3.88 Crops

3.88.1

In General

ALTA title policies define land as being the "land described or referred to in Schedule (A) or (C) and improvements affixed thereto which by law constitute real property."

Growing crops, undoubtedly, are within the context of the above definition, and as a general rule, form part of the real estate to which they attach and follow the title thereto; however, unharvested crops may be severed from the land and sold or mortgaged. This is the reason why the ownership of crops needs to be considered carefully in connection with the possible rights of tenants, mortgagees, and purchasers at foreclosures.

Much of the law with respect to security interests in crops is now found in the Uniform Commercial Code and in other state statutes.

Liens upon crops, termed "financing statements" under the Uniform Commercial Code, are recordable in a special manner, and when they are so recorded, constructive notice is imparted to subsequent purchasers and mortgagees of the real property.

In most states, a financing statement covering crops must be filed in the county (township, etc.) of the debtor's residence and in the county (township, etc.) where the land is located.

These states are:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • Colorado
  • District of Columbia (recorder of deeds only)
  • Florida
  • Illinois
  • Indiana
  • Kentucky
  • Maryland
  • Michigan
  • Mississippi
  • Missouri
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • Ohio
  • Oklahoma
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Tennessee
  • Vermont
  • Virginia (grain also filed with office of State Corporation Commission)
  • West Virginia
  • Wisconsin.

However, the filing of the UCC-1 (financing statement) in the county where the land is located does not imply that the UCC-1 is filed in the real estate records; instead, the UCC is generally maintained separately and must be separately reviewed.

In a few states, the UCC-1 covering crops must be filed where a mortgage covering the land is recorded:

  • California
  • Georgia
  • Hawaii
  • Maine

In some states, only a central filing of the UCC-1 covering crops is to be made:

  • Connecticut (secretary of state);
  • Delaware (secretary of state);
  • Idaho (secretary of state);
  • Iowa (secretary of state);
  • Kansas (secretary of state);
  • Montana (secretary of state);
  • Oregon (secretary of state);
  • South Dakota (secretary of state);
  • Texas (secretary of state);
  • Utah (Division of Corporations and Commercial Code); and
  • Washington (Department of Licensing).

Some other states require the UCC-1 to be filed only in the location of the debtor's place of business or residence:

  • Louisiana (chattel mortgage--place of business of chattel mortgagor);

  • Massachusetts (office of clerk of town where debtor resides or if debtor is not a resident of Massachusetts, then in office of clerk of town where the crops are located);

  • Minnesota (office of county recorder of county of debtor's residence, or if debtor is not a resident of Minnesota, then in office of secretary of state);

  • Nebraska (office of county clerk of county of debtor's residence or if debtor is not a resident of Nebraska, then in office of county clerk in county where crops are located);

  • North Carolina (office of register of deeds of county of debtor's residence, but if debtor is not a resident, then in office of register of deeds of county where crops are located);

  • North Dakota (office of register of deeds of county of debtor's residence, but if debtor is not a resident, then in office of register of deeds in county where crops are located);

  • Wyoming (office of county clerk of county where debtor has principal place of business, if any; otherwise, their residence; if not a resident of Wyoming, then filing is in the office of the secretary of state).

Therefore, it is necessary that those UCC records be searched and that proper exceptions to specific financing statements be raised in connection with growing crops. Otherwise, if no UCC search of the appropriate records occurs, a general exception to all filed UCC's must be made if the land is farmland.

UCC Revised Article 9, if adopted, is effective July 1, 2001. As of April, 2001, thirty one (31) jurisdictions have adopted UCC Rev. Art. 9 which are as follows: Alaska, Arizona, California, Delaware, Hawatt, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, maine, Maryland, Michigan, Minnesota, montana, Nebraska, Nevada, North Carolina, Oklahoma, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming and Washington, D.C.

The following procedures apply to perfection of the security interest during the transition period from former Art. 9 to Rev. Art. 9:

Perfection. Under Sec. 9 703, a security interest perfected under former Art. 9 or outside of former Art. 9 remains perfected if:

the secured party perfected the security interest under prior law (under Art. 9 or outside of Art. 9), and

the acts of perfection (under former Art. 9 or outside of Art. 9) would also perfect the security interest under new Art. 9).

Except for security interests perfected by filing under former Art. 9, a security interest perfected under former Art. 9 or outside of former Art. 9 maintains perfected status for only one year after new Art. 9 comes into effect if:

the secured party perfected the security interest under prior Art. 9 or outside of prior Art. 9, and

those perfection steps do not suffice to perfect the security interest under Rev. Art. 9.

Such a security interest will remain continuously perfected under Rev. Art. 9 if:

the secured party had perfected the security interest under prior Art. 9 or outside of former Art. 9, and

the secured party satisfies the creation and perfection requirements under Rev. Art. 9 within one year after the effective date of the Rev. Art. 9:

Attachment. A security interest that has attached under prior Art. 9 remains attached (and enforceable) for one year only if:

The security interest has attached (is enforceable) under prior law, but

The security interest has not attached under Rev. Art. 9.

The security interest remain enforceable after oney year if the secured party takes any necessary additional steps for attachment under Rev. Art. 9 before or within one year afte Rev. Art. 9 takes effect.

An attached, but unperfected, security interest becomes perfected under Rev. Art. 9:

when Rev. Art. 9 becomes effective, if the secured party took appropriate steps to perfect the security interest under the rules of Rev. Art. 9 before Rev. Art. 9 becomes effective,

when the secured party takes appropriate steps to perfect the security interest under the rules of Rev. Art. 9 afte Rev. Art. 9 becomes effective.

In accordance with UCC Revised Article 9, perfection of an agricultural lien is governed by the law of the state where the farm products are located. (This is for agricultural liens only, it does not inlcude security interests in farm products.)

UCC Rev. Art. 9 specifies that a perfected security interest in crops has priority over a mortgagee or owner of the property if the debtor is the owner or is in possession of the real estate. (See 9 334(i)