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Farmland Sale Question

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Clone Head

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My niece owns 160 acres of farmland in North Dakota. She received an offer to sell from a farmer that owns some adjacent land. She currently rents the farmland to a relative who is very unethical and a PIA to deal with. The rental agreement, which expires December 1st, has a provision allowing the renter to match (or better) the offer. The farmer making the original offer needs the sale to happen before December 1st.

I don't have the specific language regarding the matching offer, but I assume she can sell the land to whoever she wants.

What are her options? Are there any circumstances where she has to sell to the relative?
 
I'd think that it depends on the state but imo if she wants to sell it, that's her choice and the relative doesn't have a say.

Good for her to have that option. That should be a good chunk of change.
 
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This if definitely get an estate lawyer involved situation as these situations can be very complex and are going to vary state to state.

But two things:

1. Just because the lease doesn't expire until December doesn't mean the renewal or sale process doesn't go earlier. The renter has the rights to posses the land until then but that doesn't mean a prospective buyer can't own it before that point. Indeed if North Dakota is anything like Iowa notice of lease termination needs to happen WELL before that point. In Iowa farmland rental agreements, for instance, leases MUST be terminated by September 1st or the renewal for the following crop year is automatic.

2. As a very broad rule, yes leases or trusts can have first right of refusal options so the niece might be stuck selling to the family member if they're will to match the other offer. Again to be certain on this front consult a lawyer
 
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Clone Head said:
My niece owns 160 acres of farmland in North Dakota. She received an offer to sell from a farmer that owns some adjacent land. She currently rents the farmland to a relative who is very unethical and a PIA to deal with. The rental agreement, which expires December 1st, has a provision allowing the renter to match (or better) the offer. The farmer making the original offer needs the sale to happen before December 1st.

I don't have the specific language regarding the matching offer, but I assume she can sell the land to whoever she wants.

What are her options? Are there any circumstances where she has to sell to the relative?
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It sounds like this is an inherited piece of land for your niece? If she didn't technically set up the lease agreement, hopefully all of it is in writing. One thing I can think of is the relative asked for a long term lease agreement along with first right of refusal. Doesn't mean she can't still sell it, but if there is a long term lease agreement, that would transfer to the new owner also. That might change the mind of the neighboring farmer if they can't get to farm the land for X amount of years.

She can technically sell to whoever she wants but if the neighbor's offer is 1 million dollars, she has to offer it to the relative for 1 million before she can except anything from the neighbor. She can put a deadline on when the relative has to let her know by but check to see how many days minimum that has to be.

If the relative refuses to buy, she can sell to the neighbor and they can close before December 1st but the relative still has the right to the land until the end of the rental year. In Iowa that would be March 1st. North Dakota might be slightly different if they are doing winter wheat or something but just know that the relative still has the right to the land and that things might get a little heated towards the end since you mentioned they are unethical and a pain.
 
Get an attorney involved. If it was in Iowa, (each state can have different rules/laws) I would suggest sending a termination letter for next year immediately (in Iowa if you don’t send a termination letter before 8/31 the lease rolls over) certified.

Take the offer and then the first right of refusal kicks in (FRR’s can sometimes scare purchasers away) the relative now has X amount of days to match the provisions. If they can’t, make sure they provide written notice that they can’t match.

Then sell and set the closing date asap.
 
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Don't know any of the extenuating circumstances (age, financial situation, etc.) but just because she received an offer doesn't require her to sell. Another option would be to terminate the current lease and rent to the adjacent neighbor after exploring his interest. You don't need to disclose the details to your current renter for justification. Was your niece intending to sell prior to her neighbor's offer? Land will most likely be more stable as an investment option for her money than other avenues and may provide better returns in the long run--they aren't making any more of it.
 
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If the relative matches the offer, or makes a better offer, isn’t that a win? She doesn’t have to deal with them anymore(once everything is final) and she makes the same or better money? Sounds like a win regardless if she is dead set on selling. Also, if the guy really wants the land, he’ll still want it after December 1st. Sounds like he’s trying to get her to sell quickly. Make sure she gets what it’s actually worth and this guy isn’t low balling her and making her rush the decision.
 
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Iastfan112 said:
This if definitely get an estate lawyer involved situation as these situations can be very complex and are going to vary state to state.

But two things:

1. Just because the lease doesn't expire until December doesn't mean the renewal or sale process doesn't go earlier. The renter has the rights to posses the land until then but that doesn't mean a prospective buyer can't own it before that point. Indeed if North Dakota is anything like Iowa notice of lease termination needs to happen WELL before that point. In Iowa farmland rental agreements, for instance, leases MUST be terminated by September 1st or the renewal for the following crop year is automatic.

2. As a very broad rule, yes leases or trusts can have first right of refusal options so the niece might be stuck selling to the family member if they're will to match the other offer. Again to be certain on this front consult a lawyer
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I would add one more item. Be fairly open with the adjacent farmer who she would like to sell it to and what he is up against. Tell him to stretch his offer otherwise he might not control his destiny. Farmers do silly things with adjacent land.
 
Terminate the lease as soon as possible. Have a lawyer check the will for any codicils that might prevent her from selling outside the family, but end the lease. Iowa law says before September 1, but leasee has until March 1 to vacate. No wheat or grain will be ready to harvest by then.
 
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If the tenant matches the offer can she decide not to sell at this time until the rights of refusal expire? Going to be a drawn out process but keeps the ideal path of selling to the adjacent farmer on their timeline open.
 
Clone Head said:
My niece owns 160 acres of farmland in North Dakota. She received an offer to sell from a farmer that owns some adjacent land. She currently rents the farmland to a relative who is very unethical and a PIA to deal with. The rental agreement, which expires December 1st, has a provision allowing the renter to match (or better) the offer. The farmer making the original offer needs the sale to happen before December 1st.
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That's not her problem. It's his.

My advice for anyone, but especially for women: Do not kowtow to bullies or their deadlines.
 
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pourcyne said:
That's not her problem. It's his.

My advice for anyone, but especially for women: Do not kowtow to bullies or their deadlines.
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It’s his problem, but he may be looking at a 1031 or a tax write off and the offer leaves and is gone. Then if she was truly interested in selling, that option is gone and then it’s a her problem.
 
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CycloneDaddy said:
Is the niece non-married and decent looking?
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My first thought. I swung and missed with an ex who is set to inherit thousands of acres in South Dakota. Don't recall the exact number just know her parents farm over 2000, all owned, and her mom has 500+ more she inherited that they rent.
 
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My advice would be keep the land, send notice to relative that they are not renewing lease ASAP. Rent to someone else.

Unless she has a specific need to get access to capital I see no need to get rid of an asset that makes passive income for her. Don’t sell just because someone offered to buy unless you have a very specific plan what to do with the money or a need.
 
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FarminCy said:
My advice would be keep the land, send notice to relative that they are not renewing lease ASAP. Rent to someone else.

Unless she has a specific need to get access to capital I see no need to get rid of an asset that makes passive income for her. Don’t sell just because someone offered to buy unless you have a very specific plan what to do with the money or a need.
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It's going to depend heavily on state law but it might not be that simple. Given the right of first refusal mentioned for buying there's a good chance it's there for renting to others as well.
 
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