Financing the Farm
A law bulletin series on common financial documents for farmers
July 2020
This bulletin is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department
of Agriculture. The information contained in this bulletin is provided for educational purposes only. It is not legal advice, and
is not a substitute for the potential need to consult with a competent attorney licensed to practice law in the appropriate jurisdiction.
Statutory Liens and Agriculture
Peggy Kirk Hall, Associate Professor
OSU Agricultural & Resource Law Program
Hannah Scott, Program Manager, Center for
Cooperatives, The Ohio State University and Law
Fellow, OSU Agricultural & Resource Law Program
Today, it is common for farmers to purchase
goods and services on credit from providers like
veterinarians, seed dealers, animal feed dealers,
and custom operators. Likewise, farmers often
provide their own goods and services prior to
receiving payment, as when delivering grain or in
a production contract arrangement. For these
situations, there are a variety of risk management
tools to ensure payment for the goods and
services provided. One such tool is a lien. State
statutes across the U.S. authorize various types of
liens to protect the interests of providers of
agricultural goods, services, and land. In this
bulletin, we explain statutory liens used in
agriculture and how they work.
What is a lien?
“Lien” is a broad term that refers to “a legal right
or interest that a creditor has in another’s
property, lasting usually until a debt or duty that it
secures is satisfied.”
1
Essentially, a lien is a legal
interest in property that secures a financial
obligation. The party holding a lien in another’s
property is often called a lienholder, claimant, or
creditor. The person or entity against whom a
party holds a lien is often called a debtor.
A lien is created in one of three ways: by statute,
by judicial verdict, or by agreement between the
creditor and debtor.
2
These three major types of
liens—statutory liens, consensual liens, and judicial
liens—operate in unique ways. The focus of this
bulletin is on statutory liens created for agricultural
situations. We discuss consensual liens in two
other bulletins in the Financing the Farm law
bulletin series: Secured Transactions explains
voluntary liens granted for personal property and
Mortgages addresses consensual lien rights in real
property. The final type of liens, judicial liens, are
less common in agriculture than other types of
liens and arise from a court verdict that entitles a
lienholder to seize certain property belonging to a
debtor as payment for a debt.
3
How statutory liens work
Statutory liens arise solely by force of statute; they
do not require an agreement between the parties,
permission from a debtor, or a court ruling for their
creation. Statutory liens automatically attach to
2
property because of a creditor’s relationship to a
debtor; they give the lienholder rights in specific
property that can ensure the lienholder receives
payment for goods, services, land, labor, or other
obligations of the debtor. Many are familiar with
tax liens and mechanic’s liens, common types of
statutory liens.
4
Statutory liens such as these aim
to minimize the risks of nonpayment for goods or
service providers serving agriculture, especially
those who are not credit professionals. Managing
such risks can help ensure that crop and livestock
production goods and services remain available
and affordable to farmers.
5
Where a statutory lien
is available, a party who has provided land, goods,
services, or labor to an agricultural producer or
processor can acquire a claim against the crops,
livestock, or equipment for which the land, goods,
services, or labor were provided by satisfying the
requirements of the statute.
6
Unique requirements. Each statutory lien in a
state has unique purposes and technical
requirements for establishing the lien. For
example, the Iowa Code provides a landlord’s lien
“for the rent upon all crops grown upon the leased
premises,” and upon personal property of the
tenant that is used or kept on the leased land
during the lease term. The lien automatically
attaches, or becomes effective, on account of a
landlord leasing property to a farmer. The landlord
does not have to take any additional action to
establish the lien.
7
However, certain agricultural
liens do require additional steps by the lienholder
in order for the lien to have priority over other
creditors, which is discussed later in this bulletin.
Possession versus non-possession. Some
statutes require that the lienholder retain
possession of the property that is subject to a lien
in order for the lien to be considered valid–-these
are called possessory statutory liens. Other
statutory liens do not require the claimant to retain
possession of the property and are called non-
possessory liens.
Enforcement. Once a statutory lien is
appropriately established, the enforcement of that
lien will also be governed by the statute that
created it. However, as one scholar explained,
“frequently state statutes are vague about
collection rights,” so it is important to consult a
knowledgeable attorney prior to trying to enforce
lien rights. In some instances, enforcing a lien
requires some type of judicial action or filing with
the appropriate court.
8
In other instances, a
lienholder may be able to exercise self-help
repossession in property they have properly taken
a lien in, so long as a they are entitled to enforce
the lien under the statute that created it.
9
Because
a lienholder can expose themselves to liability if
they try to exercise lien rights improperly, it is
important to consult an attorney about the proper
method for exercising statutory lien rights.
Priority rules. When multiple creditors, including
lienholders, claim an interest in the same piece of
property, the rights to that property are
determined based on each creditor’s “priority”
status. Priority status is determined by a process
called “perfection” in which a creditor files a notice
of its interest in property. The statutes that
establish statutory liens generally contain their
own priority rules.
10
In addition, the Uniform
Commercial Code (UCC) applies to certain
statutory agricultural liens, creating requirements
for perfection, rules of priority, and more, as
discussed later in this bulletin.
11
Types of statutory liens used in
agriculture
Statutory liens created by state laws vary widely,
reflecting the history and legislative priorities of
individual states.
12
As one group of scholars put it,
there is a “phenomenal variety” of statutory
agricultural liens in the U.S.
13
The National
Agricultural Law Center’s
Statutory Agricultural
Lien Rapid Finder Charts compiles the various
statutory agricultural liens enacted by state
legislatures across the United States.
14
The
following examples of liens illustrate the wide
variety of these types of state statutory agricultural
3
liens. Note that not all of these types of liens are
available in all states.
Landlord’s lien. In Iowa, a landlord’s lien is available
to the landlord of property leased to farmers and
attaches to the farm products grown or personal
property stored on the property.
15
Agricultural supply lien. In Oklahoma, any person
selling, furnishing, applying, or providing seed,
chemicals, pesticides, herbicides, or fertilizer for
the growing of crops may take a lien in the crops
for which the materials are supplied.
16
Agricultural crop lien. In Washington, an
agricultural landlord or agricultural input supplier,
including labor and service input providers, may
take a lien in crops.
17
Harvester or thresher lien. In Kansas, a person who
harvests or threshes grain or grain crops may take
a lien in the grain or grain crops harvested or
threshed.
18
Equipment lien. In North Dakota, a blacksmith,
machinist, farm equipment dealer, welder,
mechanic, or other specified repair person may
take a lien in vehicles, including combines, tractors,
and other farm equipment.
19
Grain handler lien. In Ohio, claimants such as
lenders and producers who’ve delivered grain to a
handler who are owed a financial obligation by the
handler holds a lien in the grain possessed by the
handler.
20
Commodity production lien. In Iowa, a contract
producer who feeds livestock or produces crops
owned by another under a production contract
holds a lien in the products produced or raised
under the contract.
21
Livestock liens. In California, a person or entity
who provides services for another’s livestock may
take a lien in the livestock serviced. Another
California statute allows providers of livestock
breeding services to take a lien in the female
animal bred or offspring resulting from the
breeding.
22
Disease control lien. In Georgia, the Georgia
Commissioner of Agriculture may take a lien in
cotton subject to an assessment for boll weevil
eradication. Other states may have similar
provisions that apply more generally or for other
specific pests or diseases.
23
Veterinarian’s lien. In Alabama, a state licensed
veterinarian may take a lien in an animal kept, fed,
24
Carrier’s lien. In Vermont, a carrier, or a shipper
that publicly operates a business for the
transportation of goods, may take a lien in goods
covered by a bill of lading.
25
Laborer’s lien. In Texas, certain workers, including
farm hands, mill operators, and loggers employed
under contract, may take a lien in things of value
created by the worker’s labor that are owned,
controlled, or possessed by the employer.
26
Timber or log lien. In Wisconsin, a person who
performs services or provides supplies for
obtaining logs and timber products may take a lien
in the logs or timber and products manufactured
from them.
27
Warehouse lien. In North Carolina, a warehouse
can claim a lien in goods covered by a warehouse
receipt or storage agreement, or the proceeds
thereof.
28
“Agricultural liens” under the UCC
Certain types of statutory liens used in agriculture
can be subject to the Uniform Commercial Code
(UCC) and its unique laws that govern security
interests and other types of commercial
transactions. Specifically, under Article 9 of the
UCC, certain statutory liens that deal with
agriculture (which we will call “UCC agricultural
liens”) must be “perfected” according to the
requirements of the UCC in order for the lienholder
to have “priority” over other creditors claiming
4
interests in the same property. Generally, to
“perfect” a UCC agricultural lien, the lien must have
become effective under state law and the
lienholder must file a sufficient financing
statement in the appropriate office.
In general, perfected UCC agricultural liens, like
perfected security interests, rank in priority
according to the time they were filed. This is known
as the first in time, first in right principle. However,
the state statute that creates the UCC agricultural
lien might provide different rules for priority than
this first in time, first in right principle.
29
For example, if a state statute specifies that an
agricultural lien will have priority over previously
perfected security interests, and the UCC
agricultural lien is properly perfected, that lien will
have priority over security interests that were
perfected before the UCC agricultural lien.
30
Because of this, lenders may hesitate to allow farm
products or property that can be subject to a UCC
agricultural lien to be used as collateral at full
value, since a statutory lien could arise in the
products later under state law that gives the
lienholder priority over the lender’s security
interest. In some instances, lenders taking assets
as collateral may request that a debtor obtain lien
waiver agreements with other parties like landlords
to ensure the value of the collateral.
Note that a perfected UCC agricultural lien or
security interest will always have priority over an
unperfected UCC agricultural lien in the same
property.
31
The rules for perfecting and maintaining perfection
of a UCC agricultural lien are complex and the
consequences of failing to perfect a UCC
agricultural lien can be severe, so readers who are
interested in utilizing these types of liens or who
have had a lien filed against their property should
consult a knowledgeable attorney.
Definition of “agricultural lien.” Due to the UCC
laws, it’s important to know what types of statutory
agricultural liens are subject to the perfection and
priority rules of the UCC. In other words, what is a
UCC “agricultural lien”?
Specifically, UCC requirements for agricultural liens
apply to those interests in “farm products” that
secure payment or performance of an obligation
for, (1) goods or services furnished in connection
with a debtor’s farming operation, or (2) rent on
real property leased by a debtor in connection with
its farming operation, and which is created by
statute in favor or a person that, (1) in the ordinary
course of its business, furnished goods or services
to a debtor in connection with a debtor’s farming
operation, or (2) leased real property to a debtor in
connection with the debtor’s farming operation,
and whose effectiveness does not depend on the
person’s possession of the personal property.
32
Essentially, this definition refers to a non-
possessory, statutorily created lien in “farm
products” that secures a farmer-debtor’s
obligation to either a person or business that
regularly furnishes goods or services to a farmer or
a person who leases real property to a farmer.
Farm products, as defined by the UCC, are goods,
other than standing timber, with respect to which
the debtor is engaged in a farming operation and
which are:
• Crops grown, growing, or to be grown,
including crops produced on trees, vines, and
bushes and aquatic goods produced in
aquacultural operations,
• Livestock, born or unborn, including aquatic
goods produced in aquacultural operations,
• Supplies used or produced in a farming
operation, or
• Products of crops or livestock in their
unmanufactured states.
33
Other laws can affect statutory liens
In addition to the UCC, there are other laws that
may impact the status of a statutory agricultural
lien. Examples include the Packers and Stockyards
Act,
34
Food Security Act,
35
Perishable Agricultural
Commodities Act,
36
and the Bankruptcy Code.
37
5
For example, where a debtor files bankruptcy, the
bankruptcy trustee may void liens against their
property in certain instances, meaning that the
lienholder’s rights in the property are removed and
the property is available to the bankruptcy estate.
38
Know the lien laws in your state
Liens are tools that give a party a legal right or
interest in another’s property. They can arise in
agriculture in a variety of ways to secure the
performance of obligations like the payment of
cash rent for farmland, the repayment of operating
loans or equipment loans, payments due to
suppliers and vendors like veterinarians or
laborers, and many other business contexts.
Farmers should understand both the potential for
their creditors to use and enforce liens as well as
the ways they might use liens to secure obligations
lien laws in the state is an important risk
management practice for farmers.
1
Lien, Black’s Law Dictionary (11
th
ed. 2019).
2
Steven C. Turner, Richard Barnes, Brooke Schumm III, Drew
L. Kershen & Marsha L. Noble, Agricultural Liens and the UCC:
A Report on Present Status and Proposal for Change, 44 O
KLA.
L.R. 9, 10 (1991), http://www.nationalaglawcenter.org/wp-
content/uploads/assets/bibarticles/turneretal_leins.pdf
3
Id.
4
Statutory lien, Black’s Law Dictionary (11
th
ed. 2019).
5
Kristine A. Tidgren, Iowa Agricultural Liens: A Legal Review,
Iowa State University Center for Agricultural Law and Taxation
(Sept. 30, 2016),
https://www.calt.iastate.edu/article/iowa-
agricultural-liens-legal-review.
6
Turner et al, supra note 2, at 10.
7
Tidgren, supra note 5.
8
Mechanic’s Liens in Practice, Practical Law Real Estate,
(2020), available at Westlaw; Tidgren, supra note 5.
9
Susan A. Schneider, Statutory Agricultural Liens Under Revised
Article 9 of the Uniform Commercial Code, National Agricultural
Law Center, (March 2002),
https://nationalaglawcenter.org/wp-
content/uploads/assets/articles/schneider_agliens.pdf
10
Robert D’Agostino & Bruce Gordon Luna II, The U.C.C. and
Perfection Issues Relating to Farm Products, 35 N.
ILL. U. L. REV.
169, 170 (2014).
https://commons.lib.niu.edu/bitstream/handle/10843/18443/
Luna-DAgostino-pdfA.pdf?sequence=1&isAllowed=y
11
Id.
12
Turner et al, supra note 2, at 12.
13
Turner et al, supra note 2, at 10.
Remember that statutory lien laws are state
specific and vary tremendously from state-to-
state. Additionally, the relationship between
statutory liens and the UCC can be complicated
and other laws might affect a lien situation. The
advice of an agricultural attorney experienced in
federal agricultural laws and the farm finance laws
in the state where the farmer operates should
prove useful and necessary to further reducing
financial risk.
Other titles in the Financing the Farm
law bulletin series
To continue to learn more about common legal
documents for farm financing arrangements, see
our law bulletins on Promissory Notes, Installment
Contracts, Leasing Arrangements, and Secured
Transactions.
14
Statutory Agricultural Lien Rapid Finder Chart, (2008), National
Agricultural Law Center,
https://nationalaglawcenter.org/state-
compilations/agricultural-liens/.
15
IOWA CODE ANN. §570.
16
OKLA. STAT. ANN. tit. 42, §47.
17
WASH. REV. CODE ANN. §60.11.
18
KAN. STAT. ANN. §58-203.
19
N.D. CENT. CODE ANN. §35-13.
20
OHIO REV. CODE ANN. §926.021.
21
IOWA CODE ANN. §579B.
22
CAL. CIV. CODE §3062; CAL. CIV. CODE §3080.
23
GA. CODE ANN. §2-7-156.
24
ALA. CODE §35-11-390.
25
VT. STAT. ANN. tit. 9A, §7-307.
26
TEX. PROP. CODE ANN. §58.
27
WIS. STAT. ANN. §779.18.
28
N.C. GEN. STAT. ANN. §25-7-209.
29
supra note 9, at 6.
30
Schneider, supra note 9, at 6.
31
Id.
32
U.C.C. §9-102(a)(5).
33
U.C.C. §9-102(a)(34).
34
7 U.S.C. §§ 181-229.
35
7 U.S.C. § 1631.
36
7 U.S.C. §§ 499a-499t.
37
11 U.S.C. Title 11.
38
11 U.S.C. §544(a)(1).
