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Four Things To Know About Agricultural Leases

Posted by Angie Schneiderman | Jul 28, 2016 | 0 Comments

A farm lease can be either oral or written.

In Iowa, an oral lease for the tenancy of a farm is enforceable for up to one year.  While it seems that an oral lease for the tenancy of a farm is the easier route to take, and perhaps the oral lease option may have the least expensive up-front cost, consider that oral lease agreements can end up being much more expensive in the long run if a dispute arises due to the need to litigate the details of the oral lease.

A written farm lease is the alternative that the lawyers at MHM&M recommend that their Clients take.  A well written lease will ensure that all parties to the lease understand its terms, clarify potential disputes before they occur, and help to mitigate cost in the event a dispute arises between the Parties.

A farm lease automatically renews every year.

With rent being near market high in recent years, it is important for landlords and tenants to remember their farm lease will automatically renew for another year unless properly terminated.  Allowing a farm lease to automatically renew is often a mistake that can lead to tenants paying more or less than the market rate for the tenancy.

Various sources are available to help landlords and tenants evaluate rental rates for their agricultural land.  In Iowa, the Iowa State University Extension and Outreach department publishes a rental rate survey annually.  You can find that information here.  Likewise, information on South Dakota cash rental rates is available from the USDA and can be found here.  The University of Nebraska Institute of Agriculture and Natural Resources also tracks this data; the most recent report can be found here.

The deadline for terminating a farm lease is September 1 for the lease to terminate on March 1.

Even if a farm tenant wants to continue farming a piece of ground, termination of the farm lease may create an opportunity for the parties to renegotiate the terms of the lease.  To terminate the tenancy, either the landlord or tenant must give written notice to the other party of the intent to terminate the lease by September 1 for the lease to successfully terminate on March 1 of the next year.  Failure to give proper notice of lease termination will result in the lease automatically renewing for another year on the same terms and conditions.

Landlords have a powerful lien if the tenant defaults on a farm lease.

Iowa law provides for a very powerful lien called a Landlord's Lien.  A landlord's Lien is a lien that automatically attaches to all crops grown on the leased property and any other personal property which has been used or kept upon the property during the tenancy.  That means that a landlord has an enforceable interest in the crops gown on the property as well as personal property that is used or kept on the property.  Landlords must perfect their lien by filing a UCC-1, Financing Statement with the Iowa Secretary of State within 20 days of the beginning of the farm lease. The Landlord's lien is given priority under Iowa law and can be even more powerful than a bank's mortgage or UCC lien perfected before the Landlord's Lien. In addition to the Landlord's Lien, the lawyers at MHM&M also encourage landlords to file a UCC Lien. The UCC Lien will not have priority with respect to properly perfected prior liens like the Landlord's Lien, but a UCC Lien does provide much greater protection if the tenant files bankruptcy.

A call to Dan, Bob, or Angie at Moore, Heffernan, Moeller & Meis, L.L.P. can make the parties to a Farm Lease be confident that their rights and interests are protected.

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About the Author

Angie Schneiderman

EDUCATION Southwest Minnesota State University, B.S., magna cum laude, 1998University of Nebraska-Lincoln, J.D., 2002 ASSOCIATIONS The Iowa State Bar AssociationState Bar of South DakotaWoodbury County Bar Association Angie J. Schneiderman is a Partner in the Firm, and has practiced with the ...

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