What happens if an FLP property is transferred or sold regarding the shared appreciation agreement?

When an FLP (Farmland Loan Program) property is transferred or sold, the shared appreciation agreement includes a provision for recapture of appreciation. This means that if the property has increased in value since the original loan was established, the appreciation must be recaptured at the time of the transfer or sale. This is often part of the agreement's intent to ensure that the benefits of any increase in the property's value are shared with the lender when the property changes hands.

Shared appreciation agreements are designed to protect the lender's investment while allowing the borrower to benefit from potential increases in property value during the loan term. Thus, the requirement to recapture the appreciation of the property ensures that the original lender is compensated fairly for the risk they took by agreeing to the loan.

This mechanism is in place to maintain a balance between the lender's interests and the borrower's capacity to enjoy the benefits of property appreciation, making it clear that the financial obligations remain even after a change in ownership.