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Best practices for developing a farmland lease

Kelli Boylen for Progressive Dairy Published on 30 June 2020
Cattle grazing

Whether you are the landowner or the renter, sound legal advice is an “insurance policy” for both sides of a leasing arrangement, says Ed Cox, an attorney with the Iowa law firm of Craver, Grothe & Cox, LLP.

“Having an attorney prepare or review your lease will cost much less than the costs of litigation,” he said. “Both parties may have the best intentions, but they may not think of something to include in the lease that could cause problems down the road.”

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Cox advises against a “one-size-fits-all” type of lease. “Unique farm and farmer characteristics require unique leases,” he said.

Landowners and land seekers should each employ their own attorney to review lease documents. “Each attorney should only represent one side, but the agreement needs to work for both parties.”

The attorney’s job is to look out for the client, including creating language in the lease to protect the client. “The client is ultimately the boss,” he said of all attorney-client relationships.

Attorneys should be thinking of all the things that can go wrong in a lease agreement. It may seem like the attorney is only focusing on the negative, but that needs to be done to create safeguards to protect the client, he said.

Kate Edwards of Renewing the Countryside, a rural sustainability advocacy organization, agreed. “Know what the fights might be as you are developing your lease. Think long-term about all the things you want to do. Your lease can be a very important tool to make sure things work out.”

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Edwards said the first meeting of the lessor and lessee often sets the stage for a longer-term relationship. Both parties need to be good communicators and be able to think of the agreement from the other person’s point of view.

She recommended using the “Elements of a Good Farm Lease” document from the Land for Good organization. It can be found online (landforgood.org/wp-content/uploads/LFG-Elements-of-a-Good-Farm-Lease.pdf).

In addition to a detailed description of the property (including a detailed map for reference), duration of the lease and rent, there are a great many things that should be included in the document. Who will pay the taxes? Who will pay utilities? Who will handle improvements? All structures need to be noted in the lease, including fences, irrigation systems, buildings and roads. Maintenance and repairs should all be detailed out of who is responsible for what, along with alterations and improvements, for both permanent and temporary structures including fencing.

Cox said both parties may want to discuss discounts for certain practices that protect the soil, such as cover cropping, contour stripping and buffer zones around waterways. Make sure to include wording that addresses what to do if crops cannot be planted or harvested due to weather conditions.

Statement of purpose

The creation of a statement of purpose can be helpful, Cox said. This way, both parties understand the ultimate goals of the agreement. Wording may read something along the lines of: “Whereas both parties share a mutual interest in the long-term health and productivity of the agricultural lands and buildings and improvements thereon; and whereas the landlord wishes to offer a secure and affordable farming opportunity to the tenant; and whereas the landlord wishes the property to be farmed according to high standards of stewardship, the parties agree as follows: The tenant will farm in accord with the highest standards of good husbandry and will take all first-class farmer-like steps to ensure the conservation of the natural resources and the long-term productivity of the farm.”

Both parties must also think about all possible prohibited and permitted activities that might take place on the land. Can the landowner make an unannounced inspection of the land? What crops and types of farming will be allowed? Can trees be removed? Is agritourism allowed? Can pastures be put in or taken out? Can manure be spread on the land by either party? Is subletting allowed? Who is allowed to hunt on the rented land?

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“A lease should be treated as a living document,” Cox said. Both parties should have regular conversations and discuss any potential changes needed to the lease and to clear potential misunderstandings before they become a problem.

Leases longer than a year should be recorded at your local courthouse, Cox said. Documents filed at the courthouse are considered to be public documents, but in most places the amount of rent and other details do not need to be filed (although the actual lease itself should be as detailed as possible). All recorded leases should be notarized.

“Try to think of everything you might need over the lease term,” Edwards said. “Don’t be shy, but don’t be demanding. Just frame it in your needs. You are the farmer; you know what you need to make your farm work. Trust your voice. It’s OK to ask for things.

“Negotiation isn’t just about the rent per acre,” she continued. “It’s about many things. … Negotiation is learning to meet the other’s needs and your needs at the same time, while finding the cross section of those needs.”

Edwards said land can be an emotional subject for many, even though it is not commonly thought of that way. The security a well-written lease offers can help reduce stress for everyone involved.

Leases should include a plan for dispute resolution, including who must cover or share the costs of formal mediation.

Both Cox and Edwards said farm leases should include procedures for termination of the lease by either party and what constitutes a default of the lease.

Succession issues, including right of first refusal, should also be included.  end mark

ILLUSTRATION: Illustration by Fredric Ridenour.

Cox and Edwards spoke about “Farmland Leasing: Best Practices for Landowners and Land Seekers” at the 2020 MOSES organic farming conference, held annually in Wisconsin.

Kelli Boylen is a freelancer based in northeast Iowa.

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