President Joe Biden’s administration is looking to help eliminate some of the ownership and succession issues that arise for many agricultural producers that inherit land. Agriculture Secretary Tom Vilsack announced the establishment of the Heirs’ Property Relending Program (HPRP) at a press conference July 29.
Through this program, the United States Department of Agriculture (USDA) will oversee the distribution of $67 million in competitive loans.
“While those affected are in all geographic and cultural areas, many black farmers and other groups who have experienced historic discrimination have inherited heirs’ property,” Vilsack said in a USDA press release. “USDA is committed to revising policies to be more equitable, and examining barriers faced by heirs’ property owners is part of that effort. This helps ensure that we protect the legacy of these family farms for generations to come.”
What is Heirs’ Property?
Last will and testament document laying on a desk. The Farm Service Agency considers heirs’ property to be land that is passed down from an individual to subsequent generations. Individuals can do this through intestate succession (without a will) or through a will, in which the real estate assets are divided equally among all heirs.
Robert Tufts, an Alabama Extension visiting professor and member of the farm and agribusiness management team, said there are several succession issues that can occur.
“Heirs’ property creates joint ownership, which means joint management,” Tufts said. “As the number of individuals with an interest in the property increases, agreement on management of the property becomes more difficult.”
According to Tufts, the way to solve the disagreements among owners is through partition, which divides the interests in land. Issues also can occur for those that inherit land through intestate succession.
“If the heirs have taken ownership through intestate succession, they do not have a marketable title,” he said. “Without a marketable title, the owners will not qualify for most USDA programs.”
How It Works
As a part of the HPRP, the FSA will first select a group of qualified lenders to implement the loans.
According to the USDA press release, an entity “must be certified as a community development financial institution and have experience and capability in making and servicing agricultural and commercial loans that are similar in nature”to qualify as a lender for the program.
Once selected, approved lenders will be able to set conditions for items such as rates, terms and the payment structure of the loans. The initial application period will open Aug. 30 and will close in October.
When it comes to borrowers, Tufts said there are some qualifications that they must meet.
“Borrowers must have the authority to incur the debt of the loan,” he said. “They must also be able to resolve ownership and succession of a farm that is owned by multiple owners.”
A qualified borrower must agree to complete a succession plan. They also have to be a family member or heir-at-law related by blood or marriage to the previous owner.
Using the Loans
Heirs’ property is a major part of the program. However, anyone that is a part of a joint land ownership can apply for the loan program. Attaining the property through the traditional methods of heirs’ property is not a requirement for the program. There are some stipulations on how producers can use the funds from the HPRP loans.
“HPRP will provide loans to landowners and farmers to help clear heirs’ property issues,” Tufts said. “The loans can cover items like legal expenses and the purchase of the interests in the property of other heirs.”
Other costs that people can use the funds for include items such as closing costs, appraisals and surveys. People cannot use the HPRP funds for items such as land improvement, operating costs, acquisition of personal property or similar items.