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Farmers' Guide to MN Lending

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Farmers' Guide to MN Lending Farmers’ Guide to Minnesota Lending Law Third Edition, March 2019 Farmers’ Legal Action Group, Inc. Farmers’ Guide to Minnesota Lending Law Third Edition, March 2019 Written by Stephen Carpenter Edited by Lindsay Kuehn This publication was made possible with the generous support of: Legal Services Advisory Committee Otto Bremer Trust Farm Aid Individual contributions from FLAG supporters To support FLAG’s work and publications like this one, please click here to make a tax-deductible donation. PUBLISHED BY Farmers’ Legal Action Group, Inc. 6 West Fifth Street, Suite 650 St. Paul, Minnesota 55102-1404 www.flaginc.org [email protected] Text © Copyright 1996, 2003, 2019 Farmers’ Legal Action Group, Inc. This Guide may be reprinted for educational purposes as long as Farmers’ Legal Action Group, Inc., is credited when reprinting. Cover photo © Debby Juarez. Acknowledgements Stephen Carpenter wrote the first edition of this Guide, published in 1996. David Moeller updated and revised the Guide for its second edition in 2003. Stephen Carpenter again wrote this third edition. Lindsay Kuehn provided significant research and edited the entire Guide. Lynn Hayes provided helpful thoughts and insights. Excellent research and editing assistance came from Ellie Bastian, Taylor Gess, Jessica Irwin, Sloan Kessler, and Karen Krub. Wendy Reid managed the production of the Guide. Her work included the copyediting, layout, and oversight of the publication process. The team of people here, along with the funders listed on the title page, have contributed to a product that is intended to help thousands of Minnesota farmers understand their legal rights and, hopefully, despite challenging economic times, help keep their families on the land and preserve their farms. Scott W. Carlson Executive Director Farmers’ Legal Action Group March 2019 Dedicated to the memory of Lou Anne Kling. A member of FLAG’s first Board of Directors, Lou Anne was a strong farm activist, and a tireless advocate for Minnesota farm families. TABLE OF CONTENTS Page Chapter One - Introduction ..................................................................................................... 1 I. Credit and farming ................................................................................................................ 1 II. Keeping a written record of credit arrangements .................................................................. 1 A. Keep copies of documents ................................................................................................ 2 B. Put important contacts with creditors in writing ........................................................... 2 C. Verify what is sent and received ....................................................................................... 2 D. Document telephone calls and conversations in writing ................................................. 2 E. Keep E-mails .................................................................................................................... 2 III. Getting help — attorneys and advocates ............................................................................. 3 A. Minnesota Farm Advocates .............................................................................................. 3 B. Attorneys .......................................................................................................................... 3 1. Looking for an attorney ....................................................................................................... 3 a. Experience in helping farmers .................................................................................. 4 b. Willing to sometimes say they don’t know ............................................................... 4 c. Trustworthiness ........................................................................................................ 4 d. Reliability .................................................................................................................. 4 2. Be clear about the work to be done and the cost .................................................................. 4 C. Legal referrals .................................................................................................................. 4 IV. What this Guide covers ......................................................................................................... 4 A. Some agreements must be in writing .............................................................................. 5 B. Real estate debt ................................................................................................................ 5 C. Secured credit ................................................................................................................... 5 D. Unsecured credit ............................................................................................................... 5 E. Leases ............................................................................................................................... 6 F. Mediation ......................................................................................................................... 6 G. Bankruptcy ....................................................................................................................... 6 H. Taxes................................................................................................................................. 6 I. Alternative Dispute Resolution (ADR) ............................................................................ 6 J. Usury ................................................................................................................................ 6 K. Scam artists targeting farmers ......................................................................................... 6 L. Glossary ............................................................................................................................ 6 V. Current through November 30, 2018................................................................................... 6 Farmers’ Guide to Minnesota Lending Law Table of Contents Farmers’ Legal Action Group, Inc. i Chapter Two - The Statute of Frauds ....................................................................................7 I. Introduction ..........................................................................................................................7 II. What agreements must be in writing ....................................................................................7 A. Agreements that cannot be completed within one year must be in writing .....................7 B. Agreements to transfer land must be in writing .............................................................. 8 C. Lease of land for more than one year must be in writing ................................................ 8 D. Lease of goods with total payments of $1,000 or more must be in writing..................... 8 E. Agreements to lend money must be in writing ................................................................ 8 F. Sale of goods for $500 or more must be in writing ......................................................... 9 G. Most security agreements must be in writing .................................................................. 9 H. Others ............................................................................................................................... 9 III. If the agreement is not in writing ....................................................................................... 9 Chapter Three - Mortgages and Contracts for Deed ....................................................... 11 I. Mortgages and contracts for deed — a basic introduction .................................................. 11 A. Mortgages ........................................................................................................................ 11 1. There are typically two documents in a mortgage transaction .................................. 12 a. Promissory note ....................................................................................................... 12 b. Mortgage .................................................................................................................. 12 2. Satisfaction of mortgage ............................................................................................. 12 B. Contracts for deed ........................................................................................................... 13 C. Differences between mortgages and contracts for deed ................................................. 14 1. Buyers can lose money already paid if a contract for deed is canceled ...................... 14 2. Contracts for deed can allow sellers to act more quickly after default ...................... 14 3. Income tax differences ............................................................................................... 15 4. Mortgages can give sellers finality ............................................................................. 15 5. A contract for deed may be cheaper for the buyer ..................................................... 15 II. Mortgages and contracts for deed — basic terms................................................................ 15 A. Real Property, personal property, and fixtures ............................................................... 15 1. Real property vs. personal property ..........................................................................
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