Farmers, landlords enter lease renegotiations

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Now that harvest is underway, many farmers and landlords might be negotiating, renegotiating or terminating lease agreements for the 2014 crop year.

Farmers like to know as early as possible which land they will rent the following year and under what terms so they can make fertilizer, seed, fuel and other input decisions immediately following harvest. But landlords, who face a Nov. 30 deadline for lease terminations in the state of Indiana, sometimes want to wait until closer to the deadline so they have a better idea of what farm incomes might look like in the coming year.

"Tenants like to know by September about land to lease for 2014 if they don't already have a lease arrangement for a particular farm or parcel," said Gerry Harrison, Purdue Extension agricultural economist.

"However, a landlord might want to wait until November if there is doubt about the lease terms for 2013. The outlook for 2014 in November might be much different than in September of the current year."

One lease arrangement that might suit both parties is a flexible lease. In this type of agreement, terms are included to address actual variations in crop yields or prices in determining a final rent payment, Harrison said.

If a landlord or tenant is uncertain about continuing with the current terms of a lease arrangement, such as the rent rate, Harrison said it's best to start renegotiations with a notice to quit, or terminate a lease.

"From litigation in Indiana in 2012, it would be careless to deal with anything other than a written notice, properly delivered, to end the current lease and to open up negotiation for new lease terms," he said. "To give notice to terminate an existing lease does not need to imply the tenant and landowner can't reach a new agreement, and tenants who have a lease in place for the coming year might be wise to revisit the arrangement with the landlord.

"If there is no more than a comment or oral notice that a new rent or other new lease terms need to be agreed to, the parties to the lease might find that they are under the same terms for the 2014 lease."

Indiana rules about written lease termination also apply to permanently terminated leases.

The only time tenants and landlords are not entitled to a written notice to quit is when the initial lease agreement is a term lease that specifically states it can be terminated orally.

According to Harrison, both tenants and landlords can protect themselves by consulting farm attorneys to end current lease agreements and set up new ones.

Purdue Extension offers free resources to help farmers and landowners better understand farmland leases through The Education Store at http://www.the-education-store.com/. Those publications include:

* Legal Aspects of Indiana Farmland Leases and Federal Tax Considerations, written by Harrison. It can be downloaded by visiting the above URL and searching for "EC-713-W."

* Indiana Cash Farm Lease, written by Purdue Extension agricultural economist Craig Dobbins. This publication helps farmers and landlords put lease agreements in writing and includes a blank cash lease form. It also can be downloaded through The Education Store by searching for "EC-257-W."


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