Your Timber Sale Contract

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A handshake is not enough; be sure you get a detailed timber sale contract in writing.

Credit: Flickr's pragdave

Your timber sale contract is meant to protect you. It lays out the details of your agreement with your buyer and everyone’s responsibilities throughout the process, and it helps prevent miscommunications and misunderstandings. It’s essential to a successful harvest.

Your contract doesn’t have to be complicated, but it should include:

• your name and address and the name and address of the buyer
• the locations of the timber for sale
• a description of the timber to be sold
• specific information about when the harvest begins and ends
• any requirements for the harvest: areas that are off-limits; which roads must be used; a deadline, if you have one; any restrictions on access; how slash and debris will be disposed of; or conditions when the loggers can’t operate (for example, if the area is too wet)
• what logging practices must be used—require the logger to follow best management practices on your land
• insurance requirements—require evidence that the buyer or logger carries workers’ compensation insurance and liability insurance
• what the condition of your land should be after harvest
• what happens if there’s damage to your land or other trees

Contracts for log sales won’t include logging stipulations, as you’ll already have arranged these by yourself or with your contracted logger. It should, however, explicitly list the volume the buyer expects and the prices you can expect for each desired tree species, quality type, etc.

If you’ve chosen stumpage as the method for your sale, you’ll want to include in your contract your expectations of how your trees and your land will be treated during a harvest. Also, make sure to secure a substantial down payment when the contract is signed.

• For lump sum sales, a down payment of one-fourth to one-third of the sale price may be made when you and the buyer sign the timber sale contract. The remainder of the lump sum should be paid before harvesting begins.
• For sale by unit harvests, a down payment of 10 to 25 percent may be made when you and the buyer sign the timber sale contract, with the remainder of the estimated balance due before the harvest begins. On very high value sales, you may choose to require only 10 percent down and less than 100 percent payment before cutting, to reduce cash flow problems for the buyer.
• Some landowners also ask for a performance bond, which is an additional amount over and above the sale price (usually 10 percent) that’s held in escrow to make sure the buyer abides by the contract. It’s refunded when the sale is complete and the contract requirements have been met.

The payment method, down payment and performance bond requirements and all payment due dates should be included in the contract.

Below we’ve included a sample timber sale contract to give you a sense of how your contract may look. It’s a sample only, and not intended for your specific timber harvest.

As you would for a home or land sale, you should consult with the professionals—in this case, your forester, lawyer and accountant—to draft a contract specifically for your harvest and your needs. Your contract is a very important document, and you want it done right.

Find out More

Marketing Timber from the Private Woodland: This website developed by the University of Minnesota Extension service has detailed information on how to set up a timber sales contract.