Even though a landowner might be leasing his or her farm to family members, neighbors, or friends, it is highly suggested that the terms of the lease be memorialized in writing. This is particularly important since oral contracts involving a tenancy in land are not enforceable.
There are several issues that should be discussed between the landowner and tenant. In addition to the term of the lease and description of property, examples of other issues that should be discussed and memorialized in the farm lease include the following:
1. Payment of property taxes;
2. Payment of liability insurance;
3. Payment of utilities;
4. Ability for the tenant to make improvements on the property (e.g., cattle guard, irrigation ditches, water pump) and whether such improvements must be removed at the end of the lease;
5. Ability for the tenant to assign or sublease to another farmer;
6. Implications of a government taking (or condemnation);
7. Whether the tenant or landlord bears the risk of loss and damages from invitees or Acts of God (e.g., flood, tornadoes);
8. Ability to hunt, fish or camp on the leased farmland (for both the tenant and landlord and possible invitees);
9. Whether the landlord has the right to enter part or all of the farmed premises;
10. Implications of tenant’s default in rent payment;
11. Forum selection (i.e., what court litigation will take place if needed), Alternative Dispute Resolution (“ADR”) (e.g., arbitration, mediation), and attorneys’ fees;
12. Ability to terminate lease;
13. Choice of law for the lease (e.g., leased farmland crosses over the Illinois-Indiana border and Illinois law controls the lease); and
14. Allowed uses on the property (e.g., growing row crops, watermelon farming, poultry farming, bull stud, beekeeping, agritourism).
These are just a handful of the issues that should be discussed between a landowner and tenant who are considering entering into a farm lease. Farmers are highly encouraged to seek the counsel of an attorney licensed in your jurisdiction before entering into a lease whether the lease is for one growing season or a decade.