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When an agricultural lease ends, usually no problems arise, and the tenant gladly turns the farmland back to the landowner. A recent case out of Illinois highlights issues that can occur when farmland has multiple owners, and a co-owner wants to terminate the lease while the other co-owner wants the lease to continue. The current tenant in this case continued to farm the leased property even though one co-owner wanted to end the lease. In that case, the trial court awarded over $62,000 to the co-owner for damages caused by the tenant holding over.
Background
Doug leased a piece of farmland co-owned by his aunt Ruth and his dad Robert under an oral farmland lease. Ruth owned an undivided 75-percent interest in the farmland and Robert held an undivided 25-percent interest in the farmland. In 2016, Doug failed to pay a portion of the rent for the 2016 crop year, and Ruth sent him written notice she was terminating the lease. In the written notice, Ruth gave Doug a date in February 2017 to turn over possession of the property. Robert did not agree that the lease should be terminated and told Doug to continue farming the land without Ruth’s consent. Doug continued to farm the property in 2017 and did not pay any rent that year or make a final rent payment for 2016. Ruth sued Doug to terminate the lease in late 2017 and at trial was awarded damages of $62,726, the portion of the 2016 rent not paid and all of the 2017 rent. Doug appealed that decision.
Court of Appeals Reasoning
On appeal, Doug argued that the trial court erred in awarding the holdover damages. The Appellate Court of Illinois turned to the Illinois Code which governs holdover damages. The Illinois Code’s holdover damage statute provides damages when:
“Wilfully holding over. If any tenant or any person who is in or comes into possession of any lands, tenements or hereditaments, by, from or under, or by collusion with the tenant, wilfully holds over any lands, tenements or hereditaments, after the expiration of his or her term or terms, and after demand made in writing, for the possession thereof, by his or her landlord, or the person to whom the remainder or reversion of such lands, tenements or hereditaments belongs, the person so holding over, shall, for the time the landlord or rightful owner is so kept out of possession, pay to the person so kept out of possession, or his or her legal representatives, at the rate of double the yearly value of the lands, tenements or hereditaments so detained to be recovered by a civil action. 735 Ill. Comp. Stat. Ann. 5/9-202”
According to the court, the willful holdover damage provision allowed for double the yearly value of rent when a tenant willfully holds over. To the court, the tenant willfully held over after the tenant received written notice of termination. According to previous decisions of the Illinois Supreme Court, a holdover is not willful when the tenant continues to have a reasonable belief that the tenant could rightfully stay on the property.
The other issue the court of appeals had to handle was about cases where co-owners do not agree on terminating a tenant’s lease. Prior decisions in Illinois allowed for one co-owner to provide notice to terminate a lease without the approval of the other co-owner(s). The court of appeals saw no reason to disagree with these prior decisions in this case.
Reviewing the facts, Ruth had given Doug written notice to terminate. Doug ignored this notice and continued to farm the property without paying rent. Based on these facts, the court of appeals upheld the findings of the lower court.
Why Care?
Similar to Illinois, Maryland also has a holdover statute allowing landlords to collect damages for the holdover. Maryland’s law does not provide similar double damages for a willful holdover. Maryland’s holdover damage statute limits damages to no less than the rent owed for the holdover period. Md. Code Ann., Real Prop. § 8-402.
The other reason to care is knowing who has to provide notice to terminate a lease in rented farmland with multiple co-owners. In this case, the tenant rented the farm with an oral lease, and the courts used prior decisions to determine when and how a co-owner must give proper notice.In cases where farmland has multiple co-owners, it is in the tenant’s best interest to consider a written farmland lease specifying which landowner can provide notice to terminate. Find other good solutions and considerations by taking a look at the Agricultural Leasing page on the University of Maryland’s website.
References
735 Ill. Comp. Stat. Ann. 5/9-202
Md. Code Ann., Real Prop. § 8-402
Schroeder v. Post, No. 3-18-0040, 2019 WL 258091 (Ill. App. Ct. Jan. 18, 2019).