Farm lease agreements can be complex legal documents, but they don’t have to be. Behind every legal provision there is a meaning, a purpose and a potential benefit to both parties of having such language in the lease. I sometimes work through lease agreements with farmers or landowners, and witness their eyes glazing over when we read through a sample provision that is two paragraphs long. I reassure them, “Don’t worry, there’s a real meaning! Edit it down! Have the lease agreement work for you!” Lease language, first and foremost, needs to make sense.
A 200-page lease agreement makes the farming arrangement no more successful than a two-page agreement. In fact, if I had to choose, I’d bet on the two-pager being the product of the stronger relationship! It is the mutual understanding and clarity you develop alongside each written provision in a lease that paves the way for success.
The fact is in some cases you might need more detail, and in others you might not. The only way to know is to first understand why the particular language is needed, and how it could apply to you. Then you can determine if you need more wording, you can say the same thing with less, edit the wording to meet everyone’s needs or if the agreement looks just right.
A lease agreement is much more than a legal document protecting your interests and rights. It is a template for developing common ground on key points before the lease term starts.
And a good lease agreement sets up a process for intentional communication between farmer-tenants, landowners and other potential support entities during the lease term.
In summary here is a good way to approach developing a lease agreement you can relate to:
• Do the best you can to understand the meaning of the common parts of a lease agreement, and why they might be important for your arrangement. Use the checklist below to make sure you have everything covered.
• Once you know the key things to consider at the outset of an arrangement, meet face to face with stakeholders. Use each common provision as a talking point, and take one at a time. Talk through your plans and intentions, confirm everyone’s expectations and clarify points of uncertainty.
• Try your best to capture in writing what you have discussed and agreed upon, going back to the drafting table to edit the provisions of an agreement so they make sense, and accurately describe what you have talked about.
• Don’t rush. Thoroughly review your written draft that represents the points you have agreed upon, and make sure to address anything remotely uncertain before you sign anything. Also before you sign anything, consider having an attorney review the document. They are likely to have additional recommendations that can reduce risks you might be unaware of.
Below are three provisions that should be included in every lease agreement, why they should be included, and what to talk through when examining them.
Permitted and Prohibited Uses
This is the meat of every lease. The reason why this is such an important provision is that farmer-tenants’ and landowners’ might have different ideas of what might be reasonable to do as part of a farming operation. Everyone has a different threshold for tolerance when it comes to trash and cleanup, everyone has a different expectation of what kind of storage method is reasonable, and everyone has varying assumptions about what else might come along with a particular type of farming.
Communicate perceptions and intentions. The best thing a prospective farmer-tenant can do is think of the five senses. Then brainstorm every possible change that might take place during the lease – anything that would change the look, sound, smell, feel or even taste of the place—and communicate this to the landowner. The best thing for the landowner to do is to be up front and provide honest feedback about every one of these possible scenarios. Share opinions about the circumstances under which a particular practice might be acceptable or unacceptable. For instance, the landowner might be fine with two 18’ x 96’ greenhouses going up, but not right by the property entrance.
And perhaps the most important part to this provision: An agreed upon process for clarifying down the road what is permissible vs prohibited, when there is grey area.
It is extremely difficult to predict every change that will happen, especially at the outset of a multi-year lease. By nature, people change, and other unforeseen factors influence decision making or perceptions over time. To account for uncertainty, parties to a lease can agree and document a process for future communication when there is question. For example, a common strategy is for the lease agreement to describe how a farmer-tenant, whenever there is a proposed new activity, improvement or change to the land or buildings during the lease term, gives the landowner a written description of the details of the proposed activity before it takes place. The landowner then typically has a preset reasonable time period for requesting more information or responding with a determination of whether or not the activity is permissible. Identifying a time for regular meetings between farmer-tenant and owner throughout the lease term for discussing questionable activities is another good strategy that can achieve the same end.
Care for the Land
I actually have not seen this provision in a lease labeled as such, but it is a good descriptor for what these types of provisions cover: Assurances to the landowner about what will be done to steward the land responsibly to minimize pollution, conserve soils, protect water quality, follow local, state, and federal environmental laws and not degrade the land. Landowners are ultimately liable for any environmental laws that are broken, so they will often want, if not require these kind of assurances. In Vermont, the Accepted Agricultural Practices are the minimum environmental standards that farmers are expected to follow, and they can be referenced in this provision in the lease.
Any other assurance the farmer-tenant can give to the landowner will help, such as providing for a way for both parties to have a regularly scheduled meeting with conservation district or NRCS staff to address resource concerns. A conservation plan can be developed with assistance from these entities. While it might not be practical for farmer-tenants to implement every environmental improvement under the sun, they can at least convey while developing the lease agreement the steps they might take. Caring for the land not only is important for meeting the landowner’s expectations, but in the long run is in the best interests of the the farmer-tenant to ensure the resource base stays productive.
Successors, Heirs and Assigns
A successor, heir or assign is anyone who could assume legal control or ownership of the property beyond the landowner signing the lease. Farmers typically want to know that the lease arrangement will stay the same regardless of who has future control of the property. If there is an unexpected death, this could be the executor of a will or spouse or sibling. It could be a brand new property owner. Who knew the owner would sell the farm at the time of initially developing the lease agreement? This provision is intended to protect the interest of the farmer-tenant, and it is really #1 in terms of providing tenants with the guarantee they need to operate on leased land, and not get kicked off the land by a future owner.
These are some key provisions. Try to minimize your assumptions when developing a lease arrangement. Instead, converse, clarify and confirm. Talk through everything possible, using sample lease agreements as a template that you and/or your attorney can later edit and customize to your particular situation. It will be well worth the initial effort, paving the way for a fulfilling arrangement every year of the lease.
Thanks to the National Grazing Lands Coalition for making this article possible. Click on over to see the great work they do for all of us. Thank them for supporting On Pasture by liking their facebook page.
SAVE THE DATE
The National Grazing Lands Conference is scheduled for December 2 – 5, 2018 in Reno, Nevada. It’s one of the best conferences we’ve been to, so you’ll want to be there!