Title Examination Standards
Chapter 1, App.
Chapter 23. Judgment Liens, Execution and Attachment
§23.8. Property Acquired by Farm Credit System; Right of First Refusal.

1. A. After January 6, 1988, agricultural real estate acquired by an institution of the Farm Credit System (a Federal Land Bank, a Farm Credit Bank or a Production Credit Association) as a result of a loan foreclosure or a voluntary conveyance from a borrower is subject to a right of first refusal vested in the "previous owner" to repurchase or lease the property. A "previous owner" is the person or entity from which or whom the Farm Credit System lender acquired title, by foreclosure or by voluntary conveyance in lieu of foreclosure, to land which had been mortgaged to such lender to secure the debt of such previous owner or of another.
2. B. If the previous owner waived his right of first refusal, the original or an authentic copy of the executed waiver should be furnished and may be recorded, with an appropriate affidavit where required.

3. C. Where the property was not sold to the previous owner, and no waiver was obtained, the examiner should be furnished with the following:

   1. 1. Evidence of notification by the lender to the previous owner by certified mail, at least 30 days (15 days for notifications between January 6, 1988 and August 17, 1988) prior to private sale to any other party, of the previous owner's right to purchase the property at the appraised value as determined by an accredited appraiser, and of the previous owner's right to offer to purchase the property at a price less than the appraised value. 2. If such sale was a private sale, an affidavit from an officer or agent of the lender that: a. the previous owner failed to submit any offer to purchase within 30 days (15 days for offers between January 6, 1988 and August 17, 1988) after notice; or b. the previous owner submitted an offer to purchase within the requisite time, but the offer was for less than the appraised value, and that the lender gave notice to the previous owner of the rejection of the previous owner's offer within 15 days after receipt of such offer, and that the institution thereafter sold the property to a third party for a stated price which is equal to or greater than the previous owner's offer; or c. after the lender rejected an offer from the previous owner to purchase the property at a price less than the appraised value, and the lender thereafter sold the property to a third party for a price less than the previous owner's offer, or on different terms and conditions from those previously extended to the previous owner, the lender first gave notice to the previous owner of its intention to accept an offer from a third party for a price less than the previous owner's offer, or on terms and conditions different from those first extended to the previous owner, by certified mail, and that the previous owner did not, within 15 days from such certified mail notice, submit an offer in writing to purchase the property under such different terms and conditions. 3. If such sale occurred at public auction or pursuant to some other public bidding procedure: a. proof that the previous owner was notified by certified mail in advance of the public auction ' competitive bidding process or other similar public offering by a notice containing the minimum bid amount, if any, required to qualify as acceptable to the institution, and also containing the terms and conditions to which the sale would be subject; and b. an affidavit from an agent or officer of the lender, if the property was sold to a third party other than the previous owner, that the previous owner did not bid an amount equal to or more than the amount for which the property was sold to the third party.

4. D. A certified mail notice is sufficient, whether or not received or accepted by the previous owner, if mailed one time to the last known address of the previous owner.

   Authority: 12 U.S.C.A. § 2219a (Farm Credit Act of 1971, § 4.36, as amended by Agricultural Credit Act of 1987, Pub. L. No. 100-233 (January 6, 1988), tit. I, § 108, 101 Stat. 1582 and Agricultural Credit Technical Corrections Act of 1988, Pub. L. No. 100-399 (August 17, 1988), tit. I § 104, 102 Stat. 990). Comment: Note that the right of the first refusal provisions apply only to "agricultural real estate". Some Farm Credit System loans are made on rural housing and not agricultural real estate. Such rural housing would not be affected by and is not subject to the right of first refusal legislation. Farm Credit Administration regulations provide that the "previous owner" includes the prior record owner where the owner's land was used as collateral for the loan even though the prior record owner was not a borrower, 12 C.F.R. § 614.4522(a)(2). Similar provisions apply to leases of agricultural property owned by Farm Credit System institutions. The "accredited appraiser" referred to in the statute is not elsewhere defined. The Ninth Farm Credit District, which includes Oklahoma, accredits certain appraisers, and utilizes such approved appraisers in determining the appraisal values. Loans in a pool backing securities or obligations guaranteed by the Federal Agricultural Mortgage Corporation ("Farmer Mac") are exempted from the right of first refusal provisions, even if held by, originated by, or serviced by Farm Credit System institutions, provided that the borrower was given notice of such exemption at the time of loan origination, and opportunity to refuse to allow the loan to be pooled; see section 8.9 of the Farm Credit Act of 1971, 12 U.S.C.A. § 2279aa-9. Loans in such a pool which were originated by non-Farm Credit System institutions are not subject to the statutory right of first refusal, even if later assigned to a Farm Credit System entity.

History: The federal Agricultural Credit Act of 1987 created a right of first refusal for former mortgagors of agricultural real estate when property they have deeded to or lost through foreclosure to a Farm Credit System Institution ("FCSI") is to be sold by the FCSI. The 1990 Report of the Title Examination Standards Committee proposed standard 12.7 to assist title examiners when a foreclosure or deed in lieu of foreclosure in favor of an FCSI is encountered in the chain of title, 61 O.B.J. 2842, 2870-77 (1990). The Committee's proposal was approved by the Real Property Section, November 15, 1990, and adopted by the House of Delegates, November 16, 1990, 61 O.B.J. 3058, 3064.