CFR > Title 7 - Agriculture > SUBTITLE B—Regulations of the Department of Agriculture > CHAPTER VII—FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE (parts 700 to 799) > SUBCHAPTER D—SPECIAL PROGRAMS (parts 750 to 786) > PART 765—DIRECT LOAN SERVICING—REGULAR > SUBPART F—Required Use and Operation of Agency Security (§765.251 to §765.254-765.300) > 765.252—Lease of security.

765.252—Lease of security.

(a) Real estate leases. The borrower may lease real estate security provided the following conditions are met:
(1) The Agency approves the borrower's request;
(2) The term of consecutive leases does not exceed 3 years, or 5 years if the borrower and the lessee are related by blood or marriage;
(3) The lease does not contain an option to purchase; and
(4) The requirements of § 765.253 have been met.
(b) Mineral leases. The borrower must request Agency consent to lease any mineral rights used as security for FLP loans.
(1) For loans secured by real estate before December 23, 1985, the Agency has a security interest in any mineral rights the borrower has on the real estate pledged as collateral.
(2) For loans secured by real estate on or after December 23, 1985, the Agency has a security interest in any mineral rights if the mineral rights were included in an appraisal.
(3) The Agency may consent to a mineral lease if the proposed use of the leased rights will not adversely affect either:
(i) The Agency's security interest; or
(ii) Compliance with any applicable environmental requirements of subpart G of 7 CFR part 1940.
(c) Lease of chattel security. Lease of chattel security is not authorized.
(d) Lease proceeds. Lease proceeds are considered normal income security and may be used in accordance with § 765.303.
(e) Lease of allotments. (1) The Agency will not approve any crop allotment lease that will adversely affect its security interest in the allotment.
(2) The borrower must assign all rental proceeds from an allotment lease to the Agency.