By Cari Rincker, Esq.
Fall is a popular time to renegotiate farm leases for the next year’s growing season. This article summarizes a checklist of issues to consider when renegotiating the terms of the lease. Farm leases should be in writing to ensure that both parties understand the terms of the lease. A written lease also provides a record of the agreement in case an issue later arises between the parties.
1. Type of Lease. Broadly speaking, there are three major types of leases: (1) cash rent, (2) crop share, and (3) hybrid. A hybrid lease provides for a minimum fixed cash rent in addition to a smaller share of the revenue. The type of lease that worked one year may need to be adjusted for the next.
2. Description of Property. Perhaps what land is and is not included in the lease needs clarification. A legal description and/or maps should be attached to the lease. In limited circumstances, a survey may be appropriate.
3. Lease Term. If you had prior oral leases, it’s possible that the start and end dates were not clear. It’s suggested to have the term of the lease and any renewal terms memorialized.
4. Payment Terms. Payment terms should be clear (including when payment is due, where it should be sent, penalties/interest for late payments). Any responsibilities for the landlord to reimburse the tenant for improvements or operational expenses should be noted.
5. Duties and Prohibitions. Farm leases should clearly describe responsibilities (e.g, maintaining fenceline, soil conservation, controlling noxious weeds) and prohibitions (e.g., use of certain chemicals, certain types of improvements, agri-tourism/ agri-tainment).
6. Management. Who is making what decisions for the farming operation? This is especially important for crop share or hybrid leases. This part of the lease may affect whether the income is “active income” or “passive income” for social security purposes. This may be especially important for landlord farmers closer to retirement.
7. Termination Procedures. The farm lease should include procedures for terminating the lease either voluntarily or involuntarily (e.g., in case of a default), including notice provisions.
8. Insurance. Who is required to have what kinds of insurance at what limits?
9. Ability to Sublease. Can the tenant-farmer sublease part of the property?
10. Confidentiality. Some farmers would prefer to have the terms of their lease private between the parties.
11. Farmstead. If the farm lease includes a house, it is recommended that the farmstead have a separate residential lease.
12. Intellectual Property. Any use of the landlord farmer’s “brand name” should be memorialized in a separate trademark license agreement.
This checklist is non-exhaustive. Farm leases should be in writing and individualized for each farming operation. Farmers are encouraged to speak to an attorney licensed in their jurisdiction about issues affecting his or her operation.
For more information contact:
Rincker Law, PLLC
Licensed in Illinois, New York, New Jersey, Connecticut & District of Columbia
301 N. Neil Street
Champaign, IL 61820 (217) 531-2179
New York Office:
535 Fifth Avenue, 4th Floor
New York, NY 10017
Fax (212) 202-6077