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Oral lease terminations uncertain in Arkansas

When setting up leases, Arkansas farmers often find a handshake preferable to a legal document. But all should know that breaking such a deal is no longer a clear-cut proposition. A 2007 change in state law governing oral leases has left such extrications on shaky ground.

“Since the 1980s, Arkansas had a law on the books requiring notice by June 30 for termination of a year-to-year farmland lease,” says Eric Pendergrass, an agricultural attorney practicing in Ft. Smith, Ark., who previously did work with the National Agriculture Law Center on the University of Arkansas campus.

“What ARLTA was designed to do was update and add clarity on relationships between landlords and tenants in residential housing. Part of that bill, however, repealed the old statute (dealing with farmland verbal lease terminations). Now, there's not a lot of statutory guidance out there.”

That fact was reinforced in an Arkansas Supreme Court decision on Jan. 10. “Essentially, what the court found was the rule saying notice of termination must be given by June 30 has been repealed.”

Now, “I'm hearing questions and concerns from tenants leasing land. They want to know what is actually required to terminate an oral lease. That's up in the air.

“I want to make it clear that those with written leases don't have to worry about any of this.

“If you look at commercial leasing standards, there's a six month notice. That might not be the best application for farmland leases, though … When replacing tenants, there's a time crunch. There's only a limited growing season.”

Normally, the Arkansas legislature meets every other year. That means the current lease law may not be “fixed” until the spring of 2009.

Slightly over a year ago, Terry Griffin came to Arkansas after working in the Midwest for a decade.

“I'm originally from Arkansas but my first career with farm management work was with the University of Illinois,” says the University of Arkansas assistant professor in the Department of Agricultural Economics and Agribusiness. “While there, I found there was a nice tenant law with a fact-sheet explaining how to terminate verbal leases.”

Griffin wanted to provide the same sort of fact sheet for his home state. He began researching and compiling the sheet last March.

“We found the pertinent law from 1983 and wrote the fact sheet explaining how it worked.”

Not long after, Griffin found his hard work needed an update.

“I was discussing the fact sheet with Ted Glaub (operator of a large farm management company in Jonesboro, Ark). He said, ‘someone just handed me a document. Looks like it might interest you so I'm sending it over.’”

Griffin soon held a copy of an act the Arkansas legislature passed into law in April 2007.

“It's interesting that no one — including farm organizations — was aware of this having been done. And why should they? It came from a section of the law that doesn't even have agriculture in the title. Thank goodness Glaub recognized it for what it was.”

The Arkansas Residential Landlord-Tenant Act (ARLTA) was submitted as Act 1004 of the 86th General Assembly of the State of Arkansas. The act was signed into law on April 4, 2007, and took effect on July 31.

“Unfortunately, with the implementation of the act, a significant portion of state statutes governing farmland leasing was stricken without offering clear guidance as to how verbal agricultural leases are to be terminated. As a result of ARLTA, a new degree of uncertainty surrounds verbal farmland leases and the rights of the landlords and tenants involved. Most farmers and landlords were — maybe still are — in the dark about this.”

Agriculture was accidentally swept up in the ARLTA legislation. In late December, Arkansas Democrat journalist Nancy Cole reported the key legislator behind ARLTA claimed he didn't intend to affect any agriculture laws.

“But he did and in the process lost existing law and had nothing to replace it with,” says Griffin.

For the updated fact sheet ( Griffin teamed up with old friend, Eric Pendergrass.

A common question for the pair: is my lease valid?

“There's nothing in ARLTA that will undermine the validity of any oral leases,” says Pendergrass. “That needs to be clear. The repeal of the old law doesn't invalidate previously existing leases.”

Are there differences in regions of the state? “Yes, most of the concern is coming from the east, where there are more row crops. On the west side, there's more livestock.”

Anticipating the need to bridge any gaps in the lease laws, an informal discussion and a proposed statute is circulating the agriculture section of the Arkansas Bar Association.

“Good people are weighing in and discussing how best to move forward,” says Pendergrass. “The proposal is still in rough form but we're looking for a sponsor for a bill.”

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