Landlord’s Liens: Cheap, Easy, but Time-Critical Insurance 

Posted on: February 9th, 2024 by

Iowa, being an agricultural state, has many ag-specific laws on the books, from increased protections for farmers facing foreclosure to laws barring restrictions on agricultural experiences like farm-to-table dining. One important but underused protection for ag industry participants is Iowa’s array of agricultural liens. Today we’ll discuss one of those liens: the landlord’s lien.

What’s a Lien?

Many people have an intuitive understanding of liens even if they might not know the terminology or the underlying legal mechanics. A lien is simply a legal interest in property that secures repayment of a debt. If you bought a car and financed it the lender would put its name on the title to note its lien. If you buy a house your mortgage is a lien on it that gives the bank the right to sell your house to pay the debt if you don’t make the payments. A landlord’s lien is in the same vein: it gives an agricultural landlord an interest in the crops grown on the property or other items stored on the property (equipment, livestock, grain stored in bins) to secure payment of the rent.

What Good Does a Landlord’s Lien Do for Me?

A landlord’s lien protects the landlord in case the tenant is unwilling or unable to pay the rent when it’s due. Clearly if all the rent is due up front a landlord’s lien isn’t necessary, but if say half the rent is due in the fall, or it’s a crop share lease, or it’s a flex lease with payments due later, or in just about any other scenario, a landlord’s lien is a best practice. If the rent isn’t paid when due then the landlord can seize and sell the crop or other collateral, sell it, and get paid, rather than being forced to sue and then try to collect. Even better though, an Iowa landlord’s lien has priority over (aka gets paid before) most other liens, most often the bank’s blanket lien on the tenant’s crop, equipment, and other collateral. If there’s not enough money to pay everyone a landlord’s lien helps a landlord ensure they won’t be left out in the cold.

I was involved in a case where a farmer was unable to pay the rent and there were two creditors with security interests (another type of lien) in the crop. Had the landlord perfected their landlord’s lien the landlord would have had the senior lien on the farmer’s crop and would have been paid in full. Since that didn’t happen the landlord had to accept the small payment that the other two creditors chose to offer. Not perfecting their landlord’s lien cost this landlord tens of thousands of dollars.

Okay, You’ve Convinced Me, I Need a Landlord’s Lien. How Do I Get One?

If you’re an Iowa ag landlord then you automatically have a landlord’s lien. The statute creates this along with the landlord-tenant relationship. However, that lien lacks most of its power (including the power to jump to the head of the priority line) unless it is perfected in a timely manner. “Perfection” sounds like a fancy legal maneuver, but it’s really a simple matter of filing a short form with the Iowa Secretary of State and paying a fee of $25 or less. Iowa State University’s Center for Agricultural Law and Taxation has an excellent blog post on perfecting landlord’s liens that includes the steps for doing it. If you want more help Ag & Business Legal Strategies can perfect your lien for you or teach you how to do it yourself. However, don’t wait! Under the law you only have 20 days after the tenant takes possession of the premises to perfect the lien otherwise it loses its superpriority status. For crop leases where the tenant takes possession on March 1 that means perfecting no later than March 21. You have to be on the ball to get the most advantage out of your landlord’s lien.

I Trust My Tenant & I Don’t Want to Ruin Our Good Relationship.

Landlord-tenant relationships are often long-standing and based on mutual trust. You may have every reason to believe your tenant will make the fall rent payment. Even then, it’s still wise to perfect your landlord’s lien because the decision to pay you might not be within your tenant’s control. If the tenant goes through hard times the bank might freeze the tenant’s bank accounts and line of credit and take all the tenant’s revenues, leaving you hung out to dry. Maybe your tenant dies and their heirs aren’t as trustworthy. Maybe they get sick. Who knows what could happen? If you perfect the lien but don’t need it you can always release it or decline to enforce it, but if you need it but didn’t prefect it then you’re out of luck. Perhaps the best way to explain it to the tenant is that the landlord’s lien isn’t a sign that you don’t trust them, it’s just taking the necessary steps to legally protect your interests in case something goes wrong, and that it’s more about protecting you from other people (or banks) than protecting you from the tenant. If the bank’s done its homework and protected itself but you as the landlord haven’t, the bank will win and you will lose, and I think all landlords and almost all tenants would prefer the landlord to win over the bank. 

What Should I Do Next? 

Once your tenant takes possession go ahead and file your landlord’s lien. If you’re not sure about how to do it or have questions contact Ag & Business Legal Strategies ASAP. We can teach you how to do it or do it for you. However, the clock is ticking, so don’t delay! If you missed the deadline it’s still worth it to perfect your landlord’s lien after that, you just don’t get the superpriority discussed. And even if you’re not a landlord, if you’re in the ag sector there’s a good chance Iowa has some other statutory lien that could help you. Contact Ag & Business Legal Strategies today to learn more about other Iowa statutory agricultural liens. 

At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our attorneys and financial strategist will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy. Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow.

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