Crop Contractors: Reap the Benefits of Perfecting a Harvester’s Lien

You plan to do some custom harvesting for one or more farmers this fall, and while you haven’t necessarily worried about being paid for your work in the past, you’ve heard this may be a down year for farm income. How can you ensure you’re first in line to be paid?

Iowa law provides a host of agricultural liens that give suppliers of goods and services to farmers statutory protection of payment for their efforts. We wrote about one of these back in the spring, the landlord’s lien. Others include the agricultural supply dealer’s lien, custom cattle feedlot lien, commodity production contract lien, veterinarian’s lien, lien for services of animals, and the harvester’s lien.

This last one is especially important as we head into our major harvest season, but can be used at other times of the year by a contractor who assists a farmer with “baling, chopping, combining, cutting, husking, picking, shelling, stacking, threshing, or windrowing” a crop—which “includes, but is not limited to, corn, soybeans, hay, straw, and crops produced on trees, vines, or bushes.” A lien is a legal interest in property that secures repayment of a debt, including debt for services rendered. However, perfecting a lien slots you higher in the pecking order of parties to be paid if the market is down or harvest is low, and the farmer can’t (or won’t) pay all their debts. “Perfecting” a lien means filing a financing statement with the Iowa Secretary of State’s office.

The perfection process

Much like the landlord’s lien protects the landlord if the farmer doesn’t pay their land rent on time, the harvester’s lien becomes important if a harvester is not paid for their work within a reasonable time. Under Chapter 571 of Iowa Code, a properly perfected harvester’s lien has priority (must be paid before) over other security interests—such as a bank loan—in the harvested crop, even over a conflicting landlord’s lien.

The harvester’s lien automatically becomes effective at the time services are rendered, but for it to do any good, it must be perfected with the Secretary of State’s office once work begins. It’s best to perfect the lien as soon as possible so it isn’t forgotten. The latest a financing statement can be filed to perfect a harvester’s lien is 10 days after the last date services are provided.

To file a statement, just create a free account through the Secretary of State website, spend about 10 minutes filling out the UCC-1 form online, and pay a minor fee—it’s only about the price of lunch, but the peace of mind it provides is priceless even if it doesn’t become necessary to use the lien to get paid. Just be certain to get the debtor’s name correct—the name on a driver’s license controls if it’s an individual, while the name registered with the Secretary of State controls if it’s an entity (like a business). If this is incorrect, then the perfection is ineffective, and the harvester’s lien has little value.

Protect yourself

Even in a state of 3.2 million people, Iowa’s ag community feels pretty small, and in your own region those in farming probably know just about everyone else. It’s easy to feel guilty about filing any sort of paperwork that could be used in a potential legal dispute with neighbors and friends—even family—since you are inclined to trust them.

Perfecting a lien, though, is less about accusing someone else of not meeting their obligations and more about protecting your own financial interests if the farmer faces circumstances beyond their control. If the farmer you did the work for goes through hard times, the bank might freeze their accounts and seize their crop proceeds as collateral to repay the bank debt, leaving you unpaid.

Or, what if a terrible storm destroys the silo after crops are harvested but before they are sold, and you haven’t yet been paid? The bank will move to collect its operating-line repayment from any insurance paid to the farmer. Without a perfected lien, you might not be paid if there aren’t sufficient funds left over.

Unfortunately, there are also times a farmer may try to renege on payment. A 2019 Iowa Court of Appeals case illustrates this. A father hired and paid by his farmer son to harvest his crops subcontracted the work out to a third-party custom harvester. When nearly 10 days had passed without payment, the harvester filed a financing statement against both father and son. After the son paid the harvester, the father sued the harvester, claiming he wasn’t properly a debtor and that the harvester’s lien had cost him income in commodity contracts.

The appeals court, however, ruled that in acting as his son’s agent and contracting out the work, the father was a debtor for purposes of the lien and was co-responsible for ensuring payment to the harvester.