It’s tough getting started in any career field these days, but farming and ranching presents a special set of challenges. For many just getting started, land is the largest and most expensive investment. Leasing land to get an operation started, or to expand one, is a good option, but before you agree to any obligations be sure you know what you are really agreeing to. These are a few considerations to think about before entering into any agreements to lease land.
1. Get it in writing
Many times land is leased and the deal is sealed with a handshake in the coffee shop or out on a dirt road beside a pickup truck. While this way of doing business is what many farmers and ranchers prefer, it’s not always the best option. Leases longer than one year must be in writing to be enforceable according to the statute of frauds. Although lease agreements for less than one year can be oral, it is better to have the agreement in writing so that it can be referenced later if any questions arise.
Leases for longer than one year aren’t the only agreements that the law requires to be written. Contracts for services that cannot be performed within one year and contracts for the sale of goods worth more than $500 must also be in writing. In addition to following the requirements of the law, it makes good business sense to have a written record of these business transactions.
2. Know all the details
The details of an agreement to lease land will dictate how the relationship between the landowner and tenant works. Below are a few of the questions that your lease agreement should answer.
What land is being leased? Often leases for large tracts of land will include a legal description of the land included in the lease. You should know the boundaries of the land that is included in the lease agreement.
How much is the rent? When exactly is rent due? Can it be paid in installments, or is it due all at once? The details of payment are essential to each party involved.
Is the lease renewable? How is the lease terminated? Continuation and termination of the lease agreement are important details. If the agreement does not include terms for termination, the law generally provides that either party can terminate the lease agreement with written notice to the other party before the end of the current agreement. The time frames for that written notice vary depending upon the length and nature of the original agreement.
Are there restrictions on the use of the land? Are hunting and fishing rights included with the lease? Who will maintain fences? Can the tenant use water on the property or dig a new well? These considerations will be different for each situation, but should be included in the terms of the agreement.
If you have questions that aren’t addressed in the lease, you should get clear answers before you sign the agreement.
3. Understand the significance of the lease
Realize that you are entering into a legally binding contract. This is an agreement between the landowner and tenant to live up to all parts of the lease, and it is enforceable by law. Don’t agree to anything that you can’t or won’t live up to. In a worst-case scenario, if one party fails to perform their part of the agreement, you could end up in court.
Shannon Mirus of Prairie Grove, Ark., is a Staff Attorney at the National Agricultural Law Center.
