Agricultural Lease Agreement Basics

*****Your feedback helps us improve! Please take 2-minutes to complete a short survey after reading this resource. As a bonus, you’ll receive a FREE downloadable copy of “The Farmers’ Guide to Business Structures.” Simply click the “Give Feedback Here” button at the bottom! *****

Communication Creates a Lease

The best lease between a farmer and a landowner is one that accounts for the unique needs, goals, and expectations of the parties involved. Ideally, a lease is the product of clear communication and understanding between the parties, and it creates proactive pathways to solve problems that might arise over the course of the relationship. In this way a lease is a mechanism for getting on the same page (literally) about how the land access relationship will operate. Importantly, if you cannot get on the same page about needs and expectations this can be a helpful sign that this may not be the right leasing relationship for you.

What exactly is a lease, legally speaking?

With regards to farmland, a lease in very basic terms is an agreement between the landowner and the farmer where the farmer gets the exclusive right to use the land. In some cases, there may be multiple farmers collaborating together and leasing from the same landowner. Once the parties agree on the use and the terms and conditions, they have a lease. A lease can be verbal (a handshake deal) or it can be memorialized in writing. However, a verbal lease is much more difficult and costly to enforce in court than a written one. It’s also harder to remember the terms of the agreement when nothing is written down. This combo makes for a potentially expensive headache when a dispute arises.

How can a written lease increase my resilience?

If you have a verbal lease agreement, you may find comfort in your friendly relationship with the other person. However, getting your agreement down in writing will go far in boosting your resilience. No matter how well you think you and the other party get along, a written lease can be beneficial for both parties. Why? Because this is a business relationship and writing down your agreement preserves everyone’s memory on the expectations and responsibilities of the business relationship. The process of writing down a lease agreement is a creative opportunity to explore contingencies such as responsibilities for maintenance and repairs and how you will resolve disputes if they should occur. Also, other people like heirs or lenders may need documentation of your agreement. There’s really no downside to creating a written lease!

Be thorough– don’t let state laws decide for you!

If you don’t have a thorough written lease that addresses your particular needs and concerns, you should be aware that the law will step in to dictate the terms of the lease agreement. Each state has its own set of “default” rules that kick in as a backstop when the parties involved don’t define their own terms of the lease agreement.

For example, state law typically says that a lease can be terminated “at will” by either party. This generally means that the landowner can terminate the lease at any time so long as proper notice is given (e.g. 30 day notice). Does this work for your needs? If not, make sure you have a written lease that specifies exactly when and how the lease can be terminated early. Make sure you are comfortable with the details, including conditions (when is it okay to terminate early?) and obligations (what does each party need to do for the other in the event of early termination?). Clear processes and expectations will help ease your fears and can also help you prevent bad things from happening altogether as both parties understand the costs.

*****Your feedback helps us improve! Please take 2-minutes to complete a short survey after reading this resource. As a bonus, you’ll receive a FREE downloadable copy of “The Farmers’ Guide to Business Structures.” Simply click the “Give Feedback Here” button at the bottom! *****

Inherent imbalance of power

As you may well know, there is an inherent power imbalance between a tenant-farmer and the landlord-landowner at play in negotiations. The landowner controls something the farmer needs: farmland. Honest and open relationships can go a long way towards easing the power imbalance but it’s something the farmer may always feel. If you are the one seeking access to farmland, take the time to consider your comfort level to assess whether this relationship is the right fit for you. Ask yourself: do you feel comfortable asking for a meeting? Or bringing up a question or addressing a complaint? Your feelings here will be instructive as to what you need in terms of communication and support, as well as how you may need to protect yourself going forward.

Of course, land is so much more than “property”, or “real property” as the law understands it. Land encompasses ecosystems, flora and fauna, indigenous wisdom, sacred traditions, and the stories of families over time and space. The law, on the other hand, tends to reduce the land’s value down to its ability to generate financial wealth, primarily for the person who owns it. If this isn’t your primary goal in your farmland leasing relationship, the law will expect you to be very clear about what you intend to do on the land if you want to see it honored in a courtroom. This is again why a written lease that spells out the particular values, roles, and responsibilities of the relationship is key to resilience.

Spelling out roles and responsibilities

If you do feel comfortable moving forward with a land access relationship, it is important to spell out the roles and responsibilities. Generally, the landowner takes care of property taxes and assessments, property insurance, and major repairs to infrastructure. Generally, the farmer takes care of taxes on agricultural production and sales, property and liability insurance, non-infrastructure repairs, maintenance, utilities, conservation practices, organic certification, and other such operational details. We say “generally” because farmers and landowners can come to whatever agreement works best for them! Every farm, farmer, and landowner is different. The best way to make sure everyone is on the same page is to communicate those expectations, work through any differences, and put it all in writing in the form of a clearly written lease.

What do I need to discuss in lease negotiations?

The basics to cover are who are the parties, what property is being leased (including both land and any infrastructure), when the lease begins and ends, and how much money is associated with the agricultural lease. However, it’s just as important to discuss these other issues which are more likely to be forgotten or to carry false assumptions:

• Are there limits on the type of agricultural production allowed? Can the farmer raise crops but not livestock? Can they raise everything except for bees? Or what if they want to grow flowers only, for example?
• Are there any land stewardship practices the parties would like to require of each other, such as using organic methods? Do those come with costs, and if so, who pays for those costs?
• Are there specific standards for weed or disease control for either party?
• If irrigation water is provided, who pays for the running of the pump and any repairs that may be necessary?
• Are we contemplating any “right of first refusal” or “option to purchase” if the landowner decides to sell? Is the lease convertible to a land contract? What are the details of this arrangement: how will the land be valued and what is the procedure for exercising the right or option?

These questions are a strong starting point, but there is much more to consider and tailor to your particular situation. For the full checklist of 41 questions on what to prioritize and discuss between landowners and farm tenants, read our guide Powerful Questions to Prepare for an Agricultural Lease.

Try This: Preparing Questions for Discussion

When approaching a landowner or potential tenant to write a lease, the goal is to get on the same page. It can be quite helpful to practice the questions you want to discuss to set yourself up for the best chances of being heard and understood. To practice, follow these 3 steps:

1. Identify the agricultural lease topic you want to discuss. This can be from the list above, or something else of top priority to you.
2. Then, write down the question you want to ask. Don’t think too much about it, try to write a question that speaks to the heart of the matter.
3. Lastly, take a hard look at the question you drafted and then consider what you know about the other party and how they communicate. Then, write down a rephrasing of your original question in a way you think they will understand and be receptive to.
4. Repeat this process for other priority questions you want to discuss in lease negotiations.
5. Find a business partner or friend and practice asking your rephrased questions to them. Ask them for their feedback on how it felt to be asked and how they interpreted the questions. Their feedback can then help you better finesse your questions and strategize how you might navigate the conversation with the intended party.

Moving Forward

Now that you have a beat on the role of written lease agreements and general issues to discuss, it’s time to decide how you want to move forward.

1. Do you want to get your lease in writing? If yes, then you have some exciting and important discussions ahead of you! If you’re ready to go forward on your own to discuss your issues and questions with the landlord/tenant and put your conclusions in writing, best of luck! If you want a full list of potential questions, issues, and contingencies to consider so you can be sure you’re covering your bases with a strong lease, read Powerful Questions to Prepare for an Agricultural Lease. If you’d prefer step-by-step support that walks you through the stages of discussing, negotiating, and drafting a lease use our Farmers’ Workbook for Creating an Agricultural Lease. If you need to learn more about the land itself first, like whether anyone else has use of it or if there are any existing easements, read Basics of Due Diligence on an Agricultural Parcel. If you want to explore rent to own-style provisions like rights of first refusal and options to purchase, watch our Practicalities and Realities series of tutorials, Part 1 and Part 2.
2. Do you want to modify your existing lease agreement to address key issues and what you want together as farmer and landowner? If you’ve identified issues that are of main priority for you at this time and want to modify your lease agreement to address those issues, you may feel prepared to do so on your own. If so, that is wonderful — go forth! If you’d like support in strategizing your negotiations and guidance on how to frame up questions before having those discussions, read Powerful Questions to Prepare for an Agricultural Lease.
3. Do you want to explore a model lease first to get a sense of what a lease can look like? Check out our Sample Annotated Long-Term Agroforestry Lease Agreement.
4. Do you want to explore opportunities and responsibilities associated with long term leases? Check out our Long-Term Agroforestry Lease Workbook.
5. Are you concerned about full enforceability of your farmland lease and protection in a courtroom, if it comes to it? If this is your goal, there is no substitute for an attorney. See an attorney for help developing a lease that you can be assured is fully enforceable in your state.