Opinion

Considerations when changing Indiana farmland leases

Tuesday, November 13, 2012

The rights of a tenant and the duty of a landlord concerning required notice to terminate an existing lease is not an easy answer. If your farmland lease is not in writing, there may be confusion about rights and responsibilities when it is time to renegotiate.

Many tenants may be nervous about whether they can sustain the current rent with the crop price outlook and the higher costs of production. Landlords may be oppose a rent reduction and some likely will be looking for and offered a higher rent from a new tenant.

If your farmland lease is in writing it probably spells out a notice requirement if either party wishes to terminate the lease. Leases and rentals may be for a stated term (typically one year) for which no notice is required under an Indiana term lease law.

Ample advance notice is a good idea when a lease change is needed or planned -- especially from a business and farm management point of view. The tenant needs to make plans for replacing land if a new lease cannot be renegotiated with the landlord and where fall activities for the next year's crop is typical.

In Indiana, if no other provision applies, Dec. 1 is the date many leases may automatically renew -- unless there is proper delivery of a notice to quit before the end of November. This date is based on a three-month advance notice requirement in the Indiana law for year-to-year leases.

End of the lease year may be presumed the last day of February. However, the end of the crop year is not part of the Indiana statutes, but is a custom of the Midwest, crop farming community.

In a specific situation, facts may support a year-end date that would make a November notice legally tardy.

There are practical reasons why landlords may hesitate to give an early notice of a lease termination. The cash rent landlord may be waiting for a final payment. And with a share lease, the landlord may wait until the crop is harvested.

Disagreements arise over amount of rent and other leasing arrangements, misunderstandings also arise when the leased land is sold or there is death of the landlord. These events, normally, do not terminate a lease.

Farmland leases have legal, income and estate tax issues not just level of rent or lease terms concerns. Many landlords and tenants may be well advised to seek legal and other professional counsel when dealing with considerations in a lease contract and including an appropriate lease or rental arrangement best suited for the landlord and tenant.

"Legal Aspects of Indiana Farmland Leases and Federal Tax Considerations" is online under "Legal Affairs" at http://www.exte-nsion.purdue.edu/extmedia/EC/EC-713.pdf

For more information please call Ann Delchambre at 543-1881 or email adelchambre@purdue.edu or Facebook Putnam County Agriculture.

Nov. 13 -- Putnam County Health Coalition, 10 a.m. at Extension Office

Nov. 14 -- Cooking 101 -- Appetizers 10 a.m. at Area 30 Career Center

Nov. 27 -- Extension Board Annual meeting, tickets available at Extension Office

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