We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
Understanding Shared Appreciation Agreement: A Comprehensive Guide
Definition & Meaning
A Shared Appreciation Agreement (SAA) is a formal arrangement between a borrower and a lender, typically in the context of agricultural loans. This agreement requires the borrower to repay a portion of any financial relief they received, known as a writedown, based on the increase in value of the property that secures the loan. Essentially, if the value of the real estate rises in the future, the borrower must share some of that appreciation with the lender or agency that provided the loan. This agreement is often used to ensure that both parties benefit from the financial assistance provided.
Table of content
Legal Use & context
Shared Appreciation Agreements are primarily used in agricultural finance and real estate transactions. They are relevant in the context of direct and guaranteed loans offered by government agencies, such as the Farm Service Agency. These agreements help manage the financial risks involved in lending, ensuring that if the property value increases, the lender can recoup some of the initial support provided to the borrower. Users may find templates for these agreements through legal resources like US Legal Forms, which can help them navigate the process independently.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A farmer receives a writedown of $50,000 on their loan due to financial hardship. Five years later, the value of their property increases by $100,000. Under the Shared Appreciation Agreement, the farmer may owe a percentage of that increase to the lender, depending on the terms of the agreement.
Example 2: A borrower secures a guaranteed loan for a rural property and benefits from a writedown. If the property appreciates significantly during the loan term, the lender may enforce the SAA to recover some of the writedown as part of the loan repayment process. (hypothetical example)
Relevant laws & statutes
Shared Appreciation Agreements are governed by federal regulations, particularly under Title 7 of the Code of Federal Regulations (7 CFR 761.2). This regulation outlines the conditions under which these agreements are formed and enforced in the context of agricultural loans.
Common misunderstandings
What to do if this term applies to you
If you are involved in a Shared Appreciation Agreement, it is essential to understand the terms and conditions outlined in your agreement. Keep track of your property's value and consult with a financial advisor or legal professional if you have questions about your obligations. For those looking to draft or review an SAA, consider using legal form templates available through US Legal Forms, which can simplify the process. If your situation is complex, seeking professional legal assistance is advisable.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.