A New Technique to Keep Farmland in Farming: Option to Purchase at Agricultural Value (OPAV)
Sept. 17, 2014
As interest in local and sustainable agriculture develops, organizations involved in agriculture and land conservation increasingly focus their efforts on preserving farmland. Keeping land in sustainable farming generates numerous environmental benefits, including carbon sequestration; rainwater and runoff storage, infiltration, and treatment; wildlife habitat, and more. The question arises: How to assure that preserved farmland remains actively farmed? One new technique: The Option to Purchase at Agricultural Value, or OPAV.
An OPAV is a conservation easement that gives the easement holder the perpetual right, if necessary, to purchase a farm at agricultural value rather than at a price influenced by non-farming market demand. Here, briefly, is how it works. A land trust, or organization that holds conservation easements, acquires an easement on land that is actively farmed. Negotiations with the farmer/landowner include an agreement that the land trust will have the option to purchase the property at its value for agriculture at such time as the owner decides to sell the property. The option is included in the conservation easement deed and is recorded.
Programs in neighboring states, particularly Vermont and Massachusetts, have been developed and are used to promote continuation of farming on lands particularly suited for agriculture. Most commonly, a conservation easement is acquired, held by a local land trust or government agency. The easement document then includes the Option to Purchase at Agricultural Value (OPAV) so that when the farm property is conveyed, the new owner will be an active farmer. In 1992, Massachusetts began implementing OPAVs through the Department of Agricultural Resources’ Agricultural Preservation Restriction (APR) Program. In 2003, Vermont began implementing OPAVs through the Vermont Housing and Conservation Board (VHCB).
There are several reasons a property owner may want an OPAV on their property. The OPAV ensures that farms are transferred from farmer to farmer and remain farmland. The OPAV also helps to ensure the future availability and affordability of farmland and enables access to protected farmland for new and beginning farmers. Additionally, a landowner agreeing to a conservation easement that includes an OPAV receives more money in return for the additional restrictions on their property. By adding the OPAV to the easement, a landowner receives an average of 10-40% more money than a traditional conservation easement.
An OPAV may decrease the value of the underlying fee interest even more than a conservation easement without an OPAV, offering a significant and novel mechanism to make farmland more affordable for new farmers or farmers looking to scale up. However, surprisingly, in Vermont and Massachusetts, farms with OPAVs sold at higher prices per acre than farms without an OPAV. This is likely due to competition for better soils as well as competition among farmers for farmland. Nevertheless, the experience of OPAVs in Vermont and Massachusetts show that new and beginning farmers are receiving the benefits of these laws. In Massachusetts, there have been 4 sales to new and beginning farmers of property with an OPAV. In Vermont, there have been 5 sales to new and beginning farmers of property with an OPAV.
In Vermont, conveyance to a family member or to a “qualified farmer” who plans to continue the farming operation will not trigger the option. In Massachusetts, only sales to a family member are exempt. Once the option is triggered, the land trust or other holder of the option can exercise the option and purchase the property at its appraised value for agriculture. The easement holder will then market the property only to a buyer who plans to continue to use the land for agriculture.
In Massachusetts, the main objective of the APR program is to protect productive farmland through the purchase of deed restrictions and revitalize the agricultural industry by making land more affordable and available to farmers. The program is an opportunity for young farmers entering the business and other farmers in need of additional land to purchase affordable farmland. Additionally, the program works to stabilize farmland values and guarantee the long-term availability of farmland.
In Vermont, the VHCB uses OPAVs to assure that conserved farmland is accessible and affordable to future generations of farmers. Additionally, the program hopes to perpetually protect and preserve agricultural lands, encourage sound soil management practices in accordance with generally accepted agricultural practices, preserve natural resources, maintain land in active agricultural use and make reasonable efforts to assure that conserved farmland is accessible and affordable to future generations of farmers.
The experiences in Vermont and Massachusetts indicate that most conveyances of farm property have in fact been to active farmers and/or family members; the OPAV has only occasionally been exercised by the easement holder.
As with most new techniques, legal and administrative questions arise, and any organization holding easements would need to consider the additional administrative, legal and financial burden assumed by adding OPAV to easements involving farmland. But, the Option to Purchase for Agricultural Value seems like a worthwhile new technique, one that could be a beneficial game changer akin to the development of conservation easements a few decades ago.
For more information about OPAVs or other issues contact BCM Environmental & Land Law, PLLC.