Ag Purpose Classification Requires Showing of More Than Mere Cultivation of Some Crops and Farm-Related Activities

March 29, 2013 | Erika K. Eckley and Roger A. McEowen

In the current case, a property owner (group of family members engaged full-time in the insurance business as owners/operators of an agency) took numerous and detailed steps to avoid county zoning rules by utilizing the ag exemption.  Initially, they appealed the county’s denial of ag exemptions from zoning on two parcels of land they owned.  In 1995, they acquired a 48.9-acre parcel that contained a single-family dwelling.  They used the farmstead split process to subdivide the tract into a tract with the house and 1.86 acres and then sold the tract in 1997.  They then built a house on the remaining 47-acre parcel and lived there for a period of time while trying to get the county to rezone a separate tract with a house on it and the surrounding 3.7 acres as residential.  The county refused and the plaintiff subdivided the property and conveyed it to the family patriarch individually.  In 2002, the county approved the subdivision on the basis of the agricultural exemption from county zoning.  Later, the tract and the house were sold to a third party.  Then, the parents sought to further develop their properties by building two more homes on the remaining 43.3 acres that the parents owned jointly.  They again sought an ag exemption from the zoning rules that barred more than one residence on a parcel.  The country granted the exemption but warned that the property may not be able to be subdivided if it wasn’t used for an ag purpose.  Two years later the county issued a notice of zoning violation for the 43.3-acre tract because one of the homes on the tract was rented out to tenants who weren’t engaged in farming.  The trial court ruled for the county, noting that the tenants were not farmers and ordered that the house remain vacant until a farm tenant occupied the home.  The plaintiff was fined and then held in contempt two years later for disobeying the court’s order when he arranged to have new non-farming tenants occupy the house.

After the court’s order, but before the contempt citation, the plaintiff was also scheming a way to get around  the county zoning rules by again subdividing the 43.3 acres by carving out a 6.52-acre parcel and conveying it to the family patriarch individually.  The idea was to qualify both tracts separately as farm properties with their own farmhouses.  That way the entire 43.3 acres would effectively get the benefit of an ag exemption.  Of course, multiple properties each with homes on them could ultimately be sold for more in the aggregate than could a single parcel with a single residence.  The 6.25-acre parcel had a house on it (the court described it as a “substantial with two-story gabled wings” and a manicured lawn – the court poked fun at the landowner’s assertion that they were engaged in a farming use on the tract by stating, “The manorial residence on the 6.52 acres was a residential tail wagging a farmland dog.”), and the other parcel (about 37 acres) was rented to a tenant who lived in the house and was supposed to “keep up” the land for the plaintiff. The county board of adjustment denied the exemption because neither property met the definition of “agricultural purposes” under Iowa Code § 335.2.

For both parcels, the plaintiffs claimed that the properties were used for agricultural purposes and should have been granted the agricultural exemption. On the 6.52-acre parcel, the plaintiffs argued their activities fit within the definition of agricultural purposes. The plaintiffs provided a list of activities occurring on the property including growing trees, berries, asparagus, tomatoes and farm-raised fish. On review, the Court of Appeals held the agricultural activities listed were “small-scale” and that a line had to be drawn at some point between agricultural production and a mere rural acreage. Because of this, the decision that the parcel did not qualify for the agricultural exemption was upheld.

On the rented parcel, the plaintiffs provided an accounting of the duties performed by the tenants, including fence repairs, planting seedlings and casing trees, watering crops, clearing grounds for tree planting, monitoring fish production and taking care of sheep. The court found that the activities showed the parcel was not “primarily adapted” to agriculture. The court found important that the time spent on the activities, which amounted to approximately 12 hours per week, demonstrated minimal agricultural use and a general lack of adaptation of for agricultural use. Consequently, the property was not primarily adapted for agriculture and the exemption did not apply.

The Iowa Supreme Court granted further review.  The Court found it instructive that the plaintiff provided no production or sales records from the agricultural products they claimed were grown on the 6.52-acre tract.  The Court also noted that the grapevine, raspberries and asparagus all grew wild.  While the plaintiff did buy baby trees from a state nursery, there was no evidence as to how many were planted.  The Court also noted the testimony at trial from neighbors who felt like they were “living in a development” and that if the ag exemption were granted then virtually anyone claiming to be a farm could subdivide their tracts and develop the property as the plaintiff had done and not have to comply with county zoning.  As for the house on the 37-acre tract, the court noted that the associated land wasn’t being farmed but part of it was enrolled in the Conservation Reserve Program (CRP) (incorrectly termed by the Court as the Conservation Resource Program). 

Importantly, in Iowa, CRP income is not reported on Schedule F as farm income when there is no connection with an associated farming operation occurring on non-enrolled land.   The subsequent tenant on that tract, a family member, was also employed full-time in a non-farm business – which was not disclosed to the court.  There simply wasn’t much to do on the so-called “farm.”  Indeed, a prior tenant had devoted only about two hours a day to the alleged farming activities.   
The Court noted that the test was whether the subject property was “primarily adapted” for being used for agricultural purposes.  That test was set forth in Kramer v. Board of Adjustment, 795 N.W.2d 86 (Iowa Ct. App. 2010).  Here, the Court noted, the tracts failed that test and upheld the Court of Appeals decision that upheld the county zoning board’s decisions in 2004 and 2007.

This case demonstrates to smaller, rural property owners engaged in small-scale agriculture that the barrier may be high to establish their property should qualify for an agricultural exemption.  The property must be primarily adapted for agricultural purposes. Landowners hoping to fall within the exemption should be prepared to show more than merely the number of acres or portion of property dedicated to harvesting specific crops as done by the plaintiffs in the first parcel or that a minimum amount of time is spent in agricultural activities as shown with the second parcel.  Also, it’s important not to engage in a pattern of behavior that leads the court to believe that the ag exemption provision is being used as a tool to avoid county zoning rules for personal benefit.  Lang v. Linn County Board of Adjustment, No. 11-0683, 2013 Iowa Sup. LEXIS 31 (Iowa Sup. Ct. Mar. 29, 2013), aff’g, No. 2-093/11-0683, 2012 WL 1438986 (Iowa Ct. App. Apr. 25, 2012).