Florida real estate developers are buying and improving rural land at a record rate. In many cases, these lands have been earmarked for purposes which resulted in the categorization of land as agricultural for the purposes of property tax assessment. Florida statutes, section 193.461, require county property assessors to classify land as agricultural at the request of the owner if it is shown that the land is being used for agricultural purposes in good faith. These purposes under the relevant law may include a variety of uses, such as horticulture, floriculture, forestry, dairy, animal husbandry, poultry, beekeeping and fish farming, not to name a few.
Whether land can be classified as agricultural under this law depends on a number of factors, including quantity and size of the land, its condition, market value as agricultural land, income , its productivity, the economic viability of its use, and other factors reflecting current current practices of agricultural use and production.
Sometimes referred to as an âagricultural exemption,â the classification is not really an exemption from property taxes, but rather a means of reducing the appraised value of the land on the county tax rolls, resulting in lower assessed taxes in order to reduce the estimated value of the land. preserve and encourage agricultural use of state lands.
It can sometimes take a year or two (or even more) for developers to obtain the necessary government permits to start their development projects on land they have acquired that was previously used for agricultural purposes. There can be a significant property tax saving if a developer continues the agricultural use of the land, so as to keep the appraisal value lower until development actually occurs.
While it may not be possible for many types of agricultural uses to continue during this pre-development period, cattle grazing is a common and recognized agricultural goal that is easily adapted on land in waiting. of development. As a rule, all that is needed is a fence, water and pasture, as well as a herder with cattle.
If a developer purchases land that is already used by the seller for cattle grazing, it is relatively easy for the developer to lease the land to the seller at the close in order to allow the seller to continue its agricultural use. This gives the seller extra time to move their livestock elsewhere, and it also gives the developer the tax savings associated with agricultural use on top of the lease income.
If the land is not used for cattle grazing when the developer acquires it, the developer may be able to find a rancher who needs pasture and enter into a lease with them, as long as the land is suitable.
Livestock grazing leases are relatively straightforward and contain a few basic terms. These include the length of the lease, the amount of income the breeder will pay to the developer, and any caretaking tasks the breeder will perform (such as maintaining pastures, buildings, water sources, fences. , etc.).
If the breeder hires contractors to perform improvements, they should not be allowed to tie the developer’s interest in the land (only the breeder’s leasehold interest), and the developer should register a notice to this effect. The promoter should have the right to enter the land in order to verify that the breeder is complying with his obligations.
It is probably a good idea for the developer to prevent the breeder from assigning or subletting the lease without the developer’s prior approval. It is also important that the developer can terminate the lease when he is ready to develop, giving the breeder sufficient notice to allow the cattle to be moved elsewhere. If the land is large enough to be developed in several phases, the parties may wish to provide for the partial release of the land from the lease at the start of the development of each phase.
The lease should require the breeder (i) to comply with all laws applicable to his operations, (ii) indemnify the developer against liability associated with his breeding operations, and (iii) maintain adequate liability insurance designating the developer as additional insured. Of course, a default by one of the parties that is not corrected within a specified grace period should entitle the other party to terminate the lease.
If the agricultural use of the land is for purposes other than grazing livestock, the lease will generally be more complex and tailored to the particular use concerned, but similar principles will apply. For example, a lease that allows the tenant to maintain a citrus grove will contain provisions regarding the use of fertilizers and pesticides, with the attendant liability of the operator for environmental contamination. Citrus fruits require harvesting at times, so the developer’s ability to terminate the lease will be constrained as such.
Each county is likely to have different standards that it applies to parties wishing to establish and maintain an agricultural land classification. This is common, as long as they do not conflict with the applicable Florida law reference above.
When considering entering into a lease of land for agricultural purposes, it is important for a developer to consult in advance with attorneys who practice in the areas of real estate tax law and tenancy law to ensure that the objectives desired by the developer can be achieved.