Legalese can be confusing. So it's important that you clearly understand the fine print of a cash-rent contract.
"A good lease should be in writing and include how and when to terminate a lease," says Peggy Kirk Hall, director of The Ohio State University Agricultural and Resource Law Program.
A verbal farm lease can be enforceable in certain situations. But legally enforcing the lease is costly and risky, she says. If the lease is longer than a year, it should be in writing and signed by both parties to be legally enforceable.
Know the law. Tenancy is the right to occupy property under agreed terms and conditions. State laws regarding tenancy are as variable as soil types, so check the statutes.
Ohio law, for example, does not establish a specific notice if the time is not specified in the lease. Iowa's lease termination date is Aug. 31. Typically, termination is 90 days notice. However, some courts require a six-month written notice of termination for some land leases. The notice should be given before tillage is complete, seed is bought and other inputs are purchased.
Putting the details in writing isn't a sign of mistrust; it's just good business. A written rental agreement forces consideration and communication. It is also a handy reference if there's disagreement or if one party forgets the details, says Don Breece, Ohio State University Extension farm management specialist.
The contract should benefit both parties. Have one party's attorney prepare the lease and the other party's attorney review the agreement, he suggests.
Read the fine print. Include a provision that any amendments must be in writing and signed by both parties, advises Chris Bruynis, Wyandot County, Ohio, Extension educator. Spell out procedures for resolving disputes and include any state statutes. You also need to outline what happens should the tenant or landlord die.
Every contract or lease agreement will one day terminate, notes Breece. Be sure to include in writing:
- When and how the lease may be terminated.
- Requirements for notice of termination.
- Reimbursement for crop nutrients, lime and/or completed fieldwork upon termination of the lease.
- Acts of the tenant that would constitute default of the lease.
- Tenant's rights if the property is transferred or condemned during the lease period.
- Reimbursement for a crop still in the ground when the lease is terminated.