What Is a Timber Sale Contract?
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There are over 100,000 acres of privately owned forest land in Lee County. These forests are a valuable resource that many landowners will only sell timber from once or twice in their lifetime. Just like buying or selling a home or land, timber sales should be done with a legal contract, and as an added precaution, it should be recorded at a courthouse. A well-prepared contract describes the sell process and legal requirements, which helps to avoid misunderstandings between owners and buyers. While not required, hiring a professional forester is recommended, as the development of a timber sale contract can be quite intimidating. Since timber sales typically generate a large income, most landowners should also seek the advice of an accountant and a lawyer during the process. I’ll highlight some of the items that should be included in a timber contract.
First, define the buyer and the seller. Who actually owns the timber? Will the buyer and seller use agents or deal directly with each other, or will there be a designated representative? Can the buyer (re)assign rights? By clearly stating responsible parties in the timber sale contract, both the buyer and seller will be protected throughout the sale process.
Clearly state the timber sale start and termination dates. State whether sale extensions will be allowed, and include cost calculation. An extension would certainly be a cost to the seller due to delayed forest regeneration. Which provisions will trigger a logging job shut down during bad weather, and who will make that call? Will the owner be notified when the operation begins, is temporarily ceased, and final closeout? This is extremely important for the seller, especially with a per unit sale contract.
While it may seem obvious, the contract will clearly define what is being sold. Begin with a formal legal description, and always include a tract location map, with clearly marked property lines, sale boundaries, roads, sensitive areas, etc. Define the types, sizes, and condition of the trees being sold. The buyer and seller should have a clear understanding of what is expected to be cut as well as what should not be cut. What units of measure will be used? Timber volume is measured in a variety of ways, and experienced foresters can provide the seller with a complete and detailed inventory of timber products on the property. Pricing timber can be tricky. Lump sum or per-unit sales will mean different types of payment schedules. Be sure this is clear in the contract. Bonding or security payments ensure contract provisions are satisfied and that soil, water, and other resources are protected. All owners should mandate that adequate liability insurance is in place for all entities involved in the logging operation.
The seller should clearly state the conditions of access in the contract. Roads should be maintained during the logging, and restored to their former condition at the buyer’s expense upon the completion of the operation. Require a pre-harvest plan that delineates log decks and skid trail locations. The timber sale contract should require that all deck and skid trail locations be approved by the seller or their agent prior to the start of the operation.
Always include a “Right to Halt Logging” provision in the contract with provisions to extend the contract length if operations are halted due to wet conditions that would damage the soil. Penalties need to be clearly specified in the contract. Timber trespass, while usually not intentional, occurs occasionally and needs to be addressed in the contract. Holding the buyer accountable within the contract can help the seller to avoid this situation.
The buyer should be required to follow all fire laws. Clearly specify who assumes the liability from fire and other natural disasters during the length of contract. A sound contract covers all contingencies should a legal depute arise during the length of the contract.
When disagreements about contract provisions arise, most contracts specify an arbitration mechanism that avoids the courts and a legal solution. This process involves a neutral third party to settle the dispute after both sides have had an opportunity to be heard. Having a professional forester involved in the sale process can be beneficial in this situation to help facilitate the arbitration process.
Remember, the items detailed in this article are not exhaustive and may not cover every timber sale situation. N.C. Cooperative Extension offers several resources to forest landowners. A sample timber sale contract is available from Cooperative Extension; however, it is important for the landowner to seek professional assistance from consulting foresters, attorneys, and accountants to ensure that each step of the process is done correctly.
Zack Taylor is the Agriculture Agent (Field Crops and Livestock) for North Carolina Cooperative Extension in Lee County.