THE NY FOREST OWNER 33:5: 14: Sept/Oct 1995
As a practicing attorney and a member of the New York Forest Owners Association, I have had many occasions to review timber contracts. My advice to everyone is to put all essential agreements between yourself and the timber buyer in writing. This article will discuss some of the essential elements of a timber contract and some of the considerations when preparing or entering into a timber contract.
Everyone selling timber should have a timber contract, even if the sale involves a small volume of sawlogs or a relatively small amount of firewood cordage. Prior to preparing the contract, the timber seller should know the following information:
A) The volume of wood product sold, either in stumpage sawlog volumes and/or firewood cords.
B) The boundaries of the property.
C) The price being paid prior to signing the contract.
D) The highest price a willing buyer will pay for the products being sold.
I must emphasize the highest price issue, as most clients approach me after signing a contract and ask me whether this is a "fair price". Once the contract is signed, it is too late to negotiate a "fair price" and, as seller, you are contractually obligated to sell to the buyer at the price stated in the contract. To protect yourself against an unfair price, it is my strongest recommendation that the timber volumes you collected be put out for bid so that timber buyers competing against each other (the real professionals against the real professionals) must determine what price they will pay knowing other bidders are entering bids on the timber.
Preparing a timber contract is a complex and specialized task. The average person who owns timber will find it very difficult to draft a contract that meets their own specifications without a great deal of effort and learning. Due to this, it is my advice that everyone selling timber, especially for the first time, seek out the advice of an experienced professional to assist them. Even though I am an attorney, my first suggestion would be to retain the services of a forester to assist you in obtaining the information necessary to prepare a timber contract and that you allow the forester to bid the sale to various timber buyers. Foresters are also very helpful in seeing that all of the contract terms are enforced. A forester can scale the volume of wood to be sold. They can mark the actual trees to be cut with marks at breast height (DBH) level and on the stump so that after the trees are cut, the forester can check to see if they were part of the sale contract. Foresters can also locate property boundaries as they have extensive training regarding boundary locations. Foresters are very helpful in submitting the bids to timber buyers, even outside your area, who may be interested in the wood products being sold.
The NYSDEC has service foresters to help landowners sell their wood products. Many times the DEC service foresters have a long waiting list of woodlot owners they must meet with and they can give you a list of consulting foresters who work in your area to select from if you need immediate assistance. The consulting foresters help you obtain higher prices for your wood products and,therefore, often "pay for themselves". If you choose not to hire a forester, it is still recommended that you submit your timber contract to an attorney knowledgeable in timber contracts for review. If you are not sure whether or not trees from your woodland should or could be sold at this time, it would be advisable to request that a Master Forest Owner from your area visit your woodlot and answer the questions you have regarding possible wood sales and land management. It's a free service and will help you make your decision. The NYFOA 800 number will supply you with the name of a Master Forest Owner in you area.
When looking at a timber contract that is prepared by a timber buyer, remember that the contract has been prepared to protect the buyer only. Don't just fill in the blanks! Rarely will you find a buyer's timber contract that contains even the oral promises made by the buyer when he was attempting to purchase your wood products.
A well-drafted timber contract should contain:
- An objective description of the trees to be cut. It is best if the trees are marked for cutting with paint marks at DBH and at the stump. However, if a diameter cut is utilized without marking the tree, it is almost impossible to measure DBH after the tree has been skidded out of the woods. Remember, too, that the diameter "swells" at the stump of most trees.
- Price to be paid and payment terms. Full payment should be made before the timber is cut when possible. Try to avoid pricing based upon unspecified volumes or mill receipts. Open price terms encourage high grading and are the most frequent source of complaints from timber sellers.
- There should be a penalty for cutting unmarked or smaller trees or the wrong species of tree.
- There should be an escrow held by the seller for the proper repair of the roads with water bars and erosion control features at the end of the contract.
- A time limit to complete the cut. All uncut timber should revert to the seller.
- Any special considerations, including: a) ground conditions; b) seasonal cutting restrictions; c) road use restrictions; d) stream crossing permits; e) oral promises by the buyer.
- An insurance clause requiring the buyer to produce proof of the following insurances: a) workmen's compensation insurance; b) personal liability insurance.
- A requirement to leave all the skid roads clear of debris and all the tops skidded back onto your property from the neighbor's property.
The above list is just some of the contract terms that should appear in your final timber contract. Many more terms can and should be used with the timber contract depending upon your personal circumstances. Since it is a long time between paydays when you are growing timber, it is wise to seek help from professionals on the rare occasions that you do sell timber so that you have the advice of a professional on your side when dealing with a professional timber buyer on the other side. Seeking advice from professionals after the contract is signed, is too late. Protect yourself and your valuable timber products from being taken advantage of and seek advice prior to signing any timber contracts. The cost and expense of a poorly-drafted timber contract far outweigh the value of competent advice prior to signing the contract.
David Colligan is a practicing attorney in Buffalo.