Before You Agree to a Right of First Refusal on Your Farm


Twice in the last week, I’ve had conversations with farmland owners involving the same issue: a right of first refusal.

A right of first refusal can give another person — maybe a tenant, neighbor, or former property owner — the opportunity to purchase your farm before you can sell it to someone else.

And while it may seem harmless when everyone is getting along, it can create problems years down the road.

One landowner I recently spoke with believed his tenant had a right of first refusal to purchase the farm. After reviewing the situation, we discovered the lease didn’t actually include one. That completely changed how he was able to move forward with the property.

Another family owns approximately 200 acres of farmland. Years ago, they sold off the farmhouse and gave the buyer a right of first refusal on all of the surrounding farmland. At the time, everyone probably thought it was a reasonable arrangement.

Twenty years later, the relationship has changed dramatically — but that right of first refusal is still hanging over the property.

That’s why I encourage landowners to be extremely cautious before agreeing to something like this.

A right of first refusal generally benefits the person receiving the right far more than it benefits the landowner giving it away. It can limit your options when you eventually decide to sell and may even create complications for your heirs.

Before signing anything that affects the future sale or rental of your farm, make sure you understand exactly what you’re agreeing to and have the appropriate professionals review it.

Sometimes a decision that seems simple today can have consequences decades from now.

If you’re considering selling farmland, planning for the future, or simply have questions about your options, I’d be happy to visit with you.

You can also request a copy of my book, How to Sell Your Farm for the Most Amount of Money in the Least Amount of Time, using the link below.

https://www.beforeyousellthefarm.com

— Brad Neihouser

765-427-5052

bneihouser@shook.com

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