Communication and a farm rental agreement

Communication in any business venture is important, but it is extremely important in farm rental agreements.

Historically agreements have been verbal between tenant farmer and landowner, but for some reason we don't want to talk about the terms and conditions of these agreements. Even a verbal agreement needs three months' notice for termination, preferably done in writing. That means that anyone wanting to terminate a verbal lease should do so by Dec. 1 of any given year.

There are many types of lease agreements out there such as cash rent, crop share leases and flexible cash leases sometimes called custom leases. So, it is important to have some documentation about what type of lease has been entered into by both parties.

A verbal agreement is also only enforceable for one year after the agreement it made. It is a good idea to put farm rental agreements in writing. This helps create accurate communication between both parties about what is the term of the lease and what is expected. Having a written agreement gives some documentation in case a tragedy happens and the original person who entered into the lease passes, the family will have some idea of what the lease entailed.

Farm lease agreement documents don't have to be very fancy to be effective. Remember this is to help define expectations and promote clear communication, not as a litigation tool.

For the lease a person will want to have a description of who is entering into the lease, and the date when the lease is being entered into. It's not a bad idea to have a legal description of the property on the lease just so everyone is on the same page. It is possible that a tenant may be renting several fields from the same person or that a landowner may have several different tenants.

General terms of a lease can be whatever a person wants to put into it. Terms can be flexible or general. They should at the very least include the time period for the lease.

There is nothing wrong with a lease that terminates every year. This is an opportunity to open more communication between tenant farmer and landlord to discuss the terms every year, which can be very beneficial to both sides.

Rental price, respective shares and the expected contributions from both sides should also be spelled out in the agreement. How and when payment will be made is important to have in writing too. Deciding who has insurance on of the property and what crops are to be planted are also important to discuss.

Having conditions of subleases written in the lease is also a good idea. There should also be a statement included that the landlord and the tenant do not intend to create a partnership when entering into this agreement.

One item that should be discussed is the termination and requirements of termination of the lease. Leases should never go more than three years. A lease that terminates every year is better for both parties especially in this volatile grain market. In the farm rental agreement there should be a discussion about lime or nutrient applications, who will pay for the applications and who will do the applications.

There should also be a discussion about which actions the landowner would consider default on the lease. The rights of the tenant to property should be defined and could include some hunting rights provisions.

Operations and maintenance are issues that should also be discussed in the farm rental agreement. Further discussion should include if there are any prohibited farming practices such as type of chemicals that should not be sprayed or types of tillage requirements.

Remember that the more restrictive a landlord the harder it will be to find a farmer to farm the land. Some other questions that should be asked are: What is the process of measuring soil health? Who maintains the fences? Can the tenant make improvements and get reimbursed for them? Who is responsible for soil --conservations practices?

Each farm will have a special set of circumstances and those will also need to be discussed and written down.

The landlord should have it spelled out regarding how management will be involved and the landlord's right to enter the property for specific purposes. Any amendment to the agreement should be done in writing and there should be a clause in the agreement that discusses any amendments to the agreement. There should also be some information about how the tenant is to report back to the landowner about the property.

While the guidelines don't cover every scenario or situation, it should explain the importance of open communication between tenants and landlords, and start everyone working in the direction of getting leases in writing.

More and more there are landlords who are not living within the state where their property resides and this can make communications more difficult, as the landlords may not be familiar with local farming or farming practices. Having open communication with landlords especially if they live elsewhere will help clear up problems that might arise.

These communications can lead to a very good working tenant --landlord relationship that can be profitable for each party. Keeping open communication throughout the farm rental agreement time period is a great way to build great working relationships.

For more information about farm rental leases and communication please contact Ann Delchambre 765-653-8411 or email adelchambre@pur-due.edu

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