While the landowner and the tenant farmer often prefer to avoid complicating a farm lease transaction with written contracts, both parties can save themselves a great deal of difficulty in the future by making sure they have a meeting of the minds put down in writing.
A common problem with oral farm leases concerns the lease term, or time period. A landlord might orally lease property to the farm tenant “year-to-year.” As the end of the calendar year approaches, the landlord decides that he wishes to terminate the lease so that he can sell or develop the property. The landlord asks the tenant to vacate the property by the end of the year. The tenant refuses because he understood the term of the contract to begin and end on a crop-year cycle, rather than a calendar-year cycle. The tenant explains that he has just planted winter wheat with the expectation that the tenancy would extend at least until its harvest. Who wins?
Unfortunately, the law provides no clear answers. While it is generally agreed that notice to terminate a year-to-year farm lease must be made three months prior to its date of termination, the date of termination is often an unknown where the farm lease is silent as to the lease’s term.
The Indiana Code provides, “A general tenancy in which the premises are occupied by the express or constructive consent of the landlord is considered to be a tenancy from month to month. However, this section does not apply to land used for agricultural purposes.” IC 32-31-1-2. The Code, however, does not provide whether a farm lease that is otherwise silent as to its term is a calendar-year lease, a crop-year lease, or otherwise. Case law is likewise unclear. In dictum, the Indiana Court of Appeals in the case of Pilotte v. Brummett, 332 N.E.2d 834 (Ind. Ct. App. 1975), felt comfortable stating in that case that “farm leases in the area [Tippecanoe County] customarily began March 1 and ended February 28,” and the Court accepted this custom for determining the term of an oral “year-to-year” farm lease. Ultimately, the Court did not make any binding ruling on the issue. There are simply no clear rules on this issue to be found in the Indiana Code or case law.
Generally, where a contract is unclear or ambiguous, a court will look at the surrounding circumstances to determine the intentions of the parties to the contract. This means that where the farm lease is silent as to its term, it is likely that the determination of the term would be made on a case by case basis. This sort of fact-sensitive inquiry may require testimony and other evidence to resolve the question in the courtroom.
Prospective landlords and tenants are advised to get the term of the farm lease in writing. A written lease clears up any uncertainty concerning when the farm lease begins and when it ends. The landlord and tenant can also provide in the written lease any renewal terms once the initial term of the lease is expired. Furthermore, getting the lease in writing allows the landlord and tenant to be confident that they have a meeting of the minds as to all of their respective rights and obligations. Both parties can avoid future confusion, disputes, and even litigation by making certain they have a written document memorializing all the terms of their lease.
Author: Adam J. Farrar (bio)
Phone: 812.838.5066
email: afarrar@bamberger.com
Tags: Adam J. Farrar, farm leasing, landowner, tenant farmer