This article is for educational purposes only, does not create an attorney-client relationship, and is not a substitute for competent legal advice by an attorney licensed in your state. The checklists and forms are provided only as general guidance and are not exhaustive. Suggested terms may be unnecessary in all circumstances. The authors strongly suggest that all parties consult with their own attorney when entering into or evaluating a lease agreement.
Like any contract, a lease is a package deal. Landlords and tenants should carefully consider all of the terms offered by the other party before making a decision.
Starting the conversation about your farmland lease
Farmers often worry that asking about a lease will signal distrust or unhappiness in a current landlord-tenant relationship, or, perhaps worse, open up the conversation to competitors. “Negotiation” might sound competitive and adversarial, and you may even picture lawyers fighting across the room.
Common practice could not be more different. Merriam-Webster defines “negotiate” as “to confer with another so as to arise at the settlement of some matter”, or, in plain English, to have a conversation until you reach an agreement. Negotiations with a landlord or tenant typically are just that – a conversation.
How often do you have a conversation with your landlord or tenant? Regardless of the relationship, in most circumstances, farm landlords and tenants likely speak at least once per year –when the rent check is delivered. The landlord may ask the tenant how the year went or how the family is doing, and the tenant may do the same. This is also a good time to ask how each party feels the relationship is going. Are both parties happy with the obligations being fulfilled? Are there any updates to the property that are needed, such as installing tile or beginning a new management practice? Perhaps the farm tenant is proud of the fertility levels or a new conservation practice that he or she is maintaining for the landlord’s benefit. Perhaps the landlord would contribute to these updates since they are reaping the long-term benefits, or perhaps the landlord would consider a written lease for a longer period of time at a lower or constant rental rate in exchange for the value-added by the farm tenant’s management of the property.
Perhaps you simply mail a payment each year. A farm tenant may still consider providing some updates to the landlord about his or her care of the property.
As you have these conversations, pay attention to what information your landlord or tenant seems most interested in. It may then be time to suggest that you may clarify and memorialize the agreement on a particular topic in writing. A written agreement protects the understanding of and continuity for both parties.
A lack of bargaining power is a historical characteristic of the American farmer. As John F. Kennedy once said, “The farmer is the only man in our economy who buys everything at retail, sells everything at wholesale, and pays the freight both ways.” However, don’t forget that a “negotiation” is truly just a conversation about the future of the rental arrangement that can be started a part of your regular conversation with your landlord or tenant.
Terms to Consider
What kinds of terms might you consider? Here are a few to get you started:
☐ Parties: Has the landlord or tenant changed? Has the property been put into a trust or an LLC? Has the farm? Is an adult child taking over operations?
☐ Dates: When is the lease effective and enforceable? When does the term of the lease run?
☐ Renewal Terms
☐ Description of the Property: Has the property changed? Perhaps a house or woods has been surveyed off, and an update is needed.
☐ Rental Amount and Payment Dates
☐ Termination: When, how, and for what reasons may the lease be terminated? What reimbursement will the landlord owe the tenant for crops still in the ground, crop nutrients, lime and/or completed fieldwork upon termination? Does the lease continue if either party passes away?
☐ USDA/FSA Compliance: Ensure that the farm lease complies with the USDA Farm Service Agency federal farm program regulations. Cash rental tenants are entitled to all of the federal farm program payments; crop share tenants are required to share direct and counter cyclical payments with their landlord.
☐ Farm Operations: What practices are required or prohibited? Are certain conservation practices required? Will the landlord participate in the farming operation?
☐ Repairs and Maintenance: Who is responsible for maintaining fences? Maintaining tree lines? Can the tenant make improvements to the property and will they be compensated (ex. installing tile, a fence, or a well)?
☐ Nutrient Management: Does the farm tenant have the explicit right to apply manure or to authorize a third-party farm to do so? How is the liability addressed for such activities (such as allocating liability to the tenant, providing for tenant indemnification of the landlord, or additional insurance requirements)?
☐ Access: Does the tenant have access to the property directly from the public right-of-way? Does the tenant need an easement across another property for access or another purpose? Who maintains the driveway? Does the farm tenant have a right to seek a permit to expand the driveway? At whose expense?
☐ Rights to Natural Resources and Recreation: Does the landlord retain any energy rights, mineral rights, timber rights, fishing/hunting rights, or other recreational rights? Are there any limitations on access?
☐ Insurance: What type of insurance is either party required to carry? How much?
☐ Defaults and Penalties: Failure to fulfill one party’s obligations may be a breach of contract, a default, or simply trigger a penalty. Do any of these trigger a right to terminate? What are the penalties or damages for other failures?
☐ Dispute Resolution: How will disagreements be resolved? Consider an agreement to use the Wisconsin Department of Agriculture, Trade, and Consumer Protection’s free mediation service versus litigation or arbitration.
☐ Amendments: Require that amendments be in writing and signed by both parties.
☐ Sublease or Assignment: May either party sublease or assign their interest in the lease without the other’s permission? For example, can the landlord sell the property? The tenant sublease to an adult child or an LLC?
☐ Other Rights in the Property: Has the landlord notified the tenant of any easements, conservation program enrollments, or other items that entitle a third party to a right in the property?
☐ Farmhouse or Buildings: Consider a separate lease for residential property which is subject to different laws and regulations.
This list is not all-inclusive, and not all items included may be relevant to all parties. Each landlord-tenant relationship and conversation is unique and should be documented accordingly.
Terminating a farmland lease or tenancy
Is my Wisconsin farm lease enforceable?
Negotiating Agriculture Leases
Navigating Lease Agreements for Small Acreage, High Value Crops
