Breaking up

Iowa requires a notice by 1 September of a land owner or tenants desire to terminate a farm lease arrangement. Don’t forget that under recent changes in the law , one 38 year old horse on a parcel can provide protection to a tenant as a farm tenant. Those terminations are 1 March unless the parties BOTH agree to an earlier date. When terminating a lease, Iowa Code requires adherence to proper notice. Failure to properly notice a tenant may result in a renewal of the lease under the current terms even if a party dies after the 1 September dead line.

If you and co owner (like a sibling) own a parcel together and the sibling rents it out and you cash your portion of the check, you are providing a strong presumption that you like the current arrangement, if you don’t, you best terminate the relationship by 1 September.

1 September isn’t the only time you can break a lease, failure to pay rent when due will also violate it. In the times of soaring costs of production and falling prices, some tenants have and more will, walk on high rents they are obligated to pay. The land owner has a responsibility to rent the ground out for what they can and then may seek the difference from the original, non paying tenant. Other lease provisions being broken may or may not result in booting the tenant off the land. For other violations, the tenant must be given a right to cure (or fix) the problem, and the violation must be materially harmful.

Making up

Like surgery, it is not required that you hire somebody, but it is usually recommended. When you are reviewing a lease or attempting to put one together, some simple rules should be kept in mind with lease,

Get it ALL in writing to prevent misunderstanding and make sure successors in interest (heirs upon death) on both sides understand the terms of the agreement. Make sure both parties sign the lease. Ensure an accurate description of the leased ground is included.

Agree upon compensation for any fall field work completion in the event of non renewal of the lease. Consider fertilizer application that may have multi year benefits and how those get compensated if the parties don’t stay in a relationship. Who gets to control the hunting, fishing and recreation rights, who sprays the weeds and who pays the taxes at the court house are all things that need to be addressed. Unless the lease says otherwise, the tenant gets the above ground portion of the crop.

Pricing isn’t always as simple as looking at the ISU average land values, adding 10% because you have great ground and demanding a check. Average cash rents reported are but one piece of the puzzle, with a rents compared to yield, corn suitability rating and a flat analysis of return on investment as compared to where else that money might earing a return all play a part in determining a fair rent. Operators would be wise to invest in education of the landowners on the costs of operating and why shinny pick ups purchased in December over recent years may have been more about tax planning and less about excess wealth and low rents. Likewise, operators who are renting from land owners facing increased medical costs should attempt to understand that sometimes, the rent is going up on the farm because the cost of housing the spouse or the land owner themselves in a care facility is going up.

If the term of the lease, which can be up to 20 years long, goes over 5 years it needs to be recorded or at least a memorandum of the lease needs to be recorded with some basic essential terms.