An Overview of Farm Lease Issues that Producers Should Consider

by Grant Ballard

Attorneys who practice in the area of agriculture and agricultural law regularly get questions about cropland and farm leases.  In today’s world, producers realize that lease terms and misunderstandings as to the provisions in lease agreements can be costly and result in the complete breakdown of the landlord-producer relationship.  Most farmers in our area of the country are coming to the wise conclusion that written leases are a good idea, but all too many leases are not properly drafted and are unfair to one of the parties to the lease.  However, farm leases can be constructed so that they are fair to both the producer and the landlord.  Quality leases ensure the stability of the landlord-tenant relationship and the  long-term  farm profitability of the farm operation, by clearly describing  the  responsibilities and expectations of each party to the farm lease agreement.

I am writing this short article to highlight areas of a cropland lease to which producers should give serious attention.  When you consider signing a farm lease, please, at a minimum, pay attention to the following issues.

• Dates and Signatures–  A lease should provide the beginning and ending dates for the term of the lease.  Of Course, it should be signed and dated by both parties.
• Property Description–  A lease should contain a legal description of the real property and reference all buildings and improvements to be leased by the farm operator.
• Termination Clause-  Both parties should understand and agree to the circumstances which may end the lease.  Producers should be aware of all circumstances that may allow   a landlord to terminate the lease.  Farmers should also insist the lease expressly state that they be given written notice of default along with a specified time period in which to respond to the landlord’s notice of grounds for termination.  Producers should also consider providing themselves an opportunity to cure the default, within the written terms of the lease.
• Terms of Rental–  A lease should describe with specificity the rental agreement, including whethere the lease is a cash lease or a crop-share agreement.  The time at which payment is due should be specified, as well.
• Maintenance of Property- A lease should expressly state the responsibilities of both the landlord and the tenant, in regard to the maintenance and repair of the leased property as well as any improvements on the premises.  Often a cropland lease will involve the maintenance of soil fertility and the control of noxious weeds.  It is wise to address these issues.  A good farm lease will also address the possibility of reimbursement or the discounting of rent, where the producer is forced to spend a large or unanticipated amount of money in the maintenance or repair of the landlord’s property or improvements.
• Liability Issues-  A cropland lease should not unfarily apportion liability on the producer.  In addition, the lease should require that insurance is carried on the property, and the lease should assign the responsibility to obtain and maintain coverage to one of the parties to the agreement.
• Federal Farm Programs- A farm lease that involves cropland should also address federal farm programs, especially whether the landlord or the farmer has the authority to make determinations as to farm program and conservation program participation.
• Arbitration  Provisions- Producers should understand that, by signing a lease agreement which includes an arbitration clause, they are limiting their right to use the Court system to protect their interests.  Arbitration proceedings are, for all practical purposes, final.  Producers should also be aware that arbitrators are not judges and may have no legal experience or an adequate understanding of the legal issues presented by a farm lease dispute.  Producers should give significant thought to the consequences of an arbitration clause before signing a lease that mandates the arbitration of disputes between the landlord and farmer.

When dealing with a lease that involves a significant amount of cropland or that will be in effect for a period of years, it is always a good idea to have an attorney draft and review the lease prior to signing.   For assistance in the drafting or review of your cropland lease, feel free to contact Grant Ballard at (501) 280-0100 or by email at gballard@bankslawfirm.us.