March 7, 2019
March 1 is the date when most farmland leases in Iowa go into effect each year. This year more tenants are defaulting; they’re not paying the rent. Some landlords will see new tenants farming their property in 2019. Others may face lingering disputes with tenants from the past crop year.
What are the rights and obligations of landlords and tenants with Iowa farm leases? While this is primarily determined by the terms of the written lease, general legal principles apply to all farm leases.
The following questions and answers address a few of the concerns that often arise. If you are wondering about your specific legal rights in your situation, consult with an attorney.
My tenant and I have a written lease that auto-renewed for the 2019 crop year. The lease provides that the rent is due, upfront, on March 1. It’s now mid-March and my tenant hasn’t paid. I am afraid that they don’t have the money or financing arranged. Yet, they aren’t willing to walk away from the existing lease agreement. What can I do? First, it is important to note that requiring rent upfront is a good idea for landlords wishing to minimize disputes and problems associated with a tenant’s nonpayment of rent. This protective approach does not always guarantee the elimination of disputes.
Sometimes, a landlord will be forced to confront a nonpayment situation early on in the lease term. It remains true that working with an existing tenant and attempting to reach an amicable solution is often the best approach to handling conflicts. Even so, landlords concerned about their tenants’ ability to pay are better off confronting the problem early on, rather than letting the matter simmer and the problems compound.
Iowa Code Section 562.6 generally provides that a farm lease will automatically renew under the existing terms for another crop year unless the landlord serves the tenant with a written notice for termination on or before Sept. 1. This is true even when the parties have a written lease that specifies a certain time for the lease to expire. Iowa’s laws are very protective of tenants and were written decades ago to ensure that landlords would not oust tenants without giving them adequate time to find new farms to lease.
It is important to note, however, that the written termination notice requirement does not apply where there is “default in the performance of the existing rental agreement.” Failing to pay rent when it is due is a default in performance that entitles the landlord to initiate termination proceedings, no matter when that default occurs.
Although many leases provide that nonpayment of rent “terminates” the lease, Iowa courts have ruled that termination in such cases is not automatic, but an option the landlord can exercise. The courts have reasoned that without this interpretation, a tenant could take advantage of his own default and unilaterally terminate a lease by refusing to pay rent.
Many written leases contain provisions specifying how a landlord must go about terminating a lease for nonpayment. Landlords should be careful not to breach such provisions. Generally, however, a landlord faced with a tenant whose rent is past due can terminate the lease. The landlord should first issue a notice of default and provide an opportunity to cure. When a tenant doesn’t pay, the landlord may initiate eviction proceedings under Iowa Code Chapter 648. This is an action to formally evict the tenant from the premises.
The statute requires that the landlord first serve the tenant with a three-day “notice to quit.” If the tenant leaves the property after the notice to quit is served, the landlord is free to rent the premises to another tenant. If the tenant refuses to leave, the landlord may then file the “forcible entry and detainer” petition in court and personally serving the tenant with notice of the action. Once receiving the petition, the court will schedule a timely hearing to provide the parties an opportunity to be heard.
I served my tenant with a written notice of termination before Sept. 1 of last year. They argue that the notice was not valid and refused to vacate the premises. What can I do? A landlord may seek to oust a tenant who has improperly stayed on the land after legal termination of the lease by following the same forcible entry and detainer procedures outlined above.
The landlord first serves the tenant with a three-day notice to quit and then files a forcible entry and detainer petition in court. Upon receiving the petition, the court will hold a hearing to give the tenant an opportunity to respond.
My tenant is in their first year of a three-year written lease. I am not happy with the way my tenant is caring for my land. I believe that their farming practices constitute a breach of the good husbandry provisions in our written lease. What can I do? Good husbandry provisions are important components of well-written leases. These provisions are designed to ensure that tenants are good stewards of the land they are farming. Tenants who breach these provisions may be liable for damages to their landlords. Landlords cannot assume, however, that a violation of a good husbandry provision automatically entitles the landlord to terminate the lease.
Iowa courts have ruled that tenants are entitled to notice and a reasonable opportunity to cure alleged breaches of such provisions. Termination is a harsh remedy that will not be imposed where the tenant has cured even a “material breach” of the lease. Therefore, if a landlord provides the tenant with notice of the specific ways the good husbandry provisions are being violated, the tenant will be given a reasonable period of time during which to cure the breaches. If the tenant does not cure the problems, the court likely will allow the termination.
In a 1963 case, the Iowa Supreme Court allowed the landlord to terminate a multiyear lease for breach of the good husbandry provisions. The termination, however, was effective at the beginning of the following crop year. The landlord did not attempt to terminate the lease midyear.
The court noted that the same conduct by the tenant may not have justified a landlord in terminating the lease “in the middle of a crop year and ousting the tenant with the hardships and difficulties resulting from such action.” Nonetheless, the court found that the land “should not be required to put up with [the tenants’ poor land management practices] for two more crop years.”
Filing a landlord’s lien
Landlords or tenants facing similar situations described above are encouraged to consult with their legal counsel. Landlords who attempt to oust a tenant improperly can be found liable to the tenant for damages for interfering with the tenant’s “quiet use and enjoyment’ of the property.
Landlords are also reminded that the deadline for perfecting their landlord’s lien is 20 days from the date the tenant takes possession of the property. Without filing this Uniform Commercial Code (UCC-1), the landlord has no priority over other creditors in the event of a default.
For more information on the landlord’s lien and related information, review information posted on the ISU Center for Agricultural Law & Taxation website at calt.iastate.edu.
Johnson is an Iowa State University Extension farm management specialist. He can be reached at [email protected].
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