Timber should always be sold through a written contract, a legally binding document that protects both you and the buyer by listing and clarifying the responsibilities of each party. Sample contracts are available from any professional timber harvesters and foresters. You may want to have it drafted or checked by an attorney.
Landowners typically sell timber on a “pay-as-cut” or “lump-sum” basis. Under the lump-sum method of sale, the landowner sells the timber outright for a fixed amount agreed upon in advance. In the pay-as-cut method, both parties determine the volume of timber to be cut and negotiate a price per unit (board foot, ton, cord, etc.) to be paid to the landowner after the logger delivers the logs to the mill or mills.
Which method is better? It depends. The choice of lump-sum or pay-as-cut sales method should be made after you seek advice on the tax implications of the two sale methods.
At a minimum, a good timber sale contract should:
- Describe the land and boundary lines and guarantee the title.
- Specify the amount of timber being sold, its location, and its marketing method. Describe the logging methods, utilization standards, and merchantability. Include a map of your property with the harvest boundaries clearly marked.
- Specify the location of log landings, roads, and skid trails (if desired) and require that those areas be stabilized and revegetated (if appropriate) after harvesting.
- Specify the time period covered by the contract. Logging contracts usually cover at least two dry logging periods (18-24 months).
- Prohibit excessive damage to unmarked trees and improved property such as buildings, fences and roads.
- Specify the penalties the buyer must pay if unmarked or undesignated trees are cut or damaged.
- Assign liability for losses caused by the buyer or his agents to protect the landowner from workers’ compensation claims, liability lawsuits, and property damage claims.
- Specify protection of soil, water, and recreational values.
- Require the use of Best Management Practices, BMPs (available at your local forestry or county Extension office, or from loggers and foresters) where appropriate.
- Require that the buyer abide by all local, state, and federal laws and regulations.
- Allow the sale agreement to be assigned to another logger only with the written consent of the seller.