Donald J. Breece
District Specialist, Farm Management, Southwest District
It has been said that a "contract is no better than the word of those who sign it." On the other hand, a written contract is still an essential business practice when leasing farm property. It forces detailed consideration, communication, and understanding by both parties. It serves as a handy reference in case details are forgotten or there is a death of the tenant or landlord.
The contract should encourage the most profitable, long-term operation of the farm and be beneficial for both parties. Are the returns proportional to the contributions both tenant and landlord make to the business? Will the lease prevent or discourage a tenant from operating the farm in the same way a well-financed owner-operator would run it? Are the best farming methods, conservation practices, and/or environmental practices utilized? What is the plan for needed improvements? Every contract or lease agreement will one day terminate; how is termination to be handled? What method(s) will be used to settle accounts?
The following checklist will assist tenants and landlords to consider components of a well designed lease agreement. It is advisable to have an attorney for one party prepare the lease, with a review by the attorney for the other party.
If the term of the lease is for more than one year, it must be written to be legally enforceable. It also should be reviewed each year to ensure the terms are still desirable. Multiple year agreements require the following:
|Up to 1 year||Verbal can be enforceable|
|1 to 2 years||
Must be in writing and signed by the parties.
2 to 3 years
Must be in writing, signed by the parties, notarized, and recorded in the county where the land is located.
|3 years or more||Must be in writing, signed by the parties before two witnesses, notarized, and recorded in the county where the land is located.|
This checklist does not include all possible considerations for flexible-cash rent provisions or a number of other items that tenants or landlords may want to include in the written agreement. Furthermore, each state has different statutes and local communities have unique customs. This fact sheet is not intended to take the place of sound legal advice required by any party entering into a contractual relationship.
Use the checklist as a guide to judge an agreement as to the components normally required or advisable to be included within a leasing contract.
Moore, John E., Test of a Good Farm Lease, Ohio State Extension.
Legal and Management Aspects of Ohio Farmland Leases, Fact Sheet FR-0001-01, Ohio State University Extension, 2000.
NCR75: Fixed & Flexible Cash Rental Agreements
NCR105: Crop Share Rental Arrangements
Producer Bulletins on Farm Leasing, National Center for Agricultural Law Research & Information, University of Arkansas.
This series of fact sheets is produced under the Acker Professional Improvement Program, Department of Agricultural, Environmental, and Development Economics, The Ohio State University. Reviewed by Robert D. Fleming and Peggy Kirk Hall of the Department of Agricultural, Environmental, & Development Economics, The Ohio State University.
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Keith L. Smith, Associate Vice President for Ag. Adm. and Director, OSU Extension.
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