Farmland is valuable and much money rides on cropland leases.
“Your livelihood relies on cropland leases and your landlord has significant investment in cropland,” says Grant Ballard, an attorney with Banks Law Firm in Little Rock. “I strongly advise written leases — but not just any written lease. You must pay attention to the devil in the details.”
Every lease should have a termination clause. And the farmer should fully understand it, says Ballard, who also serves as a research consultant for the National Agricultural Law Center (NALC) at the University of Arkansas. He spoke at the Jan. 30NALC-sponsored Farm Bill, Crop Insurance, and Related Legal Issues for Row Crop Producers in Morrilton, Ark.
“Make sure you know under what circumstances your landlord can say you’re in breach and walk away. On the other side, you need to have a reason, a basis, allowing you to walk away. A lease doesn’t have to be oppressive to the producer, although many are.”
The farmer should want a lease that lays out the responsibilities of both the landlord and tenant. “That’s especially true of things like maintenance and repair, noxious weed control and insurance.”
Farm leases should also address federal farm programs. “Who has the authority to make determinations as to participation in certain programs? An example of this is conservation programs.”
Another issue is controlling law.
“I see quite a few farm leases come across my desk and there’s a lot more out-of-state landlords now. Sometimes there will be a lease saying the controlling law is the state of South Dakota and all claims under the lease must be brought there.
“Object to that! Basically, some of these leases say that if the landlord evicts you from the property, you must go to South Dakota and get a judge to order the landlord to live up to the agreement. Be very cognizant of controlling law.”
Controlling law should be where the land is located, where your business is operating.
“I believe the most power a producer has is the opportunity to walk into a court in the county where he lives and put the lease before a judge. ‘Judge, this is the deal and what we bargained for. Make them live up to this.’”
Arbitration clauses are often included in draft leases. Ballard isn’t a fan.
“Make sure you take out those clauses. I know some say that arbitration is a good way to settle a conflict. I respectfully disagree. It isn’t any less expensive than just going to court. You have to pay the arbitrator by the hour – and they’ll probably be more expensive than a lawyer. You’ll have to pay a filing fee of about $165 in most Arkansas counties.”