COLUMN: Purdue Extension: Thinking about farm leases

Discussing farm rental arrangements can be stressful for everyone involved. Landlords and tenants alike must navigate lease terms, rental rates and uncertainty. Because many farm leases in Indiana are of one-year in duration, this scenario repeats itself every year as fall transitions to winter. This article provides some basic information on structuring a farm lease, be it for crop ground, pasture or farm building and bin rentals. As with every legal instrument used in the farm business, please seek legal advice to review your lease situation.

The first point to review is the term of the lease in consideration. Verbal leases are legal in Indiana, and there are many instances where the landlord and tenant make a verbal agreement. Sometimes a written lease will even lapse, and the parties agree verbally to continue with the terms, and this is a binding agreement.

When does a verbal lease terminate? Historically, the lease year for a verbal lease is Dec. 1. This means that if you don't provide your tenant with a written termination notice before Dec. 1, the tenant could claim to maintain control of the leased property for the coming crop year. Verbal lease disputes can wind up in a court. If you want to terminate your tenant, it is highly suggested to send a written termination notice by certified mail to be delivered in November. Again, consultation with legal counsel may be necessary.

What about written farm leases with a stated term? This is why I keep encouraging tenants and landlords to get the lease in writing with a fixed term noted in the instrument. You don't rent a boat at a marina without a written lease that states for how long you have control of the asset. The same case is made for term farm leases, so if the tenant applies fertilizer in the fall, plants wheat or applies lime, if the lease is for only one year, they are doing so at their own risk of not getting a renewed lease. Communication is key here for both parties: now is the time to express interest in terminating the lease or making lease amendments.

What is the ideal lease term? In Indiana, a lease longer than three years must be recorded at the courthouse. Each situation may be different. For example, a tenant renting a pasture in need of improvement may request a longer lease to recoup expenses like lime and fence upkeep. Some may like doing a two-year lease so as to not have to review the lease each year. I like a yearly review because each party can review how the lease functioned and make suggestions for changes.

Items besides the term of the lease include cropping program and land use (specific exclusion of hunting access has been noted recently), landlord rights, tenant's rights and general terms. General terms relate to compensation amount and timing.

I have seen leases that were only a few paragraphs and leases that were over 25 typed pages. The main point is to have a lease instrument that gives communication to both parties as to how the lease transaction will operate. Farm leases with buildings and improvements should have provisions for repair and maintenance of structures. Having the lease in writing should provide peace of mind for all involved, in case something unforeseen happens to either party. Purdue Extension has several resources available to assist in the effort to get the lease in writing.