All parties should understand and agree to all terms outlined in lease agreements
Thinking about leasing your property? Are you looking for a farm to rent?
There’s more to it than just agreeing on a payment.
“In general, a good lease is one in which both parties agree it’s fair and both completely understand each other’s expectations,” Wesley Tucker, University of Missouri Extension field specialist in agriculture business, explained. “The majority of problems that arise from leases occur when one or more parties do not fully understand what the other one expected. Whether a lease is verbal or in writing, taking the time to discuss these issues ahead of time will prevent 99 percent of the problems that could arise later.”
Types of Leases
Verbal lease: Verbal leases are legal, but are only considered valid for one year and are difficult to enforce. If after one year the landlord and tenant agree to extend the verbal lease for a second year, then the lease becomes what is known as a year-to-year tenancy.
“The lease will automatically be extended for another year at the anniversary date of the lease, unless one of the parties provides a termination notice ahead of time,” Tucker said. “The notice must be in writing and provided 60 days prior to the anniversary date of the lease, which is when a landlord and tenant actually made the agreement.”
A verbal lease is also binding upon heirs, but laws prohibit someone from testifying to the terms of an agreement when the other party is unable to defend themselves.
“This makes it very difficult to prove what was agreed upon,” Tucker said.
Written lease: The best way to avoid issues is to draw up a written agreement that is agreed to and signed by all parties.
“It forces you to consider what may seem like minor details now, but can become explosive issues later,” Tucker said. “Small things like who has the right to say who may hunt on the property can cause major disagreements if not discussed ahead of time.”
The minimum requirements of a written lease are the names of both parties, a legal description of the property, duration of the lease, rental rate and payment arrangements, and signatures of both parties.
“A written lease is a good way to force everyone to consider the details,” Tucker advised. “Plus it creates an incentive for both parties to structure the lease so that it’s mutually beneficial.”
Items to Consider
Tucker cautioned that there are several other items that should be considered in a lease, including:
• Landowner entry rights: Unless agreed upon in the lease, the landowner does not have the right to enter the property.
“A common example is when renting an apartment; tenants don’t want a landlord entering the apartment any time they wish, unless it’s to make repairs,” Tucker explained. “The same goes for a land lease. If a landlord wishes to have the right to enter the property or allow their grandson to hunt there, it needs to be in the lease.
• Subleasing: If the lease does not state the tenant is not allowed to sublease the property, then the tenant can sublease it to anyone he or she chooses without the landlord’s permission as long as it is for the same original purpose, such as livestock use or crop production.
• Soil fertility and lime: Tucker said knowing which party is responsible for lime and fertilizer is perhaps one of the most critical points of a lease.
“If fields are not maintained the productivity will decrease which hurts both the landlord and tenant,” Tucker said. “This may be a reason to establish a multi-year lease because it provides more incentive for the tenant to invest in the soil fertility. Another option is to include a special clause in the lease that specifies if the lease is not extended the fertilizer and lime expenses are to be amortized and the tenant refunded the unused portion.”
• Other special agreements: Items, such as fence repair, should be addressed in a lease.
“Agreeing upon who is responsible for fences and who pays for materials ahead of time helps ensure that fences are maintained and kept in working order,” Tucker said.
Other special agreements can include the use of buildings or grain bins, how often pastures should be clipped, noxious or chemical resistant weed control, or any other special restrictions either party desires.
