Cash crop farm due diligence

By the time an LOI is signed on a cash crop farm, the questions shift from what this is worth to whether everything the seller described actually checks out, and grain operations carry a specific set of items that generic small-business diligence checklists miss entirely. Land title, lease terms, equipment liens, drainage history and delivery contracts each need their own verification step, because a problem in any one of them can shrink the deal or delay the close even after price is agreed.

Land title and lease documentation

A buyer’s lawyer runs a title search on every owned parcel to confirm clear ownership and check for undisclosed easements, rights of way or family rights of first refusal, and separately reviews every rental agreement to confirm it is actually assignable rather than merely described as such. A lease that requires the landlord’s consent to assign is not a problem by itself, but a buyer needs that consent in hand — or a clear plan to get it — before closing, not a verbal assurance from the seller that the landlord is fine with it.

Equipment and asset verification

An equipment lien search confirms nothing on the fleet, bins or dryers is financed with security that would follow the asset to a new owner, and a physical inspection separately confirms condition matches what the seller represented rather than what the depreciation schedule shows. Equipment financed with liens complicating a clean asset sale is one of the more common surprises at this stage — not because sellers hide it, but because it is easy to overlook until someone specifically searches for it.

Drainage and environmental review

• Confirm whether any field has unpatented drainage work or an encroachment into a wetland or protected area
• Review soil test history for a compaction or nutrient-depletion trend, not just the most recent snapshot
• Check for any past on-site fuel, pesticide or fertilizer storage that could carry environmental liability
• Ask for the environmental farm plan or nutrient-management records, if one exists, rather than relying on the seller’s summary

Grain marketing and delivery contracts

Any forward contract, elevator delivery agreement or dealer relationship the seller relies on needs to be reviewed for whether it actually transfers to a new operator or terminates on a change of ownership, since a grain licence or dealer relationship registered to the seller personally does not automatically follow the farm. Grain sold through a federally licensed elevator or grain dealer carries statutory protection for the seller of the grain, which is a useful backstop to understand but not a substitute for confirming the contract itself is assignable.

Crop insurance and government program history

Confirm whether the operation is enrolled in crop insurance and in AgriStability or AgriInvest, and treat that enrolment history as the seller’s own record — it does not transfer to a new operator on closing, regardless of how it is described in an information package. A buyer typically has to apply for their own crop insurance coverage and re-enrol under their own name before the coverage takes effect, and there can be a gap between when the seller’s coverage lapses and when the buyer’s own coverage starts. Confirming that gap, and what it means for weather or price risk in the first crop year under new ownership, is worth doing before closing rather than discovering it mid-season.

Corporate history and tax elections in a share purchase

Where a cash crop farm is being sold as a share purchase rather than an asset sale, a buyer’s lawyer needs to dig into the operating corporation’s own history — outstanding liabilities, unfiled or disputed tax matters, and any elections made in an earlier ownership transition — because all of it follows the shares to the new owner, unlike in an asset sale. A farm corporation that has previously used the qualified farm property capital gains exemption on a partial transfer, or gone through a purification step to qualify for it, can carry conditions or representations a buyer’s lawyer will want documented and warranted before closing, not assumed from a verbal summary. This is one of the clearest reasons a share purchase on a farm needs its own dedicated legal and accounting review rather than the generic asset-sale checklist most small-business diligence guides describe.

What a finding actually means

A non-assignable lease found during diligence does not necessarily kill a deal, but it does mean re-pricing the acreage that lease covers or renegotiating directly with the landlord before closing — either of which takes time a rushed closing schedule may not have. A drainage or compaction finding is more serious when it affects a meaningful share of the land base than when it is isolated to one low-value field, and a buyer’s agronomist is better positioned than a generalist to say which is which.