By Sarah Everhart
Does your farmland lease contain a provision allowing you to monitor and maintain soil fertility?
Soil fertility, or the measurement of nutrients within a given soil, is a key to the value of your property. If your lease is silent on the issue of soil fertility, how do you know if your tenant is replacing the nutrients removed by crops each year? State law does not protect a landowner’s right to maintain soil fertility and to imply a duty on the part of the tenant to maintain soil fertility, a court will have to find an implied duty, which is unlikely. Landlords who want to maintain soil fertility and prevent tenants from depleting nutrients must incorporate provisions such as the ones described below in the lease.
To monitor soil fertility, a landlord should commission soil fertility testing at the beginning of a lease term to establish baseline fertility numbers. In the lease itself, the landlord should include the right to periodically (every few years) enter the property and take further soil tests to ensure the tenant is replacing nutrients and not “mining the soil.” The lease should specify the party (landlord or tenant) responsible for paying for the periodic soil testing. Further, a landlord should consider including a provision to allow for soil testing at the end of the lease and if the test results indicate a deficiency of certain nutrients, how the landlord should be compensated.
If soil testing results taken during the lease term indicate that nutrients need to be replenished, the lease should specify the party (landlord or tenant) responsible for paying for the replenishment program. The party that should pay for the nutrient replenishment will most likely depend on the duration of the lease term. For example, if the lease is for a period of years, it makes sense that the tenant should pay for the replenishment because he or she will be taking advantage of the increase in fertility. In general, longer lease terms discourage “mining the soil” and provide a natural incentive for tenants to maintain good soil fertility. Therefore, a landlord entering into a short-term lease should ensure that all aspects of soil fertility maintenance are incorporated into the lease because a short-term tenant has less incentive to take actions to maintain future soil health.
From the tenant’s perspective, unless there is a provision in the lease that allows for the tenant to be reimbursed for any improvement in soil fertility before the lease ends, the tenant will not be compensated for the investment and the landlord and/or future tenants will reap the benefits. A solution for allowing a tenant to be fairly compensated for investing in soil fertility is to have the tenant pay the initial cost of the replenishment but include a provision in the lease where the landlord agrees to reimburse the tenant on a pro-rata basis for carry-over value of soil replenishment if the tenant doesn’t rent the land in future years. Alternatively, a landlord and tenant can agree to simply divide the cost of any nutrient replenishment.
Some other provisions to include in a lease to preserve soil fertility are prohibitions on planting a crop known to deplete soil fertility and/or the requirement that crops be cycled in a way to replace nutrients.
With the imminent passage of the Phosphorus Management Tool regulations, soil fertility is an especially important issue for Maryland farmers. Therefore, if a landlord wants assurance and control over the long-term value of land, soil fertility needs to be incorporated into farmland leases. For more detailed information on agricultural leasing check out the ALEI leasing in Maryland guidebook found here: http://www.umaglaw.org/publications-library.html.