Farm transactions are diverse and potentially complex. Sometimes the seller and the buyer are both active farmers and the farm is viewed as an ongoing operation. The farm might be reminiscent of the traditional family farm and of modest size, or it may be of immense proportions and operated by a corporate enterprise. Other farms are sold to buyers who plan to divide and sell the land or develop all or part of what had once been an active farm.

The farm offer is potentially a residential offer to the extent that a farmhouse or other living quarters are being sold. It resembles a vacant land offer because every farm includes acres of vacant land devoted to crops, grazing or forest endeavors. It also might be a complex business contract involving the documentation and environmental concerns seen in the commercial and business world. So how can one offer to purchase form begin to address all of these varying aspects of a farm sale?

The answer is that the WB-12 Farm Offer to Purchase is a mixture of provisions drawing upon the best of the residential, vacant land and commercial offers with references to agricultural issues sprinkled throughout. As the Real Estate Contractual Forms Advisory Committee of the Department of Safety and Professional Services nears finalization of a revised WB-12 Farm Offer to Purchase, improvements are being made to provide a better base form for farm practitioners to work from.

Basic Core Provisions

The first order of business was to change the basic offer to purchase provisions so that they mirror the basic provisions of the newest WB-11 Residential Offer to Purchase, as was done with the newly revised condominium and vacant land offers. Real estate professionals want to be able to know that when it comes to the basics, like earnest money, document delivery, financing, and closing prorations, the same basic standards and procedures are found in all the offers approved by the Department. For further discussion of these provisions, review the October 2011 Legal Update regarding the “WB-12 Farm Offer to Purchase - 2012 Revisions.” It is not certain whether the mandatory use date for the new WB-12 will be January 1, 2012 or a later date, but it is expected that it will be available on at least an optional basis by the first of the year.

1 - Farm Customization

The following standard offer features have been customized to fit the
criteria for farm transactions:

• Disclosure Items: The list of items comprising the definition of “Conditions Affecting the Property or Transaction” mirrors, for the most part, the WRA Real Estate Condition Report – Farm. The list includes the disclosure items required in residential transactions, supplemented with items pertaining to vacant land and agricultural concerns. Some of these additional items address issues such as boundary lines, fence issues, hazardous and toxic substances disposed of in farm dumpsites, crop damage, livestock disease, pollutants or other irritants emanating from neighboring properties, livestock siting violations, manure storage facilities, and exclusive ag or farmland preservation zoning.

• Title Timeline: The deadline for the provision of the title commitment will be “not more than ‘X’ days after acceptance (‘15’ if left blank)” to allow the parties to evaluate any title concerns early in the process before investing in any expensive inspections, testing or site assessments.

2 - Updated Provisions

Some of the provisions in the existing farm offer have been given a facelift and updated to reflect current legal standards.

• Revised Well System Inspection Contingency: This provision was modified to conform to the Wis. Stat. § 280.30(3) change eliminating master plumbers as appropriate well inspectors.

• Revised Private Onsite Wastewater Treatment System (POWTS) Inspection Contingency: What once was the Private Sanitary System Inspection Contingency is now the improved POWTS provision. In addition to the terminology update, the list of qualified professionals and the inspections standards reflect the current standards and code requirements from the Safety and Buildings Division POWTS program. A POWTS inspection report satisfying the contingency must indicate that the POWTS complies with the code that was in effect when the system was installed, that the POWTS is not disapproved for current use, that it is hydraulically functional, and that it maintains vertical separation from limiting conditions such as groundwater and bedrock, per current code.

• Umbrella Grouping of Well Water, Well System, POWTS, Environmental Site Assessment and Inspection Contingencies: The Well Water, Well System Inspection, POWTS Inspection, Environmental Site Assessment and Inspection contingencies are all grouped together and share the Contingency Satisfaction and Right to Cure subsections that relate to all five contingencies.

3 - New Farm Features

 New additions to the WB-12 include a provision for confirmation of zoning, a contingency whereby the buyer may assess the various government and land use programs applicable to the property and new contingencies for an environmental site assessment and a map of the property.

• Zoning Classification Confirmation: Rather than rely on the seller’s representations, the buyer may seek verification from municipal zoning officials confirming the zoning or that the applicable zoning allows a specified use. Farms may include multiple zoning classifications and farmers may be uncertain of the specifics. This may be an important inclusion for any buyer contemplating land division or development.

• Government Programs Contingency: The new optional contingency provision asks the seller to deliver a list of all conservation, environmental, governmental or land use programs, agreements, restrictions or easements that apply to the property along with a list of penalties or fees that are pending or deferred. Many of these programs involve requirements that the owner must meet and penalty provisions that are triggered by early withdrawal from the program or conveyances in violation of program rules. The buyer has seven days from the buyer’s “actual receipt” (which is defined in the offer) of the information to decide whether to terminate the offer. If the buyer moves forward, the buyer must reimburse the seller for any fees and penalties charged to the seller as a result of the buyer’s failure to participate or adhere to program guidelines and restrictions. This provision gives the buyer an opportunity to see what programs and fees apply to the property, and what penalties and fees may apply should the land be developed.

• Managed Forest Land (MFL) Notice and Disclosure: Wis. Stat. § 710.12 establishes disclosure requirements for the sale of property that will continue to be subject to a Managed Forest Land order after the sale. The seller must provide written disclosures no later than 10 days after acceptance that include Division of Forestry contact information and specific mandatory language: “Changes you make to property that is subject to an order designating it as managed forest land, or to its use, may jeopardize your benefits under the program or may cause the property to be withdrawn from the program and may result in the assessment of penalties.” If the property will continue in the MFL, the parties may check the box for this optional provision and accomplish the required disclosure.

• Farm Programs Information: Brief educational information is provided about the Use Value, Farmland Preservation, and Conservation Reserve Programs: a change in the use of the property could trigger substantial penalty fees under these programs. County shoreland zoning and mitigation plans are also explained. These items alert the parties to help make sure they are not caught unaware.

• Environmental Site Assessment Contingency: Because farmers over the years have been notorious for “burying stuff,” such as containers of toxic chemicals and other hazardous substances on the farm, often in one or more informal “dumps,” the WB-12 now includes a specific Environmental Site Assessment contingency. This provision provides the framework and standards for a Phase I Site Assessment. The components of an Environmental Site Assessment are described in the definitions section.

• Document Review Options: This new provision, similar to the provision in the WB-15 Commercial Offer, gives the buyer the opportunity to request a wide range of paperwork. What a buyer might select will depend upon the buyer’s planned use. Inventories clarify what is included and help avoid disputes at closing, while the operational records of a dairy farm will be useful only if the buyer is continuing the ongoing operation. Another optional choice is to request records pertaining to transfer of development rights (TDR).

• Land Use Approval: This provision is similar to the provision in the vacant land offer. This contingency gives the buyer the opportunity to secure any rezoning, conditional use permits, licenses, variances, as well as building and occupancy permits needed for the buyer’s proposed use.

• New Map of the Property Contingency: The buyer selects the desired map components by striking out unnecessary elements and writing in other criteria not mentioned in the list of prompts, thereby customizing the map. The contingency fails and the offer is null and void if the buyer delivers a copy of the map and written notice identifying any encroachment, material inconsistency, or failure to meet the map contingency requirements to the seller.

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.