A majority of the farm leases for crop production in Ohio are still verbal (non-written) leases that are recognized as being “year-to-year.” In other words, the landlord or tenant can terminate the existing verbal lease each year.
Possibly the biggest challenge with year-to-year, verbal, farm crop leases is that there is no specific deadline for the landlord to tell the tenant if the landlord wants to terminate the annual lease.
Decades ago, Ohio law vaguely laid out the expectation that a landlord who wanted to terminate a year-to-year, verbal crop lease should tell the tenant of the termination by March of that year. Other courts reached inconsistent, alternative dates like December 31 or February 15.
The late notice of lease terminations became increasingly unworkable as agriculture changed beginning in the late 1980s. Farmers began to market their grain months, if not years in advance. Further, farmers have begun to purchase inputs like fuel, seed, fertilizer and herbicides in the calendar-year preceding the crop-year for which the inputs are intended.
In other words, a tenant farmer under a verbal lease might pre-pay all inputs in December of year 3 for crop-year 4. And, in early year 4, the tenant farmer could forward contract crop-year 4’s corn, soybeans and wheat harvests. But, after the tenant farmer took all these steps, the landlord could terminate that lease in March of year 4. That late termination, allowable by law, caused damage to tenant farmers and correspondingly created immense uncertainty for the entirety of the agriculture industry.
Beginning last month, Ohio law provides an annual notice deadline date for landlords who want to terminate year-to-year, verbal crop leases. Beginning for crop-year 2023, a landlord under a verbal, year-to-year lease with a farming tenant must terminate the verbal lease through written notice to the tenant (actually received by the tenant) by September 1 of the prior crop year.
The annual September 1 termination notice date provides certainty to year-to-year farm tenants who can anticipate and prepare for the upcoming crop year with the confidence to know that the rug will not be pulled out from tenants at the last minute.
The September 1 “notify of termination or let the tenant farm another year” law also applies to leases that are in writing but that do not include termination provisions among their written terms.
Under this new law, for any lease in which the landlord who provides the required notice by the new September 1 annual deadline, the actual termination date of that lease is legally required to be the earlier of (a) the completion of the harvest or removal of the crops on the farmland and or (b) December 31.
The law’s partial cleanup of verbal leases and poorly written leases should not encourage the continued use of verbal leases or poorly written farm leases. A well-written farm lease earns both the landlord and the tenant money and peace of mind because of the numerous provisions, in addition to termination, that provide certainty to landlords and tenants.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. 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.
