Editor’s note: The following was written by Jessica Groskopf and Allan Vyhnalek, University of Nebraska Extension educators, and J. David Aiken, Extension water and agricultural law specialist, for the university’s Crop Watch website.
Some farm leases are not written, but are verbal or "handshake" agreements. Because nothing is in writing, the parties may have different recollections of their agreement, making lease disputes more difficult to resolve.
Written leases are preferred over verbal agreements because they can ensure both parties — renter and landlord — have the same understanding of the terms of the agreement.
The most common legal issue associated with verbal farm leases is how a lease may legally be terminated. For both year-to-year leases and holdover leases, six months’ advance notice must be given to legally terminate the lease. However, the lease date (the date from which the six months is counted) is different.
In contrast, the termination of a written lease is determined by the terms of the written lease.
Terminating verbal leases
For year-to-year verbal leases, the Nebraska Supreme Court has ruled that the lease year begins March 1. Notice to a tenant to vacate under a verbal or handshake year-to-year lease (legally referred to as a "notice to quit") must be given six months in advance of the end of the lease, or no later than Sept 1.
This rule applies regardless of the crop planted. Those with winter wheat should consider providing notice before it is time to prepare wheat ground for planting.
For example, for the lease year beginning March 1, 2019, and ending Feb. 28, 2020, notice from the landlord that the lease will be terminated would have to be given to (and received by) the tenant no later than Sept. 1, 2019. The lease would then expire Feb. 28, 2020, with the new tenant (or new buyer) able to take over the lease March 1, 2020.
If, however, the notice to quit were given (or received) after Sept. 1, 2019, the existing tenant would have the lease until February 28, 2021.
Iowa Code generally provides that Iowa leases for a farm tenancy automatically renew for another crop year under the same terms and conditions as the original lease unless either party provides written termination notice on or before Sept. 1, according to Iowa’s Center for Agricultural Law and Taxation.
Farm tenancies in Missouri that are renewed year to year require notice of termination at least 60 days prior to the end of the lease year. The end of the “agricultural year” in Missouri is customarily March 1, although Missouri law allows for the parties to agree to a different ending date.
It is recommended that the farmland lease be terminated by Registered Mail. This means that the person receiving the letter signs for it, providing evidence that the termination notice was received.
Pasture lease terminations
Handshake or verbal leases are different for pastures. The typical pasture lease is for the five-month grazing season. The lease is only in effect for that time, so the lease is terminated at the end of the grazing season.
However, different lease length arrangements can be made in a written lease, and that would be followed if in effect.
Regardless of the type of lease — written, verbal or even multiple year — the landlord should have clear communication with the tenant. By sending a termination notice before Sept. 1, even for written leases, you can avoid any miscommunication or pitfalls.
In all instances, written leases would be preferred over oral or “handshake” leases. Sample leases are available in the Document Library at aglease101.org and can help both parties start thinking about the appropriate lease conditions for their situation. The site was developed by university extension specialists in the North Central Region.