Winter 2017 has been the season of farm lease disputes in our office. In the last few months, we have tackled multiple issues for farm clients who faced eviction from leased ground for the 2017 crop season. Resolving these problems likely would have been easier if we had a written lease. The scenarios below highlight two of these challenges and explain how a written farm lease helped, or would have helped, a tenant farmer with maintaining his or her lease rights.
Pretend that you have had a verbal lease with your neighbor for 30 years. You and your neighbor have always had a great relationship, with no disputes or complaints. Then your neighbor passes away, and the land passes to his or her two children, none of whom live on a farm. The children decide to sell the farm and inform you that the verbal lease is terminated, effective immediately.
So, will the verbal lease with your deceased neighbor allow you to farm the ground for 2017? To start, the law does not require the children to honor the verbal lease between you and your neighbor. If you have taken certain actions such as applying fertilizer, purchasing seed or planting a cover crop, these actions help your argument that the lease is valid for the year. If the children decide to press the issue, they may attempt to evict you. Similarly, if the property goes to auction, the auctioneer may need to disclose the existence of your lease.
In this situation, a written lease between you and the neighbor would have resolved this issue due to provisions that protect a tenant farmer. For example, one clause states that the lease is binding on all future owners of the property (including the children). Another clause provides a timeline for providing notice if the lease will not be renewed for the following year. Additionally, for added protection, you can create a public record of the lease by executing a memorandum of lease and recording that memorandum with the county recorder.
Here, the verbal lease provides very little protection. Without a written lease, there is a good chance the tenant farmer would lose the ability to farm the ground for 2017.
Better offer comes along
In a different scenario, pretend that you signed a three-year written lease with another landowner. Under the lease, rent is renegotiated each year based on the county average rate. Before the third year of the lease, the landlord informs you that he is terminating the lease effective immediately. Turns out your landlord received a rental offer that exceeded the county rate by a large sum.
How does the written lease protect you in this instance? A lease is a contract, an agreement between the two parties. The lease grants you the ability to farm the land for three years in exchange for the landlord receiving three years of rent. If the landlord does not allow you to farm the land for three years, he or she has committed a material breach. This material breach grants you a legal cause of action against the landlord. You could take the landlord to court and recover damages for financial harms suffered as a result of the material breach. These damages are often determined on a case-by-case basis by the court, but they can be significant.
When facing a lawsuit, attorney’s fees and the potential for a large damages payment, a landlord will often allow the tenant to farm the land for the lease term rather than take on the expense and stress of a lawsuit. For the farmer in this example, the written lease prevented the landlord from committing a material breach and ultimately enabled the tenant to farm the land.
Written leases act as a relatively cheap form of insurance against losing land that you farm. Without a written lease, you run the risk of a landlord pulling the rug out from under you. By spending the time and resources to put together a farm lease, you can protect against losing productive acres for years to come. If a landlord is hesitant to sign a lease and prefers to do business on a handshake, try explaining how a verbal lease creates a risk to you as the tenant, if something should happen to the landlord.
Moore is an attorney with Wright & Moore Law Co. LPF. Email him at [email protected] or call 740-990-0750.