I just had a commercial lender ask me if there is any way we could consider the following a business purpose and Reg. Z exempt.

"Our customer owns two restaurants. They are looking to sell their current home and buy a 12-acre property. They would not only live in the home on the 12-acre property, but also grow vegetables and raise chickens and pigs for their restaurants. Fresh, local “farm to table” food is a theme in their restaurants."

The bank is currently not offering consumer-purpose, home purchase money loans.

Any responses on whether this could be considered business purpose or not would be appreciated.

Thanks!

Assuming the restaurants are this customer's primary business activity, this is a good candidate for an business/agricultural exemption from Reg. Z. The applicant is already in the business of preparing and selling food. The proposed loan would facilitate a vertical consolidation of this business by reducing or eliminating suppliers of the raw food products. Without question, the cultivation of vegetable crops and production of animals fits within OI #8 to Section 1026.3(a) of Reg. Z:

An agricultural purpose includes the planting, propagating, nurturing, harvesting, catching, storing, exhibiting, marketing, transporting, processing, or manufacturing of food, beverages (including alcoholic beverages), flowers, trees, livestock, poultry, bees, wildlife, fish, or shellfish by a natural person engaged in farming, fishing, or growing crops, flowers, trees, livestock, poultry, bees, or wildlife. The exemption also applies to a transaction involving real property that includes a dwelling (for example, the purchase of a farm with a homestead) if the transaction is primarily for agricultural purposes.

Assuming the acreage is zoned for ag use (or a variance can be obtained), it's very likely that you've got an ag loan. I'd run with it.

Richard,

From one fisherman to another, I thank you for the quick and surprising response. I was originally thinking the business purpose/ Reg. Z exempt was going to be a big stretch.

The lender will be happy that these customers can be assisted.

Good point about zoning, John. Any special license should be considered, too.

Laketime: Make my day by telling us the property has a pond the borrower will use for aquaculture (catfish, etc.)

I can't remember the last time we discussed an aquaculture exemption.

I agree re business purpose. The real intent here is the farming/ag purpose to support the restaurants, and the fact that there is a home that can be utilized to reduce housing expenses is secondary.

Richard, I just checked with the lender. He said there is a large lake near the property that has a fairly good reputation for the much- loved walleye (as you probably know, in pike family). The season opens early May 2016 so consider planning a trip from VA to WI as they tend to hit on windy, cool days early in the season