Record crop yields over the last few years, coupled with rather impressive commodity prices in 2011 and 2012, have made many farmland leases more important than ever. In many instances, good farmland leases can be some of the most valuable assets a farmer possesses.
All farmland leases should be in writing. However, verbal farmland leases are enforceable in Ohio.
If a farmland lease is not in writing and not recorded at the courthouse of the county within which the farmland is located, people other than the landlord and the tenant (like buyers of the real estate or heirs who inherit the real estate) may not be required to honor the farmland lease, if that buyer or heir does not have independent knowledge of the farmland lease’s existence.
There is a little-known Ohio law that officially requires that farmland leases longer than three years be in writing, notarized like a deed and recorded at the courthouse. However, courts have held that farmland leases that are not notarized or recorded at the courthouse may still be enforceable between the landlord and the tenant, even though those farmland leases may not be enforceable against people (other than the landlord and tenant) who do not know of the lease, as explained above.
The most frequent issue arising from verbal farmland leases is the implied “automatic rollover” expectations of the landlord and the tenant. If a farmland lease is not in writing or if the written farmland lease does not provide detail concerning if/how the lease automatically extends to the next year, tenants can be put in a tough spot, not knowing whether to sow winter wheat, whether (and if so what) to fertilize, and whether tillage is appropriate.
Some states, such as Iowa, have a set of state laws that address the termination of year-to-year verbal farmland leases, but Ohio does not. Therefore, in Ohio, the termination of year-to-year verbal farmland leases creates problems that are typically laboriously addressed on a case-by-case basis to the benefit of attorneys and to the detriment of both the landlord and the tenant.
The biggest practical downside in not having a written farmland lease is that the landlord and the tenant can each (intentionally or unintentionally) forget key terms of the lease, terms such as the required rent amount, timing of payments or even the duration of the farmland lease. In my experience, “forgetfulness” in this context tends to become more common when either the landlord or the tenant thinks he or she might get a better deal elsewhere.
Written farmland leases need not be fancy or lengthy documents. However, a detailed farmland lease (ideally prepared by an attorney) can provide certainty, guidance and peace of mind to the landlord and the tenant in the event of unforeseen contingencies.
For landlords and tenants who enter into a written farmland lease but do not want certain details of that farmland lease (like the rate of rent) made public to their neighbors and competitors, a landlord and tenant can record a “Memorandum of Lease” that details the duration of the farmland lease and the rights of the tenant in the farmland during that time.
Lee R. Schroeder is an Ohio licensed attorney with Schroeder, Blankemeyer and Schroeder LLP in Ottawa. He limits his practice to business, real estate,estate planning and agriculture issues in northwest Ohio. He can be reached at firstname.lastname@example.org or at 419-523-5658. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.