Friday, June 25, 2010

Value of a Written Farm Lease

Farmers and landowners can avoid many potential misunderstandings and disputes by developing a written farm lease, said a University of Missouri Extension agriculture business specialist.
“It’s a way to hedge against uncertainty,” said Whitney Wiegel. “Are we replacing trust and common courtesy with paperwork and documents that will uphold in a court of law? Maybe so, but developing a written farm lease doesn’t have to erode a personal relationship between a landowner and tenant.”

Written lease contracts help landowners and tenants think about and agree upon essential considerations involved in leasing a farm, he said. Having a written contract adds clarity to the lease agreement and helps to ensure accountability between the landowner and farmer.

A written farm lease should contain at least five main elements, Wiegel said.
1. A description of the land and the names of the parties involved in the agreement.

2. The term (the length of time the lease is to be in effect).

3. The rental rate and/or payment type. There are five common types of rent: crop-share rent; livestock-share rent; cash rent; flexible cash rent; and farm machinery, equipment and buildings rent. For more information on the different types of rent, read the MU Extension publication “Farm Lease Agreement” (G426), available for purchase or free download at .

4. A “right of entry” statement. This statement should describe the landowner’s legal right to enter the property. Without this kind of statement, the tenant has the right to treat any person who enters the property as a trespasser—even the landowner.

5. Signatures. Signing the agreement makes it a formal contract. All co-owners of the property, including husband and wife, should sign the lease agreement when property is held in joint tenancy or tenancy by entireties (in which spouses own a property as a single legal entity).

Other items that may be appropriate to include in a lease include a description of operating expenses and how they will be allocated between the parties of the contract; explanations of the conservation practices to be implemented during the contract term; and who is responsible for repairs or improvements to the property.

A description of a record-keeping method may be included. This aids in determining which party is accountable for costs pertaining to certain elements of maintaining the property. Finally, the parties may wish to include a statement of nonpartnership. This statement explains that the contract between the parties does not establish them as business partners, which may have otherwise been implied.

“Yes, a handshake and a man or woman’s word is still valuable, but considering what is at stake—money, peace of mind and reputation—taking the time to develop a written farm lease may be well worth your effort,” Wiegel said.

To find agriculture business specialist in your area go to the University of Missouri Extension website.

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