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Every ag equipment operator has had it happen, a high dollar piece of equipment, with weather threatening on a weekend, is ground to a halt for a simple mechanical failure, like a shear bolt doing its job and well, shearing.

That simple break can bring a series of operations that rely upon each other to stand still unless another shear pin is available. Those are usually stocked after the first time a shear bolt strands the operation.

While shear bolts don’t physically manifest in other portions of an ag operation, they are metaphorically sure do. Taking time to identify in advance breaking points in an operation can cause you the pain and misery of threading a new bolt in the dark, with a little drizzle, while a semi waits to be loaded.

Hear are some “shear bolt” areas that your operation should be prepared to deal with

  1. The insurance companies do three things well, deny claims, delay claims, and defend claims. They have read your policy backwards and forwards a number of times and know distinctly what is and isn’t covered by their contract with you. Your agent is not responsible for you understanding your coverage, you are. When was the last time you looked at listed property items, valuations, costs of replacement and the like? After the storm is no time to get familiar with your coverage. Of particular note is a trend for insurance companies to demand all claims be submitted in a short period of time that doesn’t match up with traditional understanding of how long you have to bring an action. By contract, they can do this and by the contract you will be hung.
  2. Knowledge retention. Many operations have one person do the marketing for the operation, manage contract delivery dates, input deliver and pricing and coordination with third party vendors. What happens if that person leaves, quits, gets fired, or straight up just dies. Is it all on a cell phone that may or may not survive a car crash (or get impounded as evidence until the accident is fully investigated)? What are your redundant systems to pick up and move forward? Does anybody else know the truck driver’s cell phone number? Who is the guy who does the IT work for the operation and how do we get ahold of them?
  3. Title to assets. What was a great plan in 1995 (split ownership to avoid estate tax) is now an avoidable cost?  By changing from tenants in common or sole ownership to joint ownership you may avoid having to have two estates. You can’t expect your estate planning lawyer from 1995 to run you down and remind you, it is incumbent upon you to do a review of your documents and understand what is going on.
  4. Security in assets. Signing a general pledge of equipment and inventory to a lender is a big deal. It’s a promise that your equipment stands to pay for the operating note if the crop doesn’t. You selling items from that equipment line is a violation of that agreement and can expose you to financial responsibility that you could have avoided with a simple email or note to the lender about your plan to liquidate that old manure spreader. Likewise, you buying a tedder from a Facebook ad for cash may result in you having a tedder that is subject to a bank’s lien. The bank will get to come take that tedder and sell it to satisfy its lien and you are left with hunting down @genericironfordays to try to get your funds back. Better course of action is to do your research on the Iowa Secretary of State’s website and get a release from the lender that holds a security interest in that old iron.

To the delight of comedians everywhere the FTC is reportedly looking into why McDonald's ice cream machines often seem to be out of order. At first this seems pretty much like a waste of time, and nothing do with ag law, but it does.

It's because the McDonald's franchisees may be restricted from repairing the machines. The technicians are hard to come by and the four-hour cleaning cycle seems overly complex, but if you can’t even hire somebody other than a previously anointed technician, the market doesn’t work right. That is high prices and less quality. The ice cream machine with a repair restriction is legally the same critter as a yield monitor or a tractor that has the same rules. Imagine the delay when only a factory authorized representative can adjust, or trouble shoot a wonky seed tube sensor.

The concept is that an owner of a piece of equipment has right to repair, and the right would be expanded to require manufacturers publish diagnostic tools and documentation they use to fix repair their goods. This concept has traction in some states out east, where it was on a the ballot in Massachusetts as measure requiring data on cars that manufactures don’t like to make public. In fact, 27 states have kicked around right to repair measures in various formats.

Another concept being pushed is requiring manufacturers to create products that can be easily fix. Consider Apple products and how they are seemingly impossible to access, like the iPods. They have small batteries in them that fail after a number of years and right now, you or a third party that attempts to replace them will void the warranty if you do manage to figure out how to open them up. The other option is to toss them and buy new, which environmental advocates are against.

Who would be against this? The people who build things don’t want their products easily copied and they raise concerns that non authorized non trained people modifying their product makes the product dangerous in some cases.

Ag relies upon tech and this issue is as important to the future of ag as climate change, land use, and taxation.

Back in 2018, California, which can change the law with a ballot procedure that allows the voters to bypass the legislature and essentially enact whatever, passed a law that prevents farm owners in the state from using confinement systems for veal, bred hogs, or layers that are “cruel”. To not be cruel, the animal must be able to do the Hokey Pokey in the area, that is, the animal must be able to lie down, stand up and turn all the way around and each animal has a minimum square footage required.

Also, it is illegal in California to sell products that are derived from facilities that do not meet the Hokey Pokey test starting 1 Jan 2022. California raises about 4% of the bacon it needs, most of it comes from the Midwest. So essentially, the Californian’s are telling Iowa how to raise hogs, chicken and beef.

Since we are talking about it here, it should be no surprise that it went to court. American Farm Bureau and the National Pork Producers took the lead. They lost. They lost in the appeals court, even though the court acknowledges that the rule will cause changes throughout the nation. This appeals court, the 9th Circuit, is referred to in some legal circles as the 9th Circus, as it has a long history of adopting liberally liberal interpretations of the law to further social agendas.

Back in the dark ages when I went to law school, we read about Wickard, a farmer who was growing wheat in violation of an ordinance enacted by the state. The federal court pointed out that the Constitution says the feds regulate Commerce between states and since wheat makes the flour and people in all states buy flour, the fed gets a say in by making sure that one state doesn’t make an undue burden on the other state residents. This is referred to as the dormant commerce clause. It is a wide-reaching grant of federal authority, but it has always been viewed by the courts as a narrow power.

The court didn’t care that the Hokey Pokey rule, while limited to California Agri business, has an impact on ag business in other states. 87% of all pork is consumed outside of California, but the 13% who now have to have Hokey Pokey approved production raise the price for all. Since it impacts everybody, the court found it okay.

The price increase has restaurant owners simply considering removing pork from the menu, which of course, is the ultimate goal of those who seek to dismantle and eliminate ag production as we currently know it.

This ruling can go up for appeal to the US Supreme court, so it is not over for Bacon in San Francisco, but it doesn’t look great.

Public service reminders

HIPPA means your doctor can’t tell your neighbor about that weird growth on your arm pit or ask about your vaccination status. HIPPA applies to covered entities who get your health information, like doctors, insurance companies and hospitals. It does not cover Aunt Maude asking if you have to continue to take penicillin or if that rash is all cleared up.

Free Speech does not mean you can say whatever you want to say at any time. All rights are subject to other people’s enjoyment of their rights. For example, you cannot yell fire, or we are all going to die in a crowded theatre unless it is factual. Also, certain words are “Fighting words’ and are essentially off limits for expressing yourself. Also, certain images are pornographic and not artistic. In the words of a Supreme Court justice “I will know it when I see it.”. So, we do have limits on our conduct as part of our social compact with one another.

It has been tested recently in court and private companies can ask their employees to be vaccinated against whatever they ask them to be, or the employee can and work for a company that doesn’t ask or doesn’t care. If you work for government agency, which government (local, state or federal) will determine what they can and cannot ask you do to continue employment.

The government retains certain rights no matter who is on the deed. In fact, if you look back at an abstract far enough, most of original conveyances came from the United States government via a “patent.”. This document, in Iowa is generally for 40-acre sections signed by Franklin Pierce. In the end, the uncomfortable truth that we don’t always contemplate is that our rights of property ownership are derived from and there for are controlled by, the government. Of course, the government is supposed to be by the people so we are really granting ourselves rights. right??

Here is a look at some of the government powers.

Police Power: Zoning ordinances and building codes that promote the health, safety, or the general welfare of the public. Zoning can be easily defined as the government’s ability to enact regulations to reasonably control land use. It could be an ordinance requiring mowing of grass; in the country it might be soil conservation rules requiring owner to terrace property; statute authorizing destruction of diseased cattle without compensation; ordinance prohibiting ownership of dangerous/vicious animals. Sometimes zoning can’t be enforced so you need to get a variance from a board of adjustment. In Iowa, what was once an easy process is now being tightly construed that in order to get a variance, no other economic value can occur. For example, construction of a pergola less than 30 feet from the curve is something that has been routinely allowed by a board of adjustment, but under Iowa supreme court rulings, not having a pergola isn’t depriving a landowner of all economic use and is therefore not a hardship, so the variance should not be granted. The impact on the surrounding properties also considered. Note, zoning on ag land is pretty limited but the county can stop using the ag designation as a shield to get around rules against subdividing ground int buildable lots in the county for residential use.

Eminent Domain: Eminent Domain provided for in 5th Amendment to the Federal Constitution. It prohibits the government from taking private property for use without just compensation for the owner. The eminent domain clause is also known as a taking’s clause. An explicit taking is the classic example is if a landowner will not voluntarily sell property to the state to build a highway, so the state uses its eminent domain powers to obtain the property and provide the owner with “just compensation.” An implicit taking occurs when the government regulation indirectly causes a result that has the same effect as an explicit taking. An example would be if an owner bought land to develop it, but then shortly later, the government banned new development in that area. The resulting process from eminent domain power is called condemnation.

Taxation: Taxation can affect real estate in two ways the taxes that are assessed against the real estate or other taxes (i.e. income tax, sales tax) that becomes a lien on the property due to the owners’ debt. When real estate taxes remain unpaid, the property can be sold at tax sale.

Escheat: This is the process by which property reverts back to the state (or county) in cases where an owner dies without heirs and without a will or where the property is abandoned. Since the government granted the rights in the first place, they built in a feature to allow them to reclaim the rights granted if nobody else can claim them.

Statutory Interests in Property

  1. Homestead: Iowa law defines a homestead as the land that is owned and occupied as the family home; it is limited to up to ½ acre within a city plat or up to 40 acres in the country.
    1. Exemption: A homestead is exempt from most judgments. See Iowa Code §561.21 A process is required to clear any judgements from the homestead to show the world they have not attached to the homestead.
    2. Spouse’s Involvement: It takes one to buy property and two to sell if you are married in Iowa. There are a few exceptions for spouses not on the deed:
      1. if the spouse already relinquished homestead rights and statutory share rights in another instrument (i.e. POA).
      2. if their interest was terminated by an order of the court (i.e. divorce decree).
      3. if their right to recovery is barred by a statute of limitations (typically 10 years under Iowa Code §614.15).
      4. if the document is an encumbrance that is a purchase money mortgage as defined by Iowa Code §654.12B.
      5. if a court enters a decree holding that invalidating such a document would unjustly enrich the non-signing spouse.
    3. Dower/Curtesy: The terms dower (wife’s right) and curtesy (husband’s right) refer to a person’s right to his/her spouse’s property. Note: Although today these rights apply equally to men and women, I will be using an example where the husband dies, and the wife is the surviving spouse for ease of explanation.
      1. If Husband dies without a will and his own children are also the children of his wife, then Wife is entitled to all Husband’s real estate and personal property. See Iowa Code §633.211. Of course, if the Wife’s name was on title as a joint tenant, this would be a non-issue, so these rights are invoked when Wife is not on title or is not on title as a joint tenant.
      2. Even if Husband dies with a will or dies with a child who is not also his Wife’s child, the Wife is entitled to take what is known as an “elective share,” which is 1/3 of all the real property and personal property. See Iowa Code §633.238. Part of the elective share includes the homestead or so much as would be equal to the share necessary, unless the Wife would want a different arrangement. In lieu of any share in the real estate, the Wife may instead elect to retain the homestead for life as long as it is actually used as a home by the Wife. See Iowa Code §561.12.
  1. Freehold Estates:
  1. Definition: Freehold estates are interests in land in which ownership is for an indeterminate amount of time.
  2. Fee simple absolute: This is the “highest” (most complete) interest in real estate. The holder is entitled to all the rights in the property. This is commonly shortened to just “fee simple.”
  3. Defeasible fee estate: Two different types of defeasible fee estates are when the holder has a fee simple absolute title that may be lost upon the occurrence (or non-occurrence) of a certain event.
    1. Fee simple on condition precedent (a/k/a fee simple determinable): This type of ownership has certain language which will cause the estate to end automatically (i.e. “so long as,” “until,” “while,” “during,” etc.).
      1. Example: Olivia to Prairie Lakes Church so long as the premises are used for a church.
      2. Example: Olivia to Abigail in fee simple so long as she does not marry again.
      3. In both these instances, the grantee has a fee simple determinable, and the remaining interest is called possibilities of reverter, which is the right of the grantor to the parcel upon breach of the condition.
      4. However, any such possibilities of reverter are extinguished 21 years from recording of the deed creating these interests unless the claimant filed a verified claim in the recorder’s office. Lowers v. United States, 663 N.W. 2d 408 (Iowa 2003).
    2. Fee simple on condition subsequent: This type of ownership has certain language which will cause the estate to end if the prior owner enforces the issue (i.e. “upon condition,” “but if,” or “provided,” etc.).
      1. Example: Olivia to Prairie Lakes Church on the condition that the property is used for church purposes and if it is not used for church purposes, then Olivia reserves the right to re-enter and re-take.
    3. Executory Interest: In either of these examples, the prior owner can essentially “assign” his/her ability to a third party, which is called an executory interest. So, for example, Olivia to Abigail but if the property is used for a gas station, then to Tex. Tex would have the executory interest.
  4. Life Estate: A life estate is an interest in real or personal property that is limited in duration to the lifetime of its owner (or another designated person/persons).
    1. Classic Example: Olivia to Abigail for life, then to Tex. Abigail has a life estate and Tex has a vested remainder
    2. Pur Autre Vie Example: Olivia to Abigail for the life of Tex. Abigail has a life estate for the life of Tex. This is called a “pur autre vie,” which is a life estate measured by the life of a person other than the grantee.
  5. Fee Tail: A fee tail estate was abolished in Iowa over 130 years ago. Fee tail language like “O to A and heirs of her body” would not be interpreted to be refer to heirs who are the lineal descendants but not adopted of the grantee. See Skogg v. Frdell, 332 N.W. 2d 333 (Iowa 1983); Pierson v. Lane, 14 N.W. 90 (Iowa 1982). (If you encounter this in an abstract, I’ll buy you a cup of coffee!).
  1. Non-Freehold Estate: A non-freehold estate is a lease where the tenant has the exclusive right to possess real estate during the term of the lease. See Iowa Code §622.32(3). Leases will be discussed in more detail in a future module.
  1. Adverse Possession: Adverse possession involves a change in legal ownership to real estate without any payment and against the wishes of the titleholder of record. This is different than squatters’ rights but will be discussed in detail in a future module.
  1. Encumbrances:
  1. Background: There are a variety of encumbrances shown in the public records that reflect someone other than the owner of record has a right or interest relating to the property. This might include easements, leases, mechanic’s liens, mortgages, fixture filings, judgment liens, tax liens, covenants and the list goes on. This outline is only going to highlight a few of these encumbrances (easements, fixtures, liens and covenants).
  2. Discriminatory Restrictions on Land Use: Federal and state law provide certain types of zoning and covenant.
    1. Federal: The federal Fair Housing Act prohibits discrimination in the selling, renting, lending or insuring of residential property on the basis of race, color, religion, gender, disability, family status or national origin.
    2. State: States may provide additional protections of protected categories. For example, Iowa Code §216.8 adds sexual orientation to the list of protected classes.
    3. City: Cities likewise can provide even additional protections of protected categories. For example, Iowa City adds marital status as a protected category.
    4. KEY: Local governments can always provide more protections than the federal law but can never remove categories from the federal law.
  3. Easements: An easement is a non-possessory right to enter and/or use the land in the possession of another; it obligates the possessor not to interfere with the uses authorized by the easement. Restatement (Third) of Property: Servitudes 1.2(1) (2000). An easement is different from license, which is the right to enter property for a specific purpose where the right can be revoked at any time.
    1. Creation: An easement can be created in several different ways:
      1. Prescription (Adverse Possession): A court can create an easement via adverse possession as described elsewhere in this outline and in other modules. See Iowa Code §564.1.
      2. Implication: A court will imply an easement where 1) previous use was apparent and 2) the parties expected the use would survive division because it is reasonably necessary to one of the parcels.
      3. Necessity: A court will create an easement where 1) there is a necessity and 2) the two parcels immediately previously had the same owner. Unlike an easement by implication, an easement by necessity is only available to the immediate parties to the transaction (i.e. a grantor conveys a landlocked parcel and easement must be granted to grantee to give access to the public road).
      4. Grant: Private parties can create an easement by putting the terms in writing—by granting one another certain rights. The easement must be recorded if it is to be enforceable against future parties. See Iowa Code §622.32(3).
      5. Easement by Estoppel: A court will imply an easement when the claiming party has expended substantial amounts of labor/money in reliance on consent or an oral agreement that is now disputed.
    2. Types of Easements:
      1. Easement apparent: This type of easement is the most classic example. A servient estate gives usage to the dominant estate. In other words, a non-landlocked parcel would give usage to a landlocked parcel. This type of easement “runs with the land” which means it continues in perpetuity to future purchasers of either parcel.
      2. Easement in gross: An easement in gross belongs to a specific person and typically does not “run with the land” (except for some commercial easements).
      3. Negative easements: Negative easements (sometimes known as air, light, or view easements) are being used with increasing popularity to ensure undesirable construction does not occur that blocks a view. Zoning and covenants can also provide some protections.
        1. Solar energy users may petition administrative review boards if an adjoining landowner refuses to negotiate a solar access easement. See Iowa Code Chapter 564.
        2. Small wind energy systems are able to connect with electric utilities throughout the state. See Iowa Code §476.48.
        3. Just because there are windows overlooking land will not allow for an easement for light and air. See Iowa Code §564.2.
      4. Notice: While express easements are subject to the recording acts, the purchaser of the servient estate (the one GIVING the usage) is required to provide notice of the easement. If an easement is recorded, it is binding on all subsequent purchasers for value without actual notice.
      5. Extent of Easement Disputes: An easement owner may not use the easement for the benefit of additional land. The easement owner has the duty to maintain and repair the easement. The property owner can use the easement to the extent such use does not interfere with the easement owner’s use. If property owners share use of private roads as ways of necessity, then all owners shall be required to contribute equally to maintenance (unless agreed otherwise in a recorded document).
    3. Fixtures: A fixture is an item of personal property that has become part of the real property on which it is situated.
      1. No single factor determines whether something is personal property or real property, but rather here are the tests:
        1. Annexation Test: Can the item be removed without damage to the surrounding property?
        2. Adaptation Test: Has the item been adapted to the surrounding property?
        3. Intention Test: Was the intention of the parties for the item to stay with the property?
      2. A fixture passes with title to real property (whereas personal property does not).
      3. A creditor may file a fixture filing to create a security interest in fixtures. See Iowa Code §554.9502 and §554.9102. (Example: A homeowner has a water softener installed and is going to pay for it in monthly payments. The installer has the homeowner sign a security agreement which the installer files as a UCC financing statement which then become a lien on the property).
      4. Whether or not an item is a fixture can become an issue during a mortgage foreclosure because a homeowner who is foreclosed upon may not remove fixtures from the property.
      5. There are special categories of fixtures that are typically involved in leases (i.e. installed by the tenant at the tenant’s expense). Ideally the lease will specify the conditions surrounding these items.
    4. Liens: Each of these four types of liens will be discussed in detail in future modules, but the below is an overview.
      1. Judgments (Iowa Code 624.23): Any judgment against a titleholder becomes an automatic lien against any real estate owned by the judgment debtor.
      2. Mechanic’s Liens (Iowa Code 572): A mechanic’s lien may be necessary to secure payment from a homeowner for services that furnish materials or labor for a building or improvement on the property.
      3. Tax Liens (26 USC 6321, Iowa Code 450.7, Iowa Code §422.26 and many others): Not surprisingly, unpaid federal or state taxes of many different varieties can become a lien on real estate.
      4. Mortgages: A mortgage is a voluntary conveyance of a security interest in land, intended by the parties as collateral for repayment of a debt.
    5. Covenants: A covenant is a promise to do (or not do) something relating to the land.
      1. How is it not an easement? It does not convey a property interest, but rather it is a contractual limit or promise about land.
      2. What about zoning? If zoning and a covenant are in conflict, the zoning regulation will prevail.
      3. What is required? In order to be enforceable, a covenant must be created by the grantor and must be in writing (i.e. satisfy the Statute of Frauds). Today, covenants are routinely filed with subdivision plats to protect all of the property in the subdivision. See Iowa Code §558.11 and Iowa Code §558.41.
      4. The Doctrine of Equitable Servitudes: Even without recorded restrictions, there can be restrictions implied in deeds when there is a clear pattern or scheme of development. This doctrine has been imposed when in a residential subdivision, restrictions were contained in prior deeds conveyed by a common grantor, but some subsequent grantees were given deeds containing no such restrictions. If at the inception of subdivision, there was a common scheme of development and the unrestricted lot holders had notice of the common scheme, a court will imply those restrictions into the deeds of unrestricted lot holders. The building restrictions are viewed as a protection of the property owner and the public, rather than a restriction on use. In a subdivision, they protect property values by increasing the desirability of those lots as residences.
      5. Length of Time: Covenants, whether filed as a part of a subdivision plat or filed independently, are typically valid for 21 years from the recorded date. Covenants can be extended for an additional 21 years if a verified claim is filed before its expiration. See Iowa Code §614.24. (Note: A subdivision plat may contain covenants and restrictions that are not “use” restrictions. Any non-use restriction will survive beyond the 21-year deadline and will exist indefinitely). Covenants with illegal portions are invalid and unenforceable as to that portion (i.e. racially restrictive covenants are invalid but would not automatically invalidate remaining covenants within the same document).
Monday, December 06, 2021
  • Patrick B. Dillon
  • Jill Dillon
Dillon Law PC
Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
Dillon Law PC
Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill is the assistant Fayette County Prosecutor and a certified family law mediator. Jill still has ties to her family farm operation which includes a dairy herd. Jill Dillon focuses on bankruptcy, adoptions, and mediations.

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