Therefore, the Parties agree to all of the following:

Section 1: Property and Term

a. Premises: Lessor agrees to lease to Lessee for agricultural purposes the 20-acre parcel (River County Parcel #456) located in the northwest ¼ of the northeast ¼ of Section 2 Township 12 S, Range 5 E, in River County in the state of Sun, as identified in Exhibit A. The property being leased shall be referred to as the “Premises.”(3)

b. Term: This Lease shall continue in force for 50 years, terminating on March 31, 2066.

• (3) It is essential to clearly describe the exact premises being leased. An ideal approach is to use the legal description, found on the deed or at the county recording office. It’s a good idea to also Include a map, pictures, or whatever else may be helpful and necessary to specify the boundaries. This is particularly significant if the premises being leased is only part of a larger parcel.

Section 2: Renewal

a. Renewal Procedures: The Parties may elect to renew the Lease by the following process:

Before October 1, 2065, Lessee shall give written notice to Lessor of Lessee’s intent to renew the Lease. If notice is not given, absent mutual agreement by the Parties, the Lease shall not be eligible for renewal.

Lessor shall respond to any written notice of Lessee’s intent to renew by December 1, 2065. If Lessor agrees to renewal, the Lease shall be renewed for 50 years beginning on April 1, 2066, unless the parties agree otherwise. (4)

• (4) Most often long-term leases do not automatically renew, and instead require some action on the part of the parties. This is one example of how a renewal process could work. The parties will need to agree on their own terms and timeline.

Section 3: Rent and Payment

a. Rent Amount: Lessee shall pay Lessor rent in the amount of $3,000 per year.(5)

b. Rent Payment: The rent amount shall be paid biannually; the first payment of $1,500 is due on April 1 and the second payment of $1,500 is due on August 1 of each year throughout the term of the lease beginning in 2016. If rent is not received within 30 days of the due date, Lessor may assess interest on the payment at a rate not to exceed 2%, compounded monthly. Rent is to be paid in the form of a check sent to Lessor or via an electronic funds transfer.(6)

c. Rent Adjustment: The rent amount shall be reevaluated every 10 years, unless the parties otherwise agree. The reevaluation shall be based upon the appraised value of the land only (without improvements, including trees and perennials). The parties shall hire a third-party appraiser to assess the value of the land only, on or before April 1, 2016 (“initial appraised value”) and between the months of January 1 and March 1 every 10 years thereafter (2026, 2036, 2046, and 2056). The cost of the appraiser shall be shared equally between the parties. The rent amount shall be adjusted in accordance with the appraised value of the land only every 10 years to equal the base percentage, unless the parties otherwise mutually agree. The base percentage for the rent amount adjustment will be the initial rent amount of $3,000 divided by the initial appraised amount.(7)

d. Recognition of Reduced Fair Market Value: The Parties recognize that the uses of the Premises are restricted in such a way that the fair rental value of the Premises may be reduced, and that the contribution of ecological services provided by Lessee’s use of the land increase Lessor’s consideration for this Lease.(8)

• (5) This is a basic cash rent arrangement for which the rent amount is consistent each year. The parties also have the option of entering a crop share arrangement or a hybrid between the two. For more information on these options, see Section 2 Q&A—What are the tax and financial implications for the landowner in receiving rent payments?
• (6) It’s important to include the specifics of when rent payments are due and where they are to be sent. Here, the landowner may charge interest if the payment is later than 30 days.
• (7) Long-term lease agreements generally have what’s called an escalation or rent adjustment clause, which requires the parties to reevaluate the lease at a certain point or points throughout the lease. Such a clause helps ensure that both parties maintain their level of mutual benefit in the arrangement—or “legal consideration”—which is required for the lease agreement to be enforceable. Here, the lease requires the parties to evaluate the rent amount every 10 years. Any adjustment to the rent is based on the value of the land. The parties could also agree otherwise. A periodic rent evaluation and adjustment is just one option for an escalation clause. For more information on options for escalation clauses, see Section 3 Checklist—What are the rent arrangement, amount, and payment requirements?
• (8) This again reiterates that the parties are getting mutual benefit—or “consideration”—from this lease arrangement. Here, the initial rent amount of $3,000 is less than the going-rate for agricultural leases in the area. This is in part because the landowner is requiring the farmer to use only sustainable practices (e.g., no GMOs, no aerial spraying) and because the farmer is helping add ecological balance and value to the property through the agroforestry venture. The clause affirms that the landowner recognizes this added value, which does not necessarily equate to a dollar amount. Such a clause is not necessary, but it can be helpful to remind the parties and inform the courts of this ecological value should an issue or discrepancy ever arise.

Section 4: Transfer of Interest

a. Transfer of Lessee’s Interest: Lessee may transfer or assign Lessee’s interest in this Lease at any time and without the consent of Lessor, so long as the transfer is to a family member of Lessee.(9)

b. Transfer on Death: If Lessee holds the Lessee’s interest in this Lease at the time of his death, his interest in this Lease shall transfer to the individual or entity as dictated in Lessee’s will or, if there is no will, pursuant to the laws of intestate succession in Sun State.(10)

c. Sublease: Notwithstanding the forgoing, Lessee reserves the right to sublease all or portion(s) of the Premises to anyone to engage in Permitted Uses as defined herein without the written consent
of the Lessor.(11)

• (9) Should the farmer get injured, fall ill, or for whatever reason not want or be able to continue with the lease, this section provides the farmer the option to assign or transfer the lease to a family member. The family member would then be bound by the terms of the lease. Leases are generally transferrable; however, landowners often want some restriction or limitation on transfers. After all, it is their land. By keeping it in the family, the landowner may feel more assured that the assignment will be to someone the original farmer-tenant trusts and respects.
• (10) Should the farmer-tenant die, the lease will automatically transfer to his heirs, whether designated by will or through the state’s intestate laws if he has no will at the time of death.
• (11) A sublease is different than a full transfer. A sublease simply allows someone else the right to use and occupy part or all of the leased premises for a certain period of time. The farmer-tenant may want to sublease a portion of the premises to someone else if he doesn’t have the time or capacity to do it all on his own. Or, he might want to take a break for a couple years and sublease the whole property to someone else. The way this section is written, the farmer-tenant has full freedom to enter a sublease whenever and to whomever he wants. This gives him flexibility to run his farm operation wisely and seek the help he needs. Some landowners may require written consent first, or prohibit subleases outright.

Section 5: Right of First Refusal

a. Intent to Sell Notice: In the event that Lessor intends to sell the Premises, including by intending to accept an unsolicited offer, Lessor shall give Lessee notice in writing at least 135 days before offering the Premises for sale or 60 days before accepting an unsolicited offer (the “Intent to Sell Notice”).(12)

b. Notice of Exercise: Upon receipt of an Intent to Sell Notice, Lessee shall have the option to purchase Lessor’s interest in the Premises at the Premises’ agricultural use value, according to the following requirements:

i. Lessee shall arrange for an appraisal of the Premises with a mutually agreed upon appraiser within 30 days of receiving the Intent to Sell Notice. Lessee and Lessor agree to split equally the appraiser’s costs. If the parties do not mutually agree upon an appraiser, each party shall hire an appraiser and cover the costs of their appraiser and the agricultural use value will be the average of the two appraisals

ii. The Premises shall be appraised for its agricultural use value, which takes into account the net income likely to be earned generally in River County, Sun State, by producers of the commodity crop rotation of corn and soybeans as commonly conducted on land similar to that of the Premises.(13)

iii. Lessee may elect to purchase the Premises at a price equal to the prepared agricultural use value.

iv. If Lessee elects to purchase Lessor’s interest in the Premises, Lessee shall notify Lessor of such within 30 days of receipt of the prepared agricultural use value by delivering written notice of Lessee’s decision which must include the appraised agricultural use value of the Premises (the “Notice of Exercise”). Lessee’s purchase of the Premises must be completed within 90 days of the Notice of Exercise. The time for completion of the purchase may be extended by mutual agreement of the Parties.

v. If Lessee does not submit the Notice of Exercise, or the sale of the Premises is not completed within 90 days, at the fault of Lessee, and the Parties have not mutually agreed to extend the purchase period, Lessor may sell the Premises to another party.

vi. Lessee may revoke Lessee’s Notice of Exercise. If Lessee revokes the Notice of Exercise, Lessor may sell the Premises to another party. (14)

c. Remedies for Failing to Follow Right of First Refusal: Any proposed sale of the Premises not made in compliance with the requirements of this Section 5 shall be null and void. Lessor acknowledges and agrees that any breach of this Section 5 would result in substantial harm to Lessee for which monetary damages alone could not adequately compensate. Therefore, Lessor agrees that Lessee shall be entitled to seek injunctive relief and other remedies available at law or in equity (including, without limitation, seeking specific performance or the rescission of any purchase and sale of the Premises not made in compliance with this Section 5). (15)

• (12) This section—also known as an “option to purchase”—provides the farmer-tenant the option to purchase the property should the landowner decide to sell it or get an unsolicited offer from a purchaser. The farmer basically gets the right to refuse the purchase before someone else buys it. Farmers often want to include such a section to preserve their opportunity to own the land outright. Here, the landowner must give the farmer-tenant notice and an opportunity to buy it well before she sells it.
• (13) This section is included for purposes of coming up with a purchase price should the farmer have the option to purchase the property. It is a critical section, as it is the basis for determining who owns the value of the trees if and when the property is sold. Here, the purchase price is tied to a generic “agricultural use”—which in the fictitious region of Sun State is growing corn and soybeans. You may be asking, why not tie the purchase price to the value of growing the trees and any benefits resulting from integrating agroforestry practices? That is because this particular lease is a straightforward cash rent lease and the landowner did not make any investment in the upfront purchase of the trees. The landowner has no stake in the agroforestry venture. All of the added value resulting from the mature trees and agroforestry practices is a result of the farmer’s efforts and resources, not the landowner’s. As such, the “value of the trees” ultimately belongs to the farmer, and the farmer should not have to repurchase it so to speak. Accordingly, the purchase price for the farmer, should the option arise, reflects more of a generic price for commodity crops so as to not account for any added value from the trees. If the landowner had invested in the agroforestry venture or purchased the trees upfront, or if the lease arrangement was written so that the ownership of the trees changed over time, this section would need to be written differently. Ultimately, to be effective, this section must be written in a way to reflect the allocation of the value of the trees between the landowner and the farmer at any given time.
• (14) If the parties include a right-of-first-refusal option in the lease, it needs to clearly outline how the process will take place. The section included here is just one example. The key is to include a specific timeline as well as a way to assess the value of the property, whether it is through a formal appraisal or something else. The parties could also consider applying some or all of the previous rental payments to the purchase price.
• (15) This section highlights the fact that if the landowner fails to provide the farmer-tenant a right of first refusal or doesn’t follow the process outlined, the farmer would lose his opportunity to purchase the land. It’s hard if not impossible to put a value on such a lost opportunity. Therefore, if this were to happen, the farmer has the option of filing a lawsuit for an injunction or other legal remedies, which would legally prevent the landowner from selling it to someone else until she followed the protocol.

Section 6: Lessee’s Permitted Uses and Prohibited Uses

a. Permitted Uses:

i. Agricultural and Ecological Restoration Uses: Lessee is permitted to use the Premises for agricultural and ecological restoration purposes. Agricultural use is defined as the raising of crops or for the purpose of selling agricultural products in the course of business. Although the permitted use of the property for agricultural uses is broad, the Parties acknowledge limitations on that use in this Lease. Examples of permitted agricultural uses include but are not limited to seeding pollinator plants, installing warm season grasses, and planting agricultural crops such as fruit trees, nut trees, shrub fruits, rhubarb, and asparagus. In addition, the Parties mutually agree that although perennial plants such as chestnut trees are not commonly thought of as agricultural, the planting and maintenance of food-producing horticultural plants shall be included in the definition of agricultural use. Ecological restoration uses includes ecological farming practices, experimentation, and other activities that are intended to result in carbon sequestration, soil stabilization, reduced nutrient leaching, reduced greenhouse gas emissions, increased biological diversity and pollinator habitat, agricultural disease and pest suppression, and other ecological benefits.(16)

ii. Such Other Activities that Support Agricultural and Ecological Restoration Uses: Lessee is permitted to use the Premises for all other activities that are incidental to and support the permitted agricultural and ecological restoration uses. Such activities include, but are not limited to:

Chemical Use: Lessee is permitted to apply herbicides and pesticides on the Premises, at Lessee’s sole discretion.
Educational Use: Lessee is permitted to use the Premises for educational and demonstration purposes, including but not limited to hosting tours, educational classes, and workshops.
Research Use: Lessee is permitted to use the Premises for research purposes and may direct Lessee’s agents to conduct research on the Premises. Lessor has no interest in any intellectual property that may extend from this research.
Monitoring Use: Lessee is permitted to install and operate one or more electronic monitoring devices on the property, including but not limited to time lapse and motion sensor cameras for management or documentation purposes.
Camping: Lessee is permitted to allow overnight camping on the property by no more than 25 people at a time and only incident with tours or other educational activities.
Hunting: Lessee is permitted to hunt on the property, within the constraints of the law.
Signage: Lessee is permitted to install temporary signs on the property and along the road without prior written approval by Lessor.
Livestock: Lessee is permitted to engage in the raising of pasture-based livestock and/or poultry. Lessee is responsible for providing and maintaining removable or mobile fencing systems to ensure that all raised animals are contained within the Premises at all times. Lessee agrees to treat all raised animals humanely and in accordance with the Animal Welfare Approved standards.(17)
Fire: Lessee is permitted to use fire as a management tool on the Premises, including but not limited to controlled burns of areas of the farm, burn piles of plant materials, and bonfires.
Point of Access: Lessee may access the Premises from any point connecting to a road.
Vehicle Parking: Lessee and Lessee’s agents may drive and park vehicles anywhere on the Premises.

a. Lessee’s Prohibited Uses:

i. No GMOs: Lessee shall not plant or intentionally grow any genetically modified organism.
ii. No Aerial Spraying: Lessee shall not utilize aerial spraying techniques.
iii. Unlawful Activity: Lessee shall not engage in any unlawful activities.(18)

• (16) The lease should clearly specify what the permitted uses are. This section will vary depending on the type of farming or agroforestry operation, as well as the landowner’s preferences in how the property will be used.
• (17) When animals are involved it presents a level of complexity. Can the farmer construct and operate a confined animal feeding operation (CAFO)? Does the farmer have to abide by any animal husbandry standards, and if so, what are they? Who’s responsible for fencing? Can the farmer sublease grazing rights to someone else? The lease should address all of these issues. Here, the livestock and poultry must be pasture-raised, which precludes a CAFO. The farmer must also abide by the Animal Welfare Approved standards to ensure humane treatment. Another option would be to include a set of animal husbandry standards within the lease, or to have a separate Animal Husbandry Manual that the farmer acknowledges and agrees to abide by. Here also, the farmer is responsible for erecting fencing to be sure the animals are contained on the Premises. Note that in some states the landowner is legally required to maintain fencing for grazing operations. It’s best to consult the advice of an attorney to be sure the lease is in compliance with your state’s fence laws. Note that Section 4(c) of this Lease allows the farmer to sublease any portion of the Premises for permitted uses. Therefore, as this lease is written, the farmer could sublease his grazing rights to someone else. However, that person would need to follow these terms.
• (18) Instead of relying solely on a general section, it’s best to be as specific as possible when outlining permitted and prohibited uses. This list here provides a good example of the types of issues the parties should consider and include related to permitted and prohibited uses. For more thoughts and ideas on this element of the lease, see Section 3 Checklist: What are the uses or activities that the farmer is permitted or prohibited from doing? and Are there standards and land use practices that either of the parties must follow?

Section 7: Lessee’s Rights and Obligations

a. Conservation Reserve Program Enrollment: Lessee reserves the right to enroll all or part of the Premises into the Conservation Reserve Program or other similar government programs with prior written approval by Lessor so long as the term of those programs ends prior to the ending of the term of the Lease. Lessee will incur all establishment and management costs associated with enrolling land into such programs, and, consequently, Lessee will receive all payments from such programs.(19)

b. Improvements:

i. Temporary Improvements: Lessee may make or add temporary improvements to the Premises without prior written approval by Lessor. Temporary improvements include but are not limited to: trees, shrubs, and perennial plants; mobile or removable structures such as greenhouses and hoop houses, removable or mobile fencing, removable parts of irrigation systems, and structures required for monitoring activities and signage permitted under Section 6(a)(ii). Unless otherwise agreed in writing, any temporary structures that Lessee erects on the Premises are the property of Lessee, and Lessee may remove them at any time throughout the duration of the Lease. Lessee is responsible for remedying or compensating Lessor for any damages incurred to the Premises from the removal of temporary improvements.

ii. Permanent Improvements: Lessee may not make any permanent improvements to the Premises without prior written approval by Lessor. Permanent improvements include building or adding any structure or object that is irremovable or would cause permanent damage to the Premises if removed.(20)

c. Insurance: Lessee shall, at Lessee’s sole expense, continuously maintain the following insurance:(21)

i. Workers’ compensation insurance, where required by the laws of Sun State.

ii. Liability insurance of not less than $1,000,000 for injury to or death of any one person; and $2,000,000 for injury to or death of any number of persons in one occurrence; and $100,000 for property damage. The dollar amounts of this coverage shall be adjusted in 10-year intervals by mutual agreement of the Parties with the first adjustment beginning 10 years from the effective date of this Lease. Such insurance shall insure Lessee against all liability assumed under this Lease and imposed by law. Lessee shall name Lessor as an additional insured on any liability policy.

iii. Automobile liability insurance on all automotive equipment used in conjunction with operations in amounts not less than $100,000 for bodily injury and the same for property damage and liability.

• (19) If the parties wish to enroll the land in a conservation program, the lease will need to specify who is responsible and who gets the payments.
• (20) The lease needs to specify how the parties will handle any improvements that the farmer-tenant may add to the property. These include things like buildings, structures, wells, irrigation systems, and so on. For an agroforestry lease, it could also include trees, plants, and shrubs—if the parties choose to treat these as improvements. Here, improvements are divided into temporary (i.e., removable) and permanent (i.e., irremovable). The farmer-tenant can add temporary improvements without prior approval of the landowner. Because these are “removable,” the farmer-tenant in effect owns them and can remove them at any time. However, the farmer-tenant needs written permission to add any permanent improvements. Because these are “irremovable”—that is, can’t be removed without causing permanent damage to the Premises—the landowner in effect owns them. Here, the trees, plants, and shrubs are considered temporary improvements—owned by the tenant—until and unless they cannot be removed without permanent damage. This is one creative way the parties could account for the value and ownership of the trees and perennials throughout the duration of the lease. However, many other options are available and it will depend on the circumstances of the parties and their particular arrangement. For more information on this issue, see Section 2 Q&A: How are the trees valued and accounted for throughout the lease? In addition, see Section 3 Checklist: How are improvements handled and accounted for, including the addition of trees?
• (21) The lease needs to specify any insurance requirements for the farmer-tenant, including premium amounts. Here, the tenant is required to obtain worker’s compensation when required, liability insurance, and automobile insurance.

Section 8: Lessor’s Right of Entry

a. Lessee’s Exclusive Use: Lease of the Premises is exclusive.

b. Right of Entry: Lessor or Lessor’s agents may enter the Premises only upon providing 24-hour written notice to Lessee.(22)

• (22) This is an exclusive lease. Therefore, it’s akin to renting an apartment or a house. The landlord can’t simply just walk in and check things out. Some landowners may want to reserve some usage rights. If that’s the case, the parties will need to clearly outline the parameters and protocols for preventing and addressing conflicts between the parties’ respective uses and activities. If the landowner wants to reserve substantial usage rights, a lease may not be the best option. By nature, a lease must provide some level of exclusivity or primary usage to the tenant. If the landowner wants to retain primary usage rights, a better option may be a license or an easement. For more on this issue, see Section 2 Q&A: What’s the difference between an agricultural lease and an easement? and What’s the difference between an agricultural lease and a license? Be sure to also see Section 3 Checklist: Does the landlord retain rights to use the premises?

Section 9: Lessor’s Obligations

a. Provide Utilities: Lessor must provide Lessee with occasional access to electricity for light uses such as charging batteries. Lessor must also provide access to trash disposal for incidental refuse generated from Lessee’s agricultural activities.

b. Pay Taxes: Lessor shall pay any and all taxes, assessments, and charges, when due, that are charged against the Premises.

c. Lessee’s Payments in Event of Delinquency: If Lessor does not timely pay the relevant water, utility, and refuge bills or taxes charged against the Premises, Lessee may pay the unpaid bills or delinquent taxes and either invoice Lessor for the amount paid or use the payment to offset future rental payments. Lessor shall pay Lessee any invoiced amount for unpaid bills or delinquent taxes within 30 days of receipt of invoice in the form of a check at a current address provided to Lessor by Lessee on the invoice. Lessee may assess interest on any overdue balance of the invoiced amount at a rate not to exceed 2%, compounded monthly. (23)

•  (23) This section provides that the landowner is required to pay for the utilities and taxes. All these fees are accounted for in the rental amount. Sometimes leases account for them separately. It’s up to the parties to decide what arrangement is best for them. The last paragraph specifies that if for whatever reason the landowner fails to make a payment on time, the farmer-tenant can go ahead and make it so there’s no interruption or issue with the services.

Section 10: Mutual Duties and Responsibilities

a. Access to Water:

i. Lessor must provide and maintain access to water through an irrigation hookup on the Premises throughout the term of the Lease. Lessee acknowledges and agrees to reasonable delay in the provision of water should water pressure drop, available capacity decrease, or other contingency occurs that is outside the control of Lessor. Lessor agrees to use best efforts to remedy any adverse contingency and resume the provision of water as soon as is reasonably possible.

ii. Lessee is responsible for building and maintaining all infrastructure necessary to carry water from the irrigation hookup to and throughout the Premises, including piping, drip table, sprinklers, and valves. Lessee must use the irrigation hookup in a responsible way, and is responsible for paying any repair or replacement costs should damage result beyond ordinary wear and tear. Lessee will use water responsibly and sustainably including taking actions necessary to prevent erosion on the Premises and to control the flow of excess water and runoff.(24)

b. Indemnification:

i. Lessor shall indemnify, defend, and hold harmless Lessee against any liability and pay for any and all damages, losses, or expenses that are incurred by Lessee in connection with the Premises that extend from Lessor’s negligence or failure to perform the terms of this Lease.

ii. Lessee shall indemnify, defend, and hold harmless Lessor against any liability and pay for any and all damages, losses, or expenses, up to the limits of Lessee’s insurance policy where available, that are incurred by Lessor in connection with the Premises that extend from the Lessee’s negligence or failure to perform the terms of this Lease.(25)

c. No Pledge of Credit: Neither Party shall pledge the credit of the other Party for any purpose without the consent of the other Party.(26)

• (24) Depending on the region and geography of the area, water usage may be a significant concern. A separate water or irrigation section may be helpful to fully address all the issues surrounding water usage—including timing, flow rate, repairs, cost, etc. This is just one example of the arrangement for water access and usage that the landowner and farmer may agree upon.
• (25) An indemnification clause is simply a promise by the other party to cover your losses if he or she does something that causes you harm or causes a third party to sue you. This is a mutual indemnification clause, which means that both parties agree to compensate the other for damages, losses, or expenses that result from their actions or inactions.
• (26) This is another way of saying that the farmer-tenant may not enter a debt and pledge the property as collateral. Similarly, the landowner may not take out a lien on the property for any value that is rightfully the farmer-tenant’s—including the value of the trees, any equipment, or other improvements that belong to him.

Section 11: Enforcement of Effect

a. Dispute Resolution: Prior to taking any action in a court of law, the Parties to this Lease agree to appoint a committee to evaluate the dispute and make recommendations for its resolution. The committee shall consist of three persons: 1) One adult appointed by Lessee who is not a member, partner, director, or employee of Lessee or an immediate family member of Lessee; 2) One adult appointed by Lessor who is not a member, owner, partner, director, or employee of Lessor or an immediate family member of Lessor; and 3) One adult who is appointed by the Parties’ designees and is a qualified and experienced mediator or professional in a relevant field such as an extension officer, an experienced farmer, or a representative from an agricultural or environmental agency (altogether, the “Dispute Resolution Committee”). The Dispute Resolution Committee shall review written submissions and supporting evidence submitted by both Parties within 30 days of the committee’s creation. The Dispute Resolution Committee shall make findings of fact and propose a resolution for the dispute within 60 days of the Dispute Resolution Committee’s creation. The Parties may accept the resolution if they wish. Lessor and Lessee agree to each assume 50% of the costs of the Dispute Resolution Committee, as costs are incurred.(27)

b. Binding Effect: The provisions of this Lease shall be binding on the heirs, executors, successors, administrators, and assignees in a like manner as upon the original Parties, except as provided by mutual written agreement.(28)

c. Memorandum of Lease: Lessee has the right to record a Memorandum of Lease in the River County Office of the Recorder of Deeds and in the River County Farm Service Agency Office.(29)

• (27) This is a creative approach to resolving disputes, which may or may not be preferred by the parties. If a dispute were to arise, the parties must first go through a dispute resolution committee that they themselves create. The parties may decide to accept or reject the resolution of the committee. If they reject it, they can then go to court. This helps facilitate open communication throughout, and can help prevent the parties from ever going to court—which is risky, expensive, and time consuming.
• (28) Leases are generally binding on future landowners. That means that if the landowner dies or sells the property, the subsequent landowner must continue with the lease as they will be bound by the terms. The parties could agree otherwise. Either way, it is essential that the lease specify whether it is binding on future landowners or not. Here, this section explicitly states that the lease carries on with future landowners.
• (29)Leases grant the tenant a property interest. Therefore, just like a real estate sales agreement, it should be recorded with the official recording office in the county or region where the property is located. This recording process basically notifies any future landowners that the property is subject to a lease. It’s yet another step to provide the tenant a sense of security that the lease will carry on if the initial landowner were to sell the property or die and pass it on to her heirs. In some counties, long-term leases must be recorded to have any legal validity in court. It’s best to play it safe and record your lease.

Section 12: Amendments and Early Termination

a. Amendments: Any amendment to this Lease is ineffective unless in writing and signed by both Parties.(30)

b. Early Termination:

i. This Lease may be terminated before its date of expiration upon the written consent of both Parties.(31)

ii. If Lessee is unable or unwilling to comply with the terms of this Lease for the full term or any renewal or extension, then Lessee may terminate the Lease early by giving one-year written notice to Lessor. If Lessee terminates the Lease early, Lessor may suffer a loss in the form of rent proceeds. Therefore, within two years and two months of providing notice of early termination, Lessee shall pay Lessor liquidated damages in the amount of one year’s rent less any proceeds the Lessor receives from leasing, assigning, or otherwise using the Premises in the first year after termination. Lessor agrees to take reasonable steps to mitigate damages upon receiving notice of early termination from Lessee.(32)

iii. If Lessor is unable or unwilling to comply with the terms of this Lease for the full term or any renewal or extension, then Lessor may terminate the Lease early by giving one-year written notice to Lessee. If Lessor terminates the Lease early, the Lessee may suffer a loss in the form of the cost of establishing and maintaining perennial crops and the increasing value over time of established perennial crops. Therefore, within one year and one month of providing notice of early termination, Lessor agrees to pay Lessee liquidated damages in the amount of $8,000 per acre planted with woody crops plus $4,000 per acre per year that those woody crops have been in place. For example, if Lessee establishes three acres of woody crops in year one and two acres of woody crops in year two, and then Lessor terminates the Lease in year three, the liquidated damages owed to Lessee are 5 acres x $8,000 + 3 acres x 2 years x $4,000 + 2 acres x 1 year x $4,000 =$72,000. Lessee agrees to take reasonable steps to mitigate damages upon receiving notice of early termination from Lessor.(33) 

c. No Amendment by Performance: The conduct, representation, or statement of either Party, by act or omission, shall not be construed as a material alteration of this Lease, unless such a provision is put in writing and signed by both Parties as an amendment to this Lease.(34)

d. Waiver of Performance: The failure of either Party to insist on strict performance of this Lease is not a waiver of any subsequent default or failure of the other Party to comply with the terms of this Lease. The Parties may waive performance of this Lease, but the waiver must be in writing and signed by both Parties to be effective.(35)

• (30) The parties must get any agreed-to changes to the lease agreement in writing. The parties thus need to be careful not to simply rely upon anything said in a conversation. Get it in writing.
• (31) If the parties both agree, they can terminate the lease early. This gives them an out should something unexpected arise.
• (32) This is a form of a liquidation clause. It sets an amount for calculating damages if the farmer-tenant decides to terminate the lease early for whatever reason. It recognizes that the landowner may suffer a loss in rent proceeds. It requires the landowner to mitigate or prevent that loss by trying to find another tenant or otherwise use the land in a way that brings in some profit. Essentially, the farmer- tenant will have to pay the landowner one year’s rent minus whatever the landowner is able to bring in from the land over the course of two years and two months. This is one creative approach to addressing the possibility that the farmer-tenant may have to back out of the long-term lease. It is an attempt to strike a balance of fairness to both parties. The parties are free to negotiate whatever approach is best for them under their circumstances. Note that liquidated damages must be fair and reasonable to be upheld by a court; they cannot excessively penalize the other party. It’s best to tie liquidated damages to a real-life scenario like the example here.
• (33) This is a liquidated damages clause that will kick in if the landowner terminates the lease early for whatever reason. Here, the liquidated damages are based on an equation that accounts for the value of the trees and shrubs that the farmer-tenant invests in and plants over the course of the lease. This addresses the issue in an agroforestry lease that the venture takes time to become profitable. If the landowner suddenly terminates the lease, the farmer has a lot at stake. Again, this is just one option. The parties are free to negotiate an approach that works best for them. Of course, it will depend on how the parties account for the value of the trees in other places of the lease, including the rent amount (is it less to account for the added value of mature trees?) as well as improvements (are the trees considered temporary improvements and is the farmer-tenant permitted to take them when the lease terminates?). Also note that anytime the parties include a formula in a lease or other agreement, it’s a good idea to also provide an example, as done here, so that the parties clearly understand how it works.
• (34) This is legal language explaining that simply saying or doing something isn’t enough to amend the lease agreement. An amendment must be in writing to be effective.
• (35) This is legal language explaining that if one of the parties doesn’t comply with a term and the other party doesn’t say anything, it doesn’t mean the party can thereafter get away with doing it again. The only way the parties can get out of any of the terms or obligations of the lease is by getting it in writing.

Section 13: Additional Terms

a. Notice of Address Change: Each Party shall provide the other Party written notice of any change in their mailing address within 30 days of the address change.(36)

b. Notice of Bank Account Change: Lessor shall provide Lessee written notice of any change in the bank account information for electronic fund transfer within 30 days of the bank account change, but no less than 10 days prior to a rent payment due date.(37)

c. No Use of Identifiers: Neither Party shall use the name, trademark, or other identifier of the other Party in any advertisement, promotion, publicity, or other purpose without the prior written approval of the other Party.(38)

d. Compliance with Laws: Lessee shall use the Premises in a manner that does not cause harm to others or create any nuisances. Lessee shall maintain the Premises in a safe condition, in full compliance with all applicable laws and regulations, and as required to maintain both Parties’ insurance policies. Neither Party shall permit illegal activities to be conducted on the Premises. (39)

e. Attorney’s Fees: The prevailing Party shall have the right to collect from the other Party its reasonable cost and necessary disbursements and attorneys’ fees in enforcing this Agreement. (40)

f. Governing Law: This Lease is governed by the laws of Sun State. The language in this Lease in all cases should be construed according to its fair meaning and not strictly for or against Lessor or Lessee. (41)

g. Severability: If any part of this Lease is or becomes invalid or unenforceable, such material shall be read out of the Lease and the remainder of the Lease shall remain effective. (42)

h. Partnership: This Lease does not create a partnership or joint venture and neither Party has the authority to obligate the other without written consent. (43)

i. Notice: Unless stated otherwise, notice must be given in writing and delivered in person or mailed through the United States Postal Service by registered or certified mail to the last known address of the other Party. Notice is effective 72 hours after being deposited in the United States Postal Service mail with a return receipt or in the case of personal delivery, upon receipt. (44)

Signatures
We set our signatures to this document.

Phil Farmer-Tenant____________ Date____________

Lisa Landowner____________ Date____________

• (36) The parties must notify each other of any address change. This ensures that rent payments and other written notifications are sent to the right place and are received on time.
• (37) If the landowner expects the farmer-tenant to pay rent through direct deposit, she must provide an updated bank account.
• (38) This protects the branding and intellectual property—such as trademark, copyright, etc.—of each of the parties. The parties can use each other’s brand, but only with written permission.
• (39) This reiterates that the farmer-tenant must engage in only those activities that are permitted under the lease and comply with the law. He can’t create a “nuisance” which is a legal term that means an unreasonable, unwarranted, or unlawful use of one’s property. Activities causing a nuisance could include things like dumping toxic chemicals, knocking down buildings without permission, and so on.
• (40) This means that if the parties were to go to court or take other measures to enforce the agreement, whoever “loses” will have to pay the other party’s attorney fees.
• (41) This means that if the parties were to ever go to court the laws of Sun State would apply. Generally, it will be the laws of the state where the property is located. But the parties could agree otherwise if, for example, one of them lives in another state.
• (42) This is legal language saying that if a court were to conclude that one of the provisions or sections of the lease is invalid for whatever reason, the remainder of the lease is still intact and enforceable.
• (43) Lease arrangements run the risk of being deemed a general partnership in the eyes of the law, even if it’s not what the parties intended. If for whatever reason a court finds that the lease arrangement between the parties is a general partnership, the parties will have what’s called joint authority and joint liability. This means that both parties will be on the hook for the actions or inactions of the other party, including incurring debt or legal liability. This clause helps prevent that from happening, should the parties want to not treat their arrangement as a business venture together. If the parties want to create a business venture together, it would be advisable to form an official business entity together, such as an LLC or corporation, in addition to the lease. Unlike a general partnership, the formal entity provides the individuals involved some level of personal liability protection for the business’ liability. For more on this issue see Section 2 Q&A: What are the tax and financial implications for the landowner in receiving rent payments? (d) Accidental partnerships.
• (44) This specifies how the parties must officially notify each other if important issues in the lease come up, such as renewal, default, invoices, etc.