A timber sale contract generally contains the following provisions:
- Names and addresses of the buyer and the seller.
- Date of contract execution.
- Legal description of the location of the timber being sold; this can be found in a warranty deed or from a county plat book.
- Description of the trees being sold, including a description of how boundaries are being marked. The inventory, or a list of species, number, size and volume of trees, is ideal.
- Guarantee of ownership and right to convey, generally in the form of a title search and abstract.
- Payment amount and due date.
- A clause providing the buyer with entrances and exits (rights of ingress and egress, in legalese); includes any restrictions, whether rights-of-way will need to be secured from other landowners and who will be responsible for acquiring and paying for them.
- Method of harvest; use of best management practices to limit water pollution and site degradation, the layout of roads and logging decks and special provisions for hunting season or very wet weather.
- Penalties for non-performance, including compensation for excessive damage to or cutting of trees that were not marked for harvest.
- Provision for use of an arbitration panel for settling disputes.
- Statement that the seller will not be held accountable for personal injuries during the contract period, and that the buyer is required to carry adequate insurance. Could include a performance bond that is held in escrow until all contractual obligations have been met.
- Statement that the buyer will comply with all federal, state and local laws.
- Provision either for or against the buyer being able to resell the timber or part of the timber (like the tops and limbs) and whether the timber owner must be notified.
- Agreement about who will bear the loss in case the timber is destroyed or stolen during the contract period.
- Deadline for harvest completion; reasons extensions will be granted and additional costs associated with extension.
- Notarized signatures of all parties. Registration of the contract, generally at the county recorder’s office.
While many of these provisions are straight-forward, others require negotiation with the buyer. Some sellers may need additional provisions for special circumstances, such as preservation of high value sites on or near the tract.
The purpose of a timber sales contract is to reduce the possibility of misunderstandings and make sure both parties are protected. A good timber sales contract, one that protects sellers by ensuring that the forest is ready for regeneration after a harvest, saves time and money by eradicating problems that can lead to litigation.
A good timber sale contract is one prong in a three-part strategy to ensure that timber is being harvested sustainably. Two other strategies will increase the likelihood that all goes according to plan.
Prior to Signing a Timber Sale Agreement
Know the reputation of the harvest contractor, dealer and or broker. New operators or operators new to the area represent larger risks for timberland owners; for timber stand improvements or thinnings intended to leave the most valuable trees standing, more experienced buyers are preferable. In addition, if the bid comes from someone other than the logger (a dealer or broker), know who does that buyer’s harvesting.
Before making a final decision, a timberland owner should visit a tract owned by a previous customer to identify whether best practices were used; bad signs include trees with scraped bark, damaged or destroyed small trees, excessive rutting or trash left behind.
After Signing a Timber Sales Agreement
Once the timber harvest begins, a timberland owner should make frequent site visits to make sure everything is proceeding according to the contract. Staying involved in the process from selecting the trees for harvesting to watching the last log truck roll off the property will help maximize the health of the forest left behind, making it ready for replanting and ensuring long-term sustainability.
Do sale contracts usually have a penalty for not harvesting within the contract time frame?
Do contracts typically include an earnest money payment or performance bond?
Yes, they could. In general, anything the seller or buyer wants in the contract can be put in. Typically, the contract will have an expiration that guarantees back to the landowner the rights of the timber if the buyer does not come and harvest it.
If it’s lump-sum, the money should be paid up front. If it’s pay-as-cut, typically those are sold with a cash advance payment that the landowner receives, and then the buyer deducts from the payments as he harvests the timber.
As for performance, the contract should have language that states how the buyer is to operate on and leave the tract, particularly roads, after harvest. Also, there should be a penalty fee, usually 3 times the stumpage rate, for harvesting over the boundary.