The second and third protections for ag borrowers during foreclosure

Mollie Pawlosky Iowa Real Estate & Land Use Dickinson Law Firm Des Moines, IA

Posted on 03/03/2017 at 08:00 AM by Mollie Pawlosky

The second protection: The lender must attempt mediation.
A lender shall not initiate a proceeding to foreclose a mortgage on agricultural property, which is subject to a debt of $20,000 or more under the mortgage, UNLESS the lender receives a mediation release, OR unless the court determines after notice and hearing that the time delay required for the mediation would cause the lender to suffer irreparable harm. Title to land that is agricultural property is not affected by the failure of any creditor to receive a mediation release, regardless of its validity.

The third protection for ag borrowers:  The borrower is given a receivership preference.
First, in any action to foreclose a real estate mortgage, not just on agricultural property, if a receiver is appointed to take charge of the real estate, preference shall be given to the owner or person in actual possession, subject to approval of the court, in leasing the mortgaged premises.

But, if the real estate is agricultural land used for farming, the owner or person in actual possession SHALL be appointed as receiver without bond, PROVIDED that all parties agree to the appointment.

The rents and profits derived during the receivership are then applied in the following order:
•    To the cost of receivership.
•    To the payment of taxes due or becoming due during said receivership.
•    To pay the insurance on buildings on the premises or such other benefits to the real estate, or both, as may be ordered by the court.
•    The balance shall be paid and distributed as determined by the court.

If the owner or person in actual possession of agricultural land is not given a right of first refusal in leasing the mortgaged premises, the owner or person in actual possession has a cause of action against the receiver to recover either actual damages or a $1000 penalty, and costs, including reasonable attorney fees.  The receiver shall deliver notice of an offer to the owner, in person or via certified or registered mail, which contains the terms of the offer and the name and address of the person making the offer.  An offer is deemed to have been refused, if the owner or person in actual possession does not respond within 10 days following the date that the notice is mailed.

Mollie’s next blog in the series addresses the ag borrower’s ability to seek a continuance. For specific questions on issues that lenders face in agricultural foreclosures, contact Mollie directly at

This blog is derived from a presentation given by Mollie Pawlosky during the Dickinson Law Firm’s Webinar Series, “Avoiding Aggravation in Ag Lending.”  The webinars advised financial institutions regarding aspects of agricultural lending.  Mollie’s presentation advised clients of special protections for agricultural borrowers during foreclosure. This blog is the second in a series of five blogs based on Mollie’s presentation.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.


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