Agricultural Leases & Legal Considerations
A wide range of agricultural leases cover farmland across the United States, where fewer and fewer property owners operate activities on their own land. These leases may be written, oral, or even implied through conduct. Regardless of the form, a lease must identify the property covered by the lease, the parties to the lease, the rate of rent, and the length of the lease. It may also contain provisions that address subleasing, insurance, crop selection, farming practices, improvements and maintenance to the property, and termination procedures, among other things. Landlord - tenant laws in some states may affect specific provisions in agricultural leases as well.
The parties generally should try to put a lease in writing if possible. This will help avoid disputes down the road or resolve them more efficiently. However, an oral lease may be valid if it does not fall within the statute of frauds. Different states impose different statutes of frauds, but often these laws cover contracts that cannot be fulfilled within one year. If an oral lease lasts one year or less, it likely will not violate the statute of frauds.
Types of Agricultural Leases
The two main types of agricultural leases are cash rent leases and crop-share leases. These cover the land in general, rather than a particular use. A cash rent lease provides that the tenant will pay a set rent for the parcel or per acre. Some property owners may favor these leases because they will receive a steady amount of rent, regardless of the performance of crops and price fluctuations in the market. Meanwhile, a crop-share lease gives the property owner a percentage of the crops produced on the land. This arrangement results in higher risk and higher reward for the property owner. If the crops perform better or worse than expected, or if market prices are higher or lower, they will receive those benefits or burdens together with the tenant. More recently, some property owners and tenants have negotiated hybrid leases that combine aspects of cash rent and crop-share leases.
Other types of leases involve specific activities on the land. Examples include:
- Oil and gas leases: rights to minerals below the ground of a property are leased to a development company for extraction
- Energy leases: solar and wind leases allow a company to enter the property and build infrastructure to collect these forms of energy
- Fee hunting leases: a property owner can license individuals or groups to conduct hunting on their property on an annual, seasonal, or short-term basis
Terminating an Agricultural Lease
A tenancy with a specific start date and a fixed termination date is traditionally known as a tenancy for a period of years. (Although its name refers to "years," it can cover a lease that lasts for a certain number of months as well.) This type of lease usually does not require notice of termination, but the parties can insert a notice requirement in the lease if they choose. Some states limit the duration of a tenancy for a period of years.
On the other hand, a lease without a definite end creates a periodic tenancy. These may be month-to-month or year-to-year leases. Periodic tenancies cannot end automatically and may be terminated only when one party provides proper notice. For a year-to-year lease, a party usually must provide six months of notice before the beginning of the next lease term. The notice period is usually 30 days for month-to-month leases. Some state laws have altered these notice periods.
