The fifth protection for ag borrowers during foreclosure

The fifth protection for ag borrowers:  The lender is barred from seeking foreclosure without redemption.
If the mortgaged property is used for an “agricultural purpose,” the lender cannot foreclose without redemption. “Agricultural purpose,” means a purpose related to the “production, harvest, exhibition, marketing, transportation, processing or manufacture of agricultural products by a person who cultivates, plants, propagates or nurtures the agricultural products.”  “Agricultural products,” include, “agricultural, horticultural, viticultural, and dairy products, livestock, wildlife, poultry, bees, forest products, fish and shellfish, and any products thereof, including processed and manufactured products, and any and all products raised or produced on farms and any processed or manufactured products thereof.”

Unless the borrower has taken an action to stay execution of the judgment, the borrower is entitled to the general one-year redemption period.  The borrower and lender may, by written agreement, extend the period of redemption up to five years.  This agreement has to be approved by the court and filed in the foreclosure proceedings.  During that period, the debtor is entitled to possession of the land.

To redeem, the titleholder has to pay into the clerk's office the amount of the certificate, and all sums paid by the holder of the certificate in effecting redemptions, added to the amount of the holder's own lien, or the amount the holder has credited thereon, if less than the whole, with interest at contract rate on the certificate of sale from its date, and upon sums so paid by way of redemption from date of payment, and upon the amount credited on the holder's own judgment from the time of said credit, in each case including costs.

So, if the lender is the winning bidder at the Sheriff’s sale, instead of receiving a Sheriff’s deed, the lender receives a Certificate of Purchase.  Unless redemption is made within one year by the debtor, the holder of the Certificate of Purchase is entitled to receive a Sheriff’s deed.

Mollie’s final blog in the series addresses the ag borrower’s right of first refusal, after the Sheriff’s deed is recorded. For specific questions on issues that lenders face in agricultural foreclosures, contact Mollie directly at mpawlosky@dickinsonlaw.com.

This blog is derived from a presentation given by Mollie Pawlosky during the Dickinson Law Firm’s Webinar Series, “Avoiding Aggravation in Ag Lending.” The webinars advised financial institutions regarding aspects of agricultural lending.  Mollie’s presentation advised clients of special protections for agricultural borrowers during foreclosure. This blog is the fourth in a series of five blogs based on Mollie’s presentation.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- Mollie Pawlosky