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Agricultural Lease Agreements

If there is one piece of advice I could give everyone, it would be get it in writing.  Leasing agreements can be beneficial to both landowners and tenants alike.  For a landowner, a lease agreement may allow continued revenue without his or her physical labor needed to operate a farm or ranch.  A hunting lease may provide for an additional source of revenue, while also diversifying income streams.  For a tenant, a lease agreement may be an excellent way of getting started in agriculture, as it allows the tenant to begin farming or ranching while avoiding the high cost of purchasing land of their own. 

A friend of mine often laments, “Guess you just can’t rely on a handshake anymore.”  Historically, many lease agreements involving agricultural land have been done on a handshake between landowner and tenant.  This leaves both sides facing significant risk in the event something goes wrong.  There are a number of issues to consider regarding written leases. 

First, although oral lease agreements are generally legally enforceable, this is not the case for agreements lasting for more than a year.  The Statute of Frauds requires lease agreements for real estate lasting over one year to be in writing.  This is particularly important as many agricultural lease agreements are for more than one year.

Second, a written lease agreement may be necessary to provide to other agencies. For example, if the property qualifies for any sort of Farm Bill programs, the Farm Services Agency (FSA) will need a copy of a written lease agreement.  Similarly, a County Appraisal District may request a copy of a lease agreement if the agricultural use of the tenant is the basis for an agricultural tax exemption.

Third, written lease agreements protect both parties and their relationship. By agreeing to terms that both the landowner and tenant consider and  understand, the odds of an issue arising to cause a dispute during the lease agreement greatly decreases. 

Determining the right amount to charge or pay for an agricultural lease may be more of an art than a science.  A number of considerations go into reaching a mutually acceptable lease rate for both the landowner and the tenant. 

Common types of lease arrangements include: cash leases, crop share leases, and flex/hybrid leases.  There is no one size fits all agricultural lease agreement, as every situation is different.  For a thorough checklist and more detailed information, you should seek an attorney versed in real estate matters to assist you.

Key points to consider are: the type of lease (i.e., grazing, hunting, farm), duration of the lease, termination provisions, stocking rates, repair and maintenance provisions, landowner’s access to the land, tenant insurance considerations, use of ATVs, gate requirements, guests other than lessee, rules regarding open flames, description of the land, soil fertility, use of pesticides, noxious weeds and disaster contingencies.  

If you are leasing or considering leasing your property to another, you should seek an attorney familiar with real estate and leasing.  They can discuss the type of lease and terms that best suit your particular needs and prepare the lease agreement.

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C.  He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas. (936)295-6394www.moakandmoak.com

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