As the Lease Termination Date Approaches Farm Landowners Have Options
Updated: Nov 5, 2020
By Sarah Everhart
The article is not a substitute for legal advice. See here for the site’s reposting policy.
As summer rolls in, the time comes for farm landowners to decide if they will renew or terminate their leases. In Maryland, farm leases typically require notice from the party seeking to terminate at least six months prior to the end of the lease term – even in oral or “handshake” tenancies. For those with leases which began on January 1 this means the notice to terminate needs to be given by June 30th and that deadline is quickly approaching. To read more about lease termination check out this past post.
When a lease is renewed the terms of the original lease will normally continue to apply until the parties agree to terminate the original terms or the parties agree to a new lease. But what if the tenant and landlord are happy to stay where they are but want to change some of the lease terms? If incorporating an on-farm conservation practice is a change being contemplated for a farming operation, a lease can be a valuable tool. Modifying an existing lease or forming a simple lease to include and account for conservation practices is a way to ensure risk and expenses are allocated fairly. A simple lease can also provide much needed security for a farm tenant who is unsure whether to invest in a practice on a farm he/she may or may not be farming next year.
A popular Maryland agricultural conservation practice is the use of cover crops. Although the Maryland Cover Crop Program provides an incentive for farmers, applying and implementing cover crops on leased farmland still requires consideration of the associated responsibilities and benefits. For example, who is responsible for applying for the program, paying for seeding and labor, and who receives the cover crop payment? Landowners who are unfamiliar with the Maryland Cover Crop Program are, in some cases, confused about how the program functions and whether it results in a financial windfall for the farmer. In other cases, landowners may expect their farmer to participate in the program and be disappointed if a farmer fails to do so and fields are left barren during the winter season. A lease provision like the one below is an example of language that can be added to a lease to alleviate confusion and reduce the potential for legal conflict:
Cover Crop sample lease provision: To the maximum extent possible, Tenant shall plant a fall cover crop on all fields that have been planted during the previous cropping season. Tenant is encouraged to participate in the state or federal cover crop program for each year of the lease. If Tenant is awarded state or federal cover crop funding, he shall have the right to all funding. If payments from a state or federal source do not completely cover the cost of the planting, maintaining and harvesting or suppressing cover crops, Tenant shall be responsible for all overages.
Another aspect of implementing conservation practices on leased land that can be challenge to the leasing relationship is the time and expense required to maintain a conservation practice. A lease can be used to compensate a party for maintenance duties. For example, rent can be adjusted and/or federal or state cost-share can be divided. Click here to hear a recent webinar on how best to structure cost-share for conservation on leased farmland.
For more information on how to incorporate conservation into a lease, check out ALEI’s Agricultural Conservation Leasing Guide. The Guide contains communication and leasing strategies and sample lease language for numerous types of conservation practices that farmers and landowners can incorporate into lease agreements. For more information on conservation practices on leased land, contact ALEI or your local extension or Soil Conservation District agent.
If modifications or a new lease cannot be worked out, written notice of termination should be given to end an existing lease. See Agricultural Leasing in Maryland for a sample termination letter and more detail about general leasing considerations and provisions.