That’s what Tiffany Dowell Lashmet, AgriLife Extension agriculture law specialist, says. “You never know what might happen between two folks with an oral lease, even if they are family or the best of friends,” she said. “Lease agreements certainly do not have to be lengthy and complex, but there are some terms you need to include to protect both sides.”
Lease agreements help both parties think through possible issues or situations that they need to agree on before they shake hands and make a deal. At a recent workshop in Amarillo, Texas, Dowell Lashmet recommended including the following in a lease:
Describe leased property and limitations
Include a map clearly showing the leased land and any important areas. Delineate where entry points to the property.
Setting a stocking rate
Be very clear on size, weight or animal units allowed. Be aware that this number may need to change based on drought or wildfire.”
Maintenance of fixed assets
“Who has to maintain things? Who has to pay for it? You can do whatever you want, but spell it out in the lease. Fences are a big deal. Who is required to maintain those fences and make sure periodic inspections are done?”
Forum clause
If the tenant and the landowner don’t live in the same area, this clause identifies where you want any legal forum to be if an issue arises that requires court action.
Dispute resolution clause
“Suing people is expensive; consider a method of avoiding court and settling the case beforehand through mediation or arbitration. These are two very different things – mediation has a third party involved and if both parties agree to settle, it’s written up and everyone goes home, or if they don’t, they go to court. But in arbitration, the arbitrator hears both sides of the case and then the arbitrator picks a winner and you are done. Generally you can’t go to court after that. Make sure you know what you are agreeing to.”
Attorney fee provision
“If you clarify that in a court situation the prevailing party can recover attorney fees, you can pursue that, otherwise each are on their own.”
Term of lease and cancellation
“There are two typical lease types when dealing with grazing leases – tenancy for term or periodic tenancy. Term has a start and end date, that’s it. Periodic has a start and end date that renews itself unless one party gives written notice. Make notice of cancellation be in writing. Set a time when the notice is due.”
What may be done on the property?
“If limitations are not included on the lease, they don’t exist. Put it in the lease if you want it clarified. Can kids ride four-wheelers? Can anyone hunt or is it for grazing purposes only? Do they have access to corrals or just pasture? Spell out who has hunting rights or you will have a tense situation in November when deer season opens.”
If the lease will include hunting rights, Dowell Lashmet had a few more tips:
“Consider whether you will allow hunters to bring and utilize tree stands and deer blinds,” she said. “From a liability standpoint, landowners may want to consider not providing these, due to the number of injuries occurring each year related to tree stands and deer blinds.
“You might also want to clarify what weapons and vehicles can be used on the property. Make sure you read your insurance policy and make sure it provides coverage for injuries to people who are paying money for hunting.”
She said it also doesn’t hurt to include in the lease a statement that lessee is required to follow all state and federal laws or the lease will terminate.
“Leasing land can be beneficial for both landowner and tenants alike,” she said. “Both parties can benefit from developing written lease agreements to protect their rights in this scenario.”
Might be worth having a discussion about leasing options. Many owners lease “by the acre” for a flat fee because it is easier and accept the risk that their tenant won’t overgraze. Some lease by cow days or animal units so there is a disincentive for overstocking and they accept risk of lower payments if the place is rested or understocked. My parents leased to an order buyer by pound of weight gain and managed the cattle themselves plus maintaining water and fences to maximize control and accept risk if on the profit/ loss side for over or understocking. They also had an out clause for drought that required destocking.
Great article. I am a fan of clear, detailed and thorough communication. A written lease just ensures that we remember what was agreed upon.
I would like to add a couple more items that I learned through the years.
When oil companies moved in with seismographing and drilling, who receives payment for the damages to grass? For seismographing that damages the grass it should go to the lessee, not the lessor as the lessee may be suffering from less grass. Actual drilling for oil will bring up other issues that can cause problems.
My leases were all by the acre and long term over a span of years. In law, at least in Colorado, the lessee has control of the land unless there are stipulations in the contract. In Colorado a lease can be filed at the courthouse. I failed to do so one lease and an oil company pulled in to begin seismographing without my knowledge. If I had filed the lease it would have shown up on a search by the oil company landman and I would have been notified and would have received damages to the grass I paid for. The land owner was contacted by the oil company and the deal was made with her. After a discussion between the three entities I received one half of the damages.
Thanks, Chip! Useful info, from the school of hard knocks…