Beware of the Disappearing Agricultural Lien
By Shannon Raye Martinez
SAALFELD GRIGGS PC
If you provide services or products in the agricultural industry and have not received payment from your customers, you may be able to obtain a lien on either the crops themselves (and proceeds thereof) or the land on which the crops are grown. Many people are either unaware that these rights exist, or unaware of the deadlines and strict rules that must be followed to protect lien rights. Additionally, although lien rights in the agricultural industry have been in existence for many years now, some of the rules associated with these liens have been revised in recent years. This article provides an overview of some of the types of agricultural liens available, and provides tips on how to enjoy the benefits of these liens and avoid potential traps.
BENEFITS OF LIENS
There are important benefits to obtaining and perfecting an agricultural lien. First, a lien on someone’s crops or property could coerce them into paying for the services you have provided. Second, if your lien applies to proceeds from the sale of the crops, you may be able to obtain payment from the buyer of those crops out of the sale proceeds. Third, you may bring a lawsuit to foreclose upon the lien and recover amounts owing to you in the suit. Lastly, if the debtor files for bankruptcy or is in receivership proceedings, a lien may mean the difference between getting paid in full for the services or products provided, and no payment at all.
TYPES OF LIENS
In Oregon, the most common liens available in the agricultural industry are the Agricultural Produce Lien and the Agricultural Services Lien.
Agricultural Produce Lien. An Agricultural Produce (“Ag Produce”) Lien is available to those persons who engage in the business of growing or producing Ag Produce for market or for delivery to others. Ag Produce includes all horticultural and viticultural products, fruits and vegetables, nuts, hay, bee products and meat animals. The lien automatically attaches to the produce delivered or transferred to the buyer for the contract price of the produce.
The lien expires 45 days after the date final payment is originally due for the produce delivered. This essentially means that the lien expiration date depends on the terms agreed upon between the parties as to payment due date. In order to extend the lien, a notice of lien must be filed with the Oregon Secretary of State within the 45 day deadline.
Agricultural Services Lien. An Agricultural Services (“Ag Services”) Lien is available to any person who provides labor, supplies, materials or services on the land or in another person’s business to aid the growing or harvesting of crops or the raising of animals. Examples include providing fertilizer used on the land and diesel fuel used in the farm equipment. The lien attaches to the crops or animals aided by the materials or services, as well as the sales proceeds. The value of the lien equals either the reasonable or agreed charges.
In order to preserve your lien rights, a notice of claim of lien must be filed no later than 75 days after the close of furnishing of the labor, services, materials or supplies. Additionally, once the lien has been filed, the lien only attaches to the crops (or proceeds) for the amount of labor, services, materials or supplies supplied within the six months immediately preceding the filing of the lien.
What exactly does “close of furnishing” mean? This issue has not yet been decided by the courts in Oregon, so it is subject to interpretation. The safest practice is to file a lien within 75 days of providing the labor, services, materials or supplies. However, in practice, this can be unrealistic if you are making recurring shipments to a farmer. For example, if you have a contract with a farmer to continue to provide supplies for six months, the lien may be filed within 75 days after the contract ends at the end of that six month term, and will attach to all supplies in the preceding six months. However, when the terms of the parties’ agreement are not clear, the strength of the lien will depend on the facts of the case, and ultimately may be litigated. To avoid challenge to the lien, it is best to get the notice of claim filed as early as possible.
PRIORITY OF LIENS AND ATTORNEY FEES
A properly filed Ag Produce Lien has priority and is superior to all other liens and security interests, except for tax liens, without regard to whether those other liens or security interests attached prior to the Ag Produce Lien. Additionally, all properly filed Ag Produce Liens share equally in the funds available, regardless of the date filed.
Likewise, a properly filed Ag Services Lien enjoys priority over all other liens and security interests, except for tax liens, and share pro rata with all other properly filed Ag Services Liens. Additionally, a properly filed Ag Services Lien has priority over an Ag Produce Lien.
Upon foreclosure, a holder of any of the liens explained above may recover his or her reasonable attorney fees for recording and foreclosing upon the lien.
Following the deadlines explained above can help you to obtain payment of a debt owing to you for agricultural services or products sold. Failure to follow these strict rules could result in a loss of these lien rights forever. Please note that there are other types of liens, as well as numerous additional rules that apply to all types of agricultural liens, which are too numerous to cover in this article.
If you have any questions regarding the issues addressed in this article, please contact Shannon Raye Martinez or Erich Paetsch in our office.
Our firm has given presentations and hosted seminars on these and other types of lien rights. If you are interested in having someone in our firm speak to your business about this topic, please feel free to contact our office.