Navigating Due Diligence on an Agricultural Parcel

*****Your feedback helps us improve! Please take 2-minutes to complete a short survey after reading this resource. As a bonus, you’ll receive a FREE downloadable copy of “The Farmers’ Guide to Business Structures.” Simply click the “Give Feedback Here” button at the bottom! *****

Due diligence is the process of conducting legal research to assess whether a parcel of land will meet your business and personal needs. Anyone can conduct due diligence: whether you are interested in buying or renting land, already own land and are wondering about starting a new business venture, or are planning for succession. The due diligence process will give you key insights into the legal character of the land so that you can plan accordingly without running into surprising zoning conflicts, easement restrictions, boundary disputes, and more. Essentially, this process will help you identify risks so that you can make informed decisions about how to manage them as you move forward with your land dreams.

Our guide Basics of Due Diligence on an Agricultural Parcel walks farmers through the most important questions to ask during the due diligence process. Take a moment to start there for the basic information. In this guide, we will explore what it looks like to actually get answers to those questions. How do you actually go about conducting due diligence research? Of course, there are attorneys, title insurance companies, and surveyors who will conduct part or all of the due diligence process for you– you can pursue that option if it suits you. But if you’re a farmer who wants to conduct the due diligence process yourself, or would like more information before investing in professional support, this guide is for you.  For an interactive learning experience on your own schedule, check out our self-paced course Asking Important Questions About an Agricultural Parcel.

Getting started

To begin, let’s review the basic questions that we covered in Basics of Due Diligence on an Agricultural Parcel. You can use these questions to guide your due diligence research. Asking these questions will help you gain a fuller understanding of the ways your vision might be supported or inhibited by the legal relationships of your land. Here are some questions to start with:

• Will the zoning code allow me to do what I want on this land?
• Where are the property lines?
• Are other people using the land?
• Are there any easements on the property?
• Are there any encumbrances on the property?

In the sections below, we will explore how to actually answer these questions by calling upon the experience of a friend of Farm Commons, Kate, who did due diligence research on family land recently inherited from their grandfather. You’ll see quotes of their tips and experience interwoven in the sections below.

Question #1: Will the zoning code allow me to do what I want on this land?

Many questions and concerns about potential land use will involve understanding zoning regulations that apply to the land in question. Not all land in the United States is under a zoning code, but the majority of farmers will find that zoning affects their property. Zoning may be handled at the local/municipal or township level, the county level, or according to state statute. Zoning codes detail what kind of activities are permitted on different parcels of land, generally by geographic area. These codes are official documents managed by boards or commissions who are often elected to the position. (The exception involves parcels governed by state land use regulations which are akin to zoning but are not exactly that. State regulations are controlled by acts of the legislature, who are also elected to the office. The majority of farmers nationwide will find the use of their land is controlled by a local zoning entity.) The zoning commission will use the zoning code to determine if activities like construction, events, subdivision, retail sales/ businesses, and building modifications can happen on a given parcel of land.

So how do you learn what zoning regulations apply to the land you want to use? We’ve distilled it down to a 7 step process:

1. Identify relevant issues from your business plan (i.e. activities you aren’t sure would be allowed, such as events on the farm and value-added good production)
2. Locate your zoning code by researching the property on a zoning map
3. Understand the zoning districts
4. Review allowed/disallowed and accessory uses to understand where your plans fit in
5. Review conditional uses or special uses to see if your plans may require specific permits
6. Pay attention to definitions as every word matters
7. Review specific requirements for your desired activities

For further support with zoning, read Strategies for Navigating Zoning Codes and Challenges which provides detailed guidance on each of these steps as well as tips for navigating a situation where your business plans are not explicitly permitted by the zoning code.

Question #2: Where are the property lines?

An accurate understanding of the property boundaries helps prevent disputes with neighbors, ensures compliance with local zoning laws, and can be essential for any future development or improvements.

Understanding property lines plays a big role in complying with zoning law. Zoning laws define setbacks, or the distance a structure needs to be from the property line or road. Ignoring these setbacks when planning new construction could lead to fines or even needing to remove a structure that does not comply with the setbacks. When it comes to neighbors, a shared understanding of boundary lines will help protect you from encroachment. An encroachment happens when something from one property, like a fence or building, crosses onto a neighbor’s land without permission. Encroachments can lead to boundary disputes between property owners and may require legal resolution.

So, how can you understand where the property lines actually are? Hiring a land surveyor is the best way to get the most accurate answer on the current property boundaries of the land in question. A land surveyor will create a land survey, which is a detailed measurement and mapping of a property’s boundaries. It identifies corners, lines, and physical features, and records them in a legal document. There are two types of land surveys that could be helpful here:

Boundary Survey: Defines the property lines and corners of your land (most common type)
ALTA/NSPS Survey: A detailed survey often required for commercial properties or real estate transactions. It includes boundary lines, improvements, and potential encroachments.

An updated land survey is the shortest path to legal resilience, but it is also expensive. A survey for a half-acre lot might cost $500-1500. A survey for a ten acre lot might be upwards of $5000. This may be an unavoidable cost if you are trying to buy land, as some mortgages require a property survey. But if you aren’t required to get a land survey, is it still worth investing in?

Again, it depends on what is important to you. If you know you want to do construction or make modifications to the property, a land survey will probably be worthwhile before you start that project– especially if the construction is happening close to the edge of your property. If you have reason to believe there is already an encroachment on the property lines, it may be worth it to get that resolved.

Try this: Check your local land records for a recent land survey.

Your town or county website will probably have a digital collection of land records. You can search these using the name of the current or past landowner and find all records relevant to that property. It is possible you’ll find a recent boundary survey of the land you want to work with. If you are able to, you could print out the survey map and bring it with you as you walk the property. You may be able to find the physical markers left by the last surveyor, which could help increase your confidence that the recorded property lines match the property lines in reality. Speaking to neighbors about their understanding of the property lines, or recent surveys on their land, could also help you piece together a picture of your property.

From Kate: I was not able to find a recent survey in the land records for my grandfather’s property. I did find a recent tax map, which I was able to print from the land records for a couple dollars. Optimistically I headed into the woods, hoping that the boundary line I saw on the map would appear on the physical land in some form. Wishful thinking. I did find a stone wall near where I expected the property line to be, but there are so many old stone walls in New England that I was not confident this particular stone wall meant anything. My grandfather had owned the land since 1958. Given how much can change in that time, the best thing for my family to do is consider investing in a land survey to get an accurate picture of the property.

I also want to acknowledge that not everyone will be able to walk the property or feel comfortable doing so. I felt this as I bushwhacked into the woods alone. I am a female-bodied, visibly androgynous person with bright pink hair, and generally would not feel safe in rural backwoods. My family connection to the land and neighbors offered a sense of safety, but this is a rare and privileged position for people to be in when conducting due diligence research.

As Kate mentions, showing up to walk the land or visiting county offices in the pursuit of due diligence might feel hard or unsafe for you. The emotional toll of due diligence research is a valid consideration as you prioritize these questions. Is there someone who could join you in visiting county offices or walking the land to increase your security? It’s also possible that understanding where your property lines are is not a priority for you right now. This could be true if you don’t have construction plans, or if you have no reason to believe encroachment is happening on your property. In that case, you could return to this particular due diligence question down the road.

Question #3: Are other people using the land?

When researching a property or trying to understand your own property better, it’s important to understand all the ways the land is currently being used. Specifically, ways the land is being used without the knowledge or consent of the landowner. There is an uncommon but risky legal issue here: adverse possession. Adverse possession is a legal concept where someone may gain ownership of a property if they have occupied and used it openly, continuously, and without the owner’s permission for a specified period of time, which varies by jurisdiction (but is typically 10+ years).

This is a surprising concept– someone can legally take land by using it illicitly for years? Where is the logic there? States vary in how they recognize adverse possessors, but those that do use the concept of adverse possession to encourage the productive use of abandoned or neglected land. For your purposes in doing due diligence, investigating the possibility of an adverse possessor on the land you want to use will help you avoid a legal mess down the road. Here are some ways to determine if adverse possession is occurring on the land:

• Observe the land. Look for signs of use or occupancy by someone other than you, the current owner, or authorized tenants. This could include structures, fences, gardens, or other indications of human presence.
• Review property records. Check the property records at your local land records office. Look for any unusual or conflicting information, such as multiple claims to ownership.
• Talk to neighbors. Engage with your neighbors. They may have information about who has been using the land and for how long. They might also be aware of any disputes or claims related to the property.
• Look for signs of occupation. Look for indications of continuous occupation, such as a maintained garden, structures, or other improvements. Evidence of regular use over an extended period can be an indicator.

If you find signs of land use that you can’t explain, consider seeking legal advice from a qualified real estate attorney. They can guide you on the appropriate steps to take based on your specific situation and local laws.

Question #4: Are there any easements on the property?

As you work towards actualizing your land and business dreams, there are a number of legal issues that could slow you down or require you to change your plan. These legal issues fall into two buckets: easements and encumbrances.

An easement grants someone the right to use or access a portion of your property for a specific purpose, even though they don’t own the land. Easements can be created for various reasons, such as utility companies needing access to power lines or neighbors requiring a pathway across your property. There are many different types of easements. Below are a few that are most likely to impact farms.

• Utility Easements: Utility companies may have easements to access and maintain utility lines, such as electrical, water, or gas lines, that pass through or near a farm.
  Road and Access Easements: These easements grant others the right to use a specific pathway or road that crosses the property, providing access to neighboring parcels or public roads.
• Conservation Easements: A conservation easement is a legal agreement that limits certain uses or activities on the property to protect its natural or cultural resources. This can affect how the land is managed for farming.
• Prescriptive Easements: In some cases, neighboring landowners may claim a prescriptive easement if they have historically used a portion of the farmer’s land without objection. This can include pathways, water rights, or other uses.
• View or Scenic Easements: These easements are designed to protect a particular view or landscape, which can limit certain activities or structures that may obstruct the designated view.
• Grazing Easements: These easements may allow neighboring landowners to graze livestock on the farmer’s property. Specific terms and conditions would be outlined in the easement agreement.

If there is an easement on the property you want to use, it is important to understand 1) what it allows other people to do with the land and 2) what it prevents you from doing. For example, utility companies may need to dig up pipes when conducting maintenance. Knowing where the utility easements are on your property will help you make informed decisions about where to plant valuable crops. A conservation easement, on the other hand, could severely restrict your ability to modify the land in any way.

How do you know if there are easements on the property? You’ll need to find where land records are held in your town or county. Land records are the collection of leases, purchases, taxes, surveys, and other legal documents related to a piece of land. Local governments are responsible for maintaining land records for each parcel of land in their district. These files are publicly available. Where to find them will vary depending on where you live: in much of the United States, land records are tracked by county governments. In New England, town governments typically hold the land records. At this point most land records are digitized, so you may be able to access the records for your land without leaving your house.

From Kate: I needed to look at the land records when doing due diligence for my family’s land. Primarily, I wanted to know if there were any easements. I took a trip to the Colebrook Town Hall and found myself in the basement with the town clerk. She walked me through their online land records database, where I was able to search all land records associated with my grandfather’s name (note: you may need the last name of the current owner to search land records databases). I was able to filter the search to look only for documents categorized as easements. Nothing came up. Easy enough– no easements on my grandfather’s land. This may not be the case for you, though. If you do find an easement, it should have a description of the exact part of the land the easement applies to and what rights the grantor (landowner) and grantee (easement holder) have in the agreement. Make sure you understand the conditions of the easement. Easements typically “run with the land,” which means they are still legitimate even if the land transfers ownership. In other words: if it’s in the land records, it is a legal agreement you will need to honor as a landowner or tenant.

Kate was able to make sense of the documents they found in the land records because the Town Clerk was able and willing to answer my questions. That might not be the case in every town or county, but it may be worthwhile to try connecting with officials directly about your questions.

Try this: Jot down the due diligence questions that are most present for you right now. Take a look at the town or county website directory and take your best guess at which person or department can answer your questions. Send an email or make a phone call!

Question #5: Are there any encumbrances on the property?

While we are looking at land records, let’s talk about encumbrances. An encumbrance is a general term for any claim, lien, restriction, or interest on a property that may affect its title or use. This can include mortgages, unpaid taxes, zoning restrictions, or any legal right held by someone other than the property owner. All of these records should also live with the town clerk or county land records office.

Encumbrances can affect your use of the land and interfere with land transfer. Here are a few common encumbrances:

• Mortgages: A loan secured by the property. Until it’s paid off, the lender holds a legal interest in the property.
• Property Taxes: Unpaid property taxes can lead to liens on the property, which must be cleared before selling.
• Liens: A legal claim against the property, often due to unpaid debts or legal judgments. Common types include tax liens, mechanic’s liens, or judgment liens.
• Restrictive Covenants: Agreements, usually found in deeds or neighborhood association rules, that dictate how the property can be used.

From Kate: Information about encumbrances will be found in the land records. Unfortunately, it won’t be easy to make sense of them– there is no red flag on a document that labels it as an encumbrance. For example, there’s unlikely to be a section of a deed labeled “Restrictive Covenant.” You will likely need to do a close reading of the text to find mention of restricted activities. Similarly, you are not likely to find a big heading with notice of outstanding liens or mortgages. But each mortgage or lien should have a corresponding “release of mortgage/lien” if the debt has been paid. Again, this was something I learned from the town clerk as I looked through documents. I did end up finding a mortgage document that did not have a corresponding “release of mortgage.” My family ended up calling the mortgage company to ensure that the terms of the mortgage had been met and to get a release of the mortgage on file.

If this is not feeling like a research project that you have time or bandwidth for, there is always the option to use a title company to do the research for you. In fact, you may need to if you are looking to buy land, as title insurance is usually a required part of a real estate transaction. But title companies can be hired by individuals at any time. They will essentially conduct the due diligence process for you: reviewing land records, accounting for outstanding liens, surveying the property lines, and verifying there are no competing claims of ownership on the property.
Moving forward

We hope you have a better understanding of what to expect as you do due diligence research.
And we want to acknowledge that asking the above questions will inevitably lead to more questions. One great way of making the due diligence process feel manageable is understanding what amount of certainty you feel comfortable with, so that you know when to call your due diligence research done. To do that, let’s zero in on what is most important to you when you think about how you want to use the land. We’ll use a tool known as the Prioritizing Grid. The Prioritizing Grid takes a list of important items and helps us order them according to their value by comparing each item against another, rather than trying to prioritize a whole list.

Try this:  To get started, consider the list of activities/land uses below. When you think about what you want to do with the land, which is most important to you? Add or remove land use priorities in the first column until you have a list that feels right.

Next, compare just two items at a time using the following pairings below. Choose the priority you value most in each pair, and make a tally mark next to that priority item in the second column above.

1,2; 2,3; 3,4; 4,5; 5,6; 6,7

1,3; 2,4; 3,5; 4,6; 5,7

1,4; 2,5; 3,6; 4,7

1,5; 2,6; 3,7

1,6; 2,7

1;7

Finally, use the number of tallies in the second column to write out an ordered list of your land use priorities.

When you complete this exercise, you will have a more concrete idea of what is most important to you in your land use vision. This is a key insight that will help you navigate the information you learn through due diligence. If you know that your land use priorities require you to understand the zoning code, start there in your research (with further support from our Strategies for Navigating Zoning Codes and Challenges). If you already suspect that an encroachment could interfere with your land dreams, start with researching the property lines. Wherever you go, kudos for building your own power through seeking knowledge.