Farm Lease Agreement

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Farm Lease Agreement

What Is a Farm Lease Agreement?

Also known as Farmland lease agreement and Agricultural lease Agreement, Farm lease agreement is a legal document that features and specifies the duties and responsibilities of a landlord as well as a tenant when a farm is being rented out. Although quite similar to a standard Residential Lease, a farm lease additionally lists information specific to farming so as to ensure optimum productivity and maintenance of the farm throughout the period of the lease.

The listings in the lease document can include basic information of the rental property, right from clauses relating to the payment of rent, security deposit and applicable late fees, to requirements for farm-specific situations and applicable legal actions to be abided by as per the bindings of the state where both the parties involved reside.

A farm rental lease agreement is considered favorable to the tenant if it provides maximum possible information regarding what his expectations from his landlord should be, but at the same time keeps the landlord safe and secure from falling prey to a neglectful tenant. The duration of a farm lease agreement can vary from a few months to a year or more and is applicable for all sorts of farming activities or equipment, including crops or livestock.

Who Takes the Farm Lease Agreement?

The farm lease agreement is undertaken and drawn between the owner of the farmland (the landlord), and the operator (tenant). It combines the resources of both the parties involved, viz. their land, labor, management, and capital, which can be optimally utilized to produce farm commodities most efficiently and productively, beneficial to both in the long run.

Purpose of the Farm Lease Agreement

A farm lease or agricultural lease agreement lists down the rights of the lessee to use particular farmland, owned by the lessor, for a specific time period, as mentioned in the lease contract. It clearly indicates the facts and figures, including the names of both parties involved, the amount of the security deposit, rent amount and the frequency at which it needs to be paid, and all other vital information concerning both the landlord as well as the tenant.

It even lays stress on essential information regarding the effective and productive utilization of the land by the tenant for optimum agricultural use and his responsibilities and obligations in handling diseased crops, land preparation prior to planting of crops, or the raising of livestock, and so on. In a nutshell, this agreement lays down unmistakable, detailed information about the responsibilities of both the landlord as well as the tenant, and can be used effectively in case any dispute arises between the two parties in the long run. Also, this farmland lease agreement is completely customizable and robust and stands in the interest of both the lessor as well as the lessee.

Contents of the Farm Lease Agreement

A farm lease agreement should include the details of the farmland or property to be leased, the names of the parties involved, the time span for which the agreement would be effective, the amount of rent to be paid for the same and the date on which it would fall due, the security deposit or fees paid, if any, and also the consequences to be faced by the tenant in case of late payment of rent or default.

Moreover, this agreement should also specify the respective responsibilities and duties of each of the parties involved, obligations to be dispensed by them, and expenses to be borne by each of them in connection to utility bills, repairs, maintenance, damages, and so on. Also, the pact should include the inclusions and emissions relating to subletting, monitoring and reporting, and the permitted and prohibited uses of the farmland to be leased.

How to Draft a Farm Lease Agreement?

A farm lease agreement should be clear and well-drafted to be legally valid. Here’s a procedure for drafting a farm lease agreement effectively.

  • The first and foremost point in the agreement should contain the names of both the parties involved and a clear description of the agricultural land in concern.
  • Consistent and specific nomenclature should be used when drafting a strong farm lease agreement.
  • The duration or period of a lease should be mentioned clearly and concisely so as to make the agreement valid.
  • The profit-sharing clause, for the agricultural yield from the land, between the landlord and the tenant should stand clearly mentioned in the agreement. Also, the exact percentage of profit to be shared and the responsibility of each party in relation to cultivating and harvesting the land should be clearly pointed out.
  • Any improvements or additions to be made on the land should be specified, along with the mention of who would undertake the expenses for the same.
  • All included and excluded utilities should be listed and itemized. However, in the absence of this, any utilities used by the tenant would be paid by him as per law.
  • The agreement should be duly signed by both parties and registered to make it legally accepted and authenticated.

Negotiation Strategy

Whether you are the owner of the land or the farmer/tenant, the first and foremost strategic approach towards land negotiation and documentation, when dealing with farmland for lease, should be to appoint or consult an experienced legal advisor. A legal counsel would help both parties consider issues which they would not have considered or laid stress on. He would even assist them to highlight upon points which would have skipped their notice.

Benefits of Having a Farm Lease Agreement

A written and notarised farm lease agreement has several advantages both for the landlord as well as the tenant.

  • Both the landlord and the tenant hold advantage and accountability regarding their rights, responsibilities, and actions when a farm lease agreement has been duly signed and registered legally by both of them. It upholds their individual rights and gives them an upper hand in case the other party defaults in executing their responsibilities rightfully. It helps remove any confusion or doubt regarding the obligations to be dispensed by each of the parties involved.
  • Any legal action to be taken by any applicant against his opponent, or even against a third party, can be comfortably carried out in the presence of a farm lease agreement. This safeguards their position and rights as a landlord or tenant, as the case may be.
  • In case the terms and conditions of the agreement are not feasible for the parties involved even at a later date after duly signing the contract, the agreement can be easily revised by simply including the new provisions in writing and signing it. This is possible only in the presence of a proper legal, valid farm lease agreement.

[ Also Read: Solar Farm Land Lease Agreement ]

Drawbacks of Having a Farm Lease Agreement

There are certain drawbacks, which cannot be overlooked when there happens to be a legal farm lease agreement between the tenant and the landlord.

  • Many a time, it has been seen that the presence of a farm lease agreement curtails the actions and imposes restrictions on the tenant, which in turn hampers his functionality and zeal to make the farm better.
  • Also, a farm lease agreement, if not framed properly, places the tenant in a better position as it has often been noticed that a neglectful tenant tends to take advantage of the same. In other words, the protection of the landlord in dealing with a  scrupulous tenant is jeopardized.

What Happens in Case of Violation?

In case of a Breach of Covenant, where any of the parties breaks a promise as mentioned in the farm lease contract, or uses the farm resources in a wasteful manner, it is not possible to terminate the lease unless such a clause has been specified in the contract or if the state creates such a law. The only solution which stands likely at this juncture is to sue the party for the damages caused or to get injunction done to avoid any further waste. However, in very rare cases where the damage caused or the action of the parties are extremely severe, in that case, the court can intervene and make allowances for warrant termination.

If there is a Breach of Contract where the violation is minor(1), the law commands the party who has committed the wrong to pay for the damages caused and offset the losses of the other party. On the contrary, the party facing the brunt can stop performing if the other party breaches the contract and if the breach warrants the nonperformance of the other party.

It becomes hassle-some to solve violation and dispute cases when the lease entered into is for a long period of time(2), say for years, and something severe happens which compel and urge either of the parties to dissolve the lease agreement. In such cases, the party asking for a dissolution of the contract has to face the brunt and even pay for the damages, which would be caused as a result of the same.

Farm lease agreements are subject to the laws of the individual states. All disclosures and lease terms and conditions are written based on the laws of the respective states in which the beneficiaries reside. Any disputes are settled as per the clause pertaining to them.  However, every state provides sufficient room to alter, modify, and incorporate rules which are in the interest of both the landlord as well as the farmer or the tenant. So, both parties must carefully study and understand all detailed information in respect to the state laws with respect to farmland lease agreement before signing and submitting the same.