termination date or method of notice of termination. If a written lease includes a termination date or method of notice, the terms of the lease apply and not the termination notice law. Also, the law does not apply to leases for pasture, timber, farm buildings, horticultural buildings, or equipment.
The notice can be provided to the tenant by hand, mail, fax, or email. If termination is provided by September 1, the lease is terminated either upon the date harvest is complete or December 31, whichever is earlier. While no specific language is required for the termination notice, it is good practice to include the date of notice, an identification of the leased farm and a statement that the lease will terminate on the completion of harvest or December 31. If termination is provided after September 1, the lease continues for another year unless the tenant voluntarily agrees to terminate the lease early.
A tenant is not subject to the new law and can terminate a lease after September 1 unless the leasing arrangement provides otherwise. Because it is generally easier for a landowner to find another tenant, even on short notice, the law protects only the tenant from untimely terminations, not landowners.
For more information, see Ohio’s New Statutory Termination Date for Farm Crop Leases law bulletin available at farmoffice.osu.edu.