By Darla Campbell
More than a third of farmland acres in Missouri are rented. That equals about 9.8 million acres, each with its own leasing agreement.
Farm leasing arrangements will continue to grow as landowners get older and want or need to back out of the day-to-day farming operation.
Land values are holding strong, and lower interest rates continue to make land an attractive investment for many who may not be familiar with agriculture. Simultaneously, lower crop and cattle prices are causing cash flow challenges for many producers. Having a stable and fair lease arrangement helps both landowner and tenant manage income and expenses.
Terminating a written lease
So, what happens when one party wants to end the lease? The process will vary depending if the lease is verbal or written, and if there are any prenotice requirements in the written lease.
A well-written lease should include an exact beginning and ending date complete with year, such as Jan. 1, 2019, to Dec. 31, 2019. Most leases include a prenotice clause indicating the lease will continue unless written notification by either party is given a specific number of days (30, 60 or 90 days) in advance of the ending date to terminate the lease.
If the lease does not include a prenotice clause, the lease will terminate on the written ending date. Communication in advance of the ending date promotes good relationships between tenant and landowner.
In the case of a prenotice clause, the time frame must be honored, or the injured party can force the continuation of the lease. In Missouri, there is no specific required length of time for termination of a written lease.
Most written leases stipulate the prenotice of termination must be given in writing. It can be sent by regular mail, certified mail or both. If both are done, then there is a record of the notice and due diligence has been performed to inform the other party.
Ending a verbal agreement
Verbal leases are more of a challenge. Verbal farm leases in Missouri require 60 days written notice before the date the agreement was made.
For example, Bob and Tom made a verbal agreement on Jan. 1, 2019, but Tom did not do any fieldwork or move his equipment in until April 15, 2019. Bob, as the landowner, decides on Dec. 1, 2019, to rent the same ground to his son-in-law in 2020, so he gives written notice to Tom.
Since Bob did not give Tom at least a 60-day written notice of his wish to terminate, Tom can force his tenancy. It does not matter that he did not begin working the ground until April.
This example shows a recent agreement period, but most verbal agreements have been in use for many years, and the details may have become less clear over time. In verbal agreements, if either party wants to terminate, give notice well in advance.
For example, the agreement was made sometime after harvest in the winter, but the exact date is a little foggy. Since harvest is usually September through November, it would be reasonable to give the notice 60 days before Nov. 1, but earlier would be beneficial.
Communication is key
Ending a lease agreement, especially a long-term lease, is often difficult as a business decision.
Since farming is more than a way to pay the bills for those involved, ending a lease may cause feelings of frustration, anger, sadness or anxiety on both sides. Recognize and respect generational differences. Consider developing a written lease. It is not a matter of trust, but rather a sound business decision for all parties, including spouses and possibly heirs.
Clear communication by all parties throughout the lease period helps to continue fair lease agreements.
Campbell is a University of Missouri Extension county engagement specialist in agriculture and environment. She writes from Lancaster, Mo.