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In the Field: The Superpower of Agricultural Liens

November 3, 2017

Overview

Agricultural liens are a very powerful but often overlooked tool available to those that aid in the growing or harvesting of crops or raising of animals or those who sell their agricultural products.  These liens attach not only to the crops, animals or produce themselves but also to proceeds from their sale.  Liens are the most efficient way of notifying third parties that you, the agricultural service provider or agricultural producer, are owed money and must be paid before other creditors.  Watching the statutory deadlines and filing notices with the Oregon Secretary of State are important steps for enforcing statutory liens rights, and with a little practice, these steps can easily be incorporated in your business model, likely resulting in more regular and speedy payment to you.   

Last week, I presented on the topic of agricultural liens and collections at the opening seminar of the Agribusiness Management Program at Chemeketa Community College in Salem, Oregon. The presentation emphasized agricultural services liens, agricultural produce liens and grain producer’s liens. This was part of a six-seminar series at Chemeketa on legal issues that can affect farming operations. The following are highlights from this presentation.

Liens Are a Tool in Your Collection Toolbox. In addition to utilizing general contract law and making thoughtful sale and credit decisions, exercising rights given under Oregon statutes to collect monies due to you for work performed, services provided or goods sold can be an effective tool.  Recognize that they are not your only tool, but certainly can be a formidable one.   

Liens Can Be Very Powerful.   If you provide labor, materials or services that aid in the growing or harvesting of crops or the raising of animals, you most likely have lien rights in the crops, animals or proceeds from their sale (agricultural services liens).  If you provided your harvested crop or grain to a third party for sale and have not yet been paid, you most likely have a lien in all of the third party’s inventory and proceeds (agricultural produce lien or grain producer’s lien).  Importantly, the lien attaches not only to the crop/animal/produce/grain itself, but also to the proceeds resulting from the sale. 

Liens Usually Have Super Priority.  If the Oregon statute is followed, the lienholder will usually enjoy “super priority” over other lienholders, including traditional agricultural lenders.  What does this mean?  When the crops, animals, produce or grain sell, liens with super priority are sold, and liens with super priority are paid before other creditors.  Liens with equal super priority will share the payment, ahead of other creditors of lesser priority.

Strict Compliance with the Statute Is Usually Required.  Super priority is great for you.  However, to obtain the super priority granted by Oregon law, there are strict timelines, statutory deadlines and procedural hoops that you must jump through in order to enjoy the benefits under the law.  Careful calendaring and knowledge of the filing requirements are a must. 

Filing of a Lien Ensures You Will Be at the Table for Any Payment Discussion.  Even if the person or entity that owes you money finds itself struggling to pay debts, filing of an agricultural lien will put the world on notice that you are a relevant party to the transaction and that you are entitled to payment.  The lien seeks to protect you against the crops, animals, produce or grain being sold without your knowledge or without your ability to collect what is owing to you.  However, if that agricultural lien is not filed, prospective purchasers might not even know you are owed anything and you cannot be a player at that payment table.  

If You Need to Hire an Attorney to Enforce Your Lien Rights (i.e., Foreclosure), Contact an Attorney in Advance of the Foreclosure Deadline.  As indicated above, there are very strict timelines at play with agricultural liens.  One of those is the deadline by which a foreclosure action must be initiated or the lien will be extinguished and no longer enforceable.  Initiating the foreclosure requires gathering information, along with the preparation and filing of legal documents to formally commence the process. Consult your attorney well in advance of the deadline so that the necessary paperwork can be prepared and filed on time. Waiting until the filing deadline may result in your not being able to find counsel who can complete the process before the deadline expires. 

Slides are available at this link.

As part of the same seminar, Schwabe attorney Joe Hobson also spoke about contract strategies, including contract formation, real estate purchase agreements and leases.  Here is a link to Joe’s PowerPoint presentation. 

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