10 min read
Are you considering leasing agricultural land, either as a tenant or landowner? If so, use this free tipsheet to help you consider what you want your lease agreement to look like.
The best lease between a farmer and a landowner is one that accounts for the unique needs, goals, and expectations of the parties involved. Ideally, a lease is the product of clear communication and understanding between the parties, and it creates proactive pathways to solve problems that might arise over the course of the relationship. In this way a lease is a mechanism for getting on the same page (literally) about how the land access relationship will operate. Importantly, if you cannot get on the same page about needs and expectations this can be a helpful sign that this may not be the right leasing relationship for you.
With regards to farmland, a lease in very basic terms is an agreement between the landowner and the farmer where the farmer gets the exclusive right to use the land. In some cases, there may be multiple farmers collaborating together and leasing from the same landowner. Once the parties agree on the use and the terms and conditions, they have a lease. A lease can be verbal (a handshake deal) or it can be memorialized in writing. However, a verbal lease is much more difficult and costly to enforce in court than a written one. It’s also harder to remember the terms of the agreement when nothing is written down. This combo makes for a potentially expensive headache when a dispute arises.
If you have a verbal lease agreement, you may find comfort in your friendly relationship with the other person. However, getting your agreement down in writing will go far in boosting your resilience. No matter how well you think you and the other party get along, a written lease can be beneficial for both parties. Why? Because this is a business relationship and writing down your agreement preserves everyone’s memory on the expectations and responsibilities of the business relationship. The process of writing down a lease agreement is a creative opportunity to explore contingencies such as responsibilities for maintenance and repairs and how you will resolve disputes if they should occur. Also, other people like heirs or lenders may need documentation of your agreement. There’s really no downside to creating a written lease!
If you don’t have a thorough written lease that addresses your particular needs and concerns, you should be aware that the law will step in to dictate the terms of the lease agreement. Each state has its own set of “default” rules that kick in as a backstop when the parties involved don’t define their own terms of the lease agreement.
For example, state law typically says that a lease can be terminated “at will” by either party. This generally means that the landowner can terminate the lease at any time so long as proper notice is given (e.g. 30 day notice). Does this work for your needs? If not, make sure you have a written lease that specifies exactly when and how the lease can be terminated early. Make sure you are comfortable with the details, including conditions (when is it okay to terminate early?) and obligations (what does each party need to do for the other in the event of early termination?). Clear processes and expectations will help ease your fears and can also help you prevent bad things from happening altogether as both parties understand the costs.
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As you may well know, there is an inherent power imbalance between a tenant-farmer and the landlord-landowner at play in negotiations. The landowner controls something the farmer needs: farmland. Honest and open relationships can go a long way towards easing the power imbalance but it’s something the farmer may always feel. If you are the one seeking access to farmland, take the time to consider your comfort level to assess whether this relationship is the right fit for you. Ask yourself: do you feel comfortable asking for a meeting? Or bringing up a question or addressing a complaint? Your feelings here will be instructive as to what you need in terms of communication and support, as well as how you may need to protect yourself going forward.
Of course, land is so much more than “property”, or “real property” as the law understands it. Land encompasses ecosystems, flora and fauna, indigenous wisdom, sacred traditions, and the stories of families over time and space. The law, on the other hand, tends to reduce the land’s value down to its ability to generate financial wealth, primarily for the person who owns it. If this isn’t your primary goal in your farmland leasing relationship, the law will expect you to be very clear about what you intend to do on the land if you want to see it honored in a courtroom. This is again why a written lease that spells out the particular values, roles, and responsibilities of the relationship is key to resilience.
If you do feel comfortable moving forward with a land access relationship, it is important to spell out the roles and responsibilities. Generally, the landowner takes care of property taxes and assessments, property insurance, and major repairs to infrastructure. Generally, the farmer takes care of taxes on agricultural production and sales, property and liability insurance, non-infrastructure repairs, maintenance, utilities, conservation practices, organic certification, and other such operational details. We say “generally” because farmers and landowners can come to whatever agreement works best for them! Every farm, farmer, and landowner is different. The best way to make sure everyone is on the same page is to communicate those expectations, work through any differences, and put it all in writing in the form of a clearly written lease.
The basics to cover are who are the parties, what property is being leased (including both land and any infrastructure), when the lease begins and ends, and how much money is associated with the agricultural lease. However, it’s just as important to discuss these other issues which are more likely to be forgotten or to carry false assumptions:
These questions are a strong starting point, but there is much more to consider and tailor to your particular situation. For the full checklist of 41 questions on what to prioritize and discuss between landowners and farm tenants, read our guide Powerful Questions to Prepare for an Agricultural Lease.
When approaching a landowner or potential tenant to write a lease, the goal is to get on the same page. It can be quite helpful to practice the questions you want to discuss to set yourself up for the best chances of being heard and understood. To practice, follow these 3 steps:
Now that you have a beat on the role of written lease agreements and general issues to discuss, it’s time to decide how you want to move forward.
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