Zero-dollar Napa Valley vineyard deal highlights ups, downs of handshake wine business deals

It seems easy and cordial: Notable figures and friends in the North Coast wine world agree to a changing of hands of a Napa Valley vineyard at no cost and without a contract.

Steve Lagier, a former winemaker for Robert Mondavi Winery, and Carole Meredith, a retired UC Davis plant geneticist credited with the discovery of the Eastern European origins of the popular zinfandel grape, are owners of Lagier Meredith Vineyard northwest of Napa. The couple has worked out a plan with in-demand consulting winemaker Aaron Pott and his wife, Claire, to hand over the 84-acre property with its 4.5 acres of planted vines likely over the next year, according to the San Francisco Chronicle.

Meredith told the Business Journal that Lagier and she would continue to live on the property and own it, while the Potts would assume responsibility for farming the vineyard and get all its fruit to make their own wines.

“The whole arrangement is based on trust and no lawyers or dollars are involved,” Meredith wrote in an email.

That kind of an arrangement in a county where vineyards can sell for a few hundred thousand dollars an acre is not unheard of in the region, but it’s not for the faint of heart, according to longtime Napa Valley estate, tax and wine business law attorney Robert Fanucci, who has himself been party to similar arrangements.

“In a really good friendship, you can have just a handshake deal. Sometimes, those are the best deals. I've had handshake deals with people, and they worked out really well,” said Fanucci, who is an owner of Gagen McCoy McMahon Koss Markowitz & Fanucci and practices in the law firm’s St. Helena office. “It's just when they don't work out, then you wish you had a written contract.”

Fanucci said he ended up in a situation like that at his other day job, as a third-generation owner of Charter Oak Winery & Vineyards in St. Helena. The owner of a 2-acre vineyard who was a friend of a friend wasn’t interested in farming it anymore, so Fanucci agreed to pay for a vineyard management company to tend it in exchange for getting the fruit. But then the vineyard owner sold it to a couple from the East Bay.

Thankfully, those new owners wanted to continue that arrangement, Fanucci said.

“I was prepared to lose the opportunity because I never got it in writing,” Fanucci said.

A lease is a typical legal route for a grape buyer such as Fanucci or Aaron Pott looking to secure a fruit source without buying it.

However, such a lease can create complexities for the vineyard owner to sell the property, and the prospective buyer that wants the fruit may face a buy-out of the lease, Fanucci said.

While there are risks of a no-lease arrangement going awry when one party or the other walks away, one advantage of not having a lease is to not have to deal with sale or capital gains taxes, Fanucci said. But with a vineyard lease, if the term is kept shorter than 35 years, else it could trigger a property-tax reassessment for the owner.

One key challenge for long-term handshake deals is a general requirement under California’s statute of fraud (Civil Code section 1624(a)) for contracts that span more than a year to be in writing, Fanucci said.

But a significant caveat to that one-year requirement is the legal theory in oral contracts of “detrimental reliance,” one way of determining a breach of an agreement, Fanucci said. That’s where one party moves forward in performing what were understood to be the terms of the deal, and the other party doesn’t step in to clear up the misunderstanding. Such reliance possibly could be seen in the Potts’ spending money to farm Lagier Meredith Vineyard and Fanucci’s paying to manage and harvest the 2-acre vineyard, Fanucci said.

While the Lagier Meredith Vineyard deal doesn’t involve a change of ownership, it’s not uncommon for Wine Country couples without heirs to pass their property to neighbors or helpful friends, Fanucci said. In that situation, the potential new owners should be aware of an array of potential tax liabilities. For example, the current federal estate-tax exemption for non-spouses is $12.6 million, but that is set to go back down to $5 million as of 2026.

Jeff Quackenbush covers wine, construction and real estate. Before coming to the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Reach him at jquackenbush@busjrnl.com or 707-521-4256.