This article addresses the rights of owners of agricultural land when tenants fail to pay their rent. Generally speaking, if a tenant does not pay the entirety of his rent when taking possession of the landlord’s property (the “demised premises”), the landlord is entitled to a “landlord’s lien” against growing or grown crops to secure his rent. Indeed, §441.280 RSMo. states: “Every landlord shall have a lien upon the crops grown on the demised premises in any year, for the rent that shall accrue for such year…” This lien attaches at the beginning of the tenancy, whether or not the parties have entered into a written lease agreement, and it is enforceable up to the amount of the unpaid rent.
Until recently, the landlord’s lien under §441.280 was superior to all other competing lien interests that may exist in the crop, the classic examples being the interests held by the tenant’s bank, which financed the tenant’s farming operation, and the local agribusiness company, which financed the tenant’s imput costs (seed, fertilizer, spray, etc.). In 2001, the superiority of the landlord’s liens crumbled when the Missouri legislature enacted revisions to Article 9 of the Missouri Uniform Commercial Code (§400.9-010 et seq.), governing secured transactions. These revisions were aimed at bringing landlord’s liens, among other agricultural liens, under the umbrella of UCC Article 9 and placing them on equal footing as “security interests” governed by the Code.
Under Article 9 of the UCC, a “secured party” is defined as a person in whose favor a “security interest” is created or provided for under a “security agreement”. In a typical landlord-tenant scenario, the landlord is the secured party and the security agreement is set forth in a written lease agreement. To “perfect” one’s security interest in certain collateral, such as crops or other farm products of the tenant, the secured party must file a UCC Financing Statement or Form UCC-1 with the Missouri Secretary of State. Once perfected, the secured party/landlord will have a lien interest that is superior to all other unsecured parties and secured parties who may have filed their respective UCC-1s later in time.
In sum, the “landlord’s lien” remains an effective tool to secure rent, but nowadays it operates against only the tenant, secured parties which are owed something less than the total proceeds obtained from the crop, and other unsecured creditors of the tenant. Thus, it is now incumbent on any landlord, who wishes to take a superior lien in the crops growing on his land, to have a written lease agreement which grants him a security interest, and to file his UCC-1 with the Secretary of State. He must take care to ensure that both documents are executed (and the UCC filed) at the beginning of the tenancy. Undue delay can spell disaster, as it affords an opportunity for other creditors to file their UCC-1s first, thereby gaining priority over the landlord.
Because lease preparation and UCC filings are tricky, it would be wise to consult an attorney before renting your farm ground to a perspective tenant. When talking with counsel, be sure to request a lease agreement that grants you a “security interest” in crops and other farm products growing on, or to be raised on your land. Also, be sure to ask about filing a UCC-1, as only a properly perfected security interest will ensure you the best opportunity to collect rent when the tenant fails pay his rent in accordance with the lease agreement.
Jerry Potocnik is an attorney in Blue Springs, Mo. He is licensed in Missouri and Kansas.
