Farm Leases - Frequently Asked Questions

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Kristine Tidgren
Assistant Director
Center for Agricultural Law and Taxation

ktidgren@iastate.edu

handshakeAs farmers wrap up their harvest for the year, they are beginning to look ahead to next year. Unless a current farm lease was terminated by September 1 of this year, the lease will remain in place.

Because nearly half of Iowa’s crop ground is farmed pursuant to a cash rent or crop share lease, it is crucial that both tenants and landlords understand the implications of Iowa law on their farm leases as they move into 2018. This article addresses several frequent questions that arise regarding Iowa farm leases and the law.  It is intended for educational purposes only. Parties seeking legal advice should consult trusted legal counsel.

My tenant has been farming my ground for 8 years. We’ve never written anything down. We’ve always just agreed to a fixed price per acre.  Do I have an enforceable lease with my tenant?

Yes. Although a written lease is preferable, verbal leases are enforceable contracts. Generally, however, such contracts can only be proven for one-year at a time.  This is because the statute of frauds bars the admission of evidence required to prove the existence of an oral farm lease beyond a one-year term.

My tenant just completed harvesting his corn and I would like to enter the property to complete fall tillage. My current tenant will not be farming the ground next year. Is this acceptable?

You need to check your lease. Under Iowa Code § 562.5A , if you do not have a written agreement granting you, as the landlord, the right to the corn stover or stalks, your tenant owns that part of the crop. If you destroy the stalks without a written agreement, you could be required to reimburse your tenant for the market value of the stalks. Your tenant is entitled to remain on the ground until March 1 of next year.

I have been cash renting ground from my landlord for the past two years. I have been paying $300 per acre and would like to lower the price. It’s now November 15. Because my two-year written lease will expire on March 1, 2018, can I just walk away if my landlord refuses to renegotiate?

Unless you served statutory notice of termination on your landlord on or before September 1, 2017, your lease has automatically renewed for another year under the same terms and conditions as those in your two-year lease. This means you are legally obligated to rent your landlord’s ground for the 2018 crop year at a price of $300 per acre. If you walk away from that obligation, your landlord could sue you for breach of contract. With that said, many landlords are open to working with their tenants to come up with a price that the tenants can afford. If your landlord agrees to a change in terms, you must sign a written agreement setting forth those new terms.

How is it that my lease can automatically renew for another year? My lease specifically states that it will expire on its own terms on March 1, 2018, and that my landlord and I both agree to waive any statutory notice requirements.

Iowa Code § 562.6 generally provides that Iowa leases for a farm tenancy automatically renew for another year under the same terms and conditions as the original lease unless either party provides written termination notice, in the specific manner directed by statute, on or before September 1. This provision, which is unique to Iowa, applies equally to oral leases or written leases. It also applies equally to one-year leases or multi-year leases. Regardless of the length of the term of the original lease, the auto-renewal provision extends the existing lease for just one additional year. However, a lease continues to yearly auto-renew under the statute, unless either party issues a notice of termination. In other words, without statutory notice, an automatically renewed lease will renew again. Although the auto-renewal statute sometimes changes contractual terms agreed upon by the parties, the Iowa Supreme Court has ruled that it is constitutional. Because this provision is strictly enforced, it is important that all farm landlords and tenants understand the auto-renewal requirements.

How does a party serve statutory termination notice to prevent a farm lease from auto-renewing?

Iowa Code § 562.7 provides three alternative methods for serving statutory termination notice. Any of the following are acceptable:

•Delivery of the notice, on or before September 1, with acceptance of service to be signed by the party to the lease or a successor of the party.

•Serving the notice, on or before September 1, personally, or if personal service has been tried and cannot be achieved, by publication, on the same conditions, and in the same manner as is provided for the service of process in a lawsuit.

•Mailing notice before 9/1 by certified mail to the last known mailing address.

The most common—and usually the most efficient—way to serve statutory notice is option three: mailing the notice by certified mail before September 1. Under this method, the service is completed “when the notice is enclosed in a sealed envelope, with the proper postage on the envelope, addressed to the party or a successor of the party at the last known mailing address and deposited in a mail receptacle provided by the United States postal service.”

I realize now that the statute requires termination notice to be sent via certified mail, but I mailed statutory termination notice to my tenant on August 25 via regular mail, before I read this article. It is now November 13. Is my termination notice valid if I can prove that my tenant read the notice?

No. The courts construe the notice statute requirements very strictly. Notice will not be sufficient if the notice was sent via regular, instead of certified, mail, even if the other party admits that they received and read the notice prior to September 1. Unless your tenant will agree to a termination, he is now entitled to rent your ground for another crop year under the same terms and conditions that governed this year’s lease.

I understand that Iowa has an auto-renewal provision for farm leases, but isn’t there an exception for smaller parcels of ground?

Since 2013, the auto-renewal statute applies to all farm tenancies of crop ground, regardless of the size of the parcel. In other words, a landlord seeking to terminate a lease for a five-acre parcel of cropland must send termination notice in the same manner as a landlord seeking to terminate a lease for a 500-acre parcel of cropland. The only size exception remaining in the statute is for farm tenancies less than 40 acres where an animal feeding operation is the primary use. In other words, statutory notice provisions do not apply to a lease for a small feedlot. They likely do apply, however, to a lease for a small parcel of pasture ground.

For more information on the legal requirements of Iowa farmland leases, please read Iowa Farm Leases: A Legal Review available at www.calt.iastate.edu/article/iowa-farm-leases-legal-review..

Date of Publication: 
November, 2017