Attorneys advise against setting up land leases without written contracts, but many Ohio farmers and landowners still rely on verbal agreements and handshakes. Those casual arrangements can lead to legal problems, especially when the landowner wants to end the lease.
To help prevent those problems, Ohio legislators are considering a bill that would establish a lease termination deadline of Sept. 1 for any agreements that don’t have written provisions for termination. The legislation, Ohio House Bill 397, passed the Ohio House last December and was introduced in the Senate.
It was referred to the Senate Agriculture and Natural Resources Committee, which began hearings on the bill in early February. Rep. Brian Stewart, R-Ashville, one of the primary sponsors of the bill, told Farm and Dairy he’s not anticipating much opposition to the bill and hopes to see it pass through the Senate quickly.
Stewart said his work as an attorney in rural Ohio brought problems with land leases to his attention.
“Questions and controversies about what happens when leases are or are not terminated are more common than anyone would like to see,” he said.
The Ohio Revised Code does not currently provide a deadline for lease termination, and case law doesn’t provide clear or consistent guidance either. If the bill is passed into law, it won’t affect leases that already specify a method for lease termination, Rep. Darrell Kick, R-Loudonville, the second primary sponsor for the bill. He told Farm and Dairy it’s meant to help head off litigation when lease agreements don’t include written termination provisions.
“This is for those that fall in those cracks,” he said.
Clear deadlines
Unless a written lease says otherwise, the legislation would require a landowner to give the person leasing the land a written notice of termination on or before the first day of September. The end date for the lease would be Dec. 31 or whenever harvest is finished for crops planted on the land, whichever comes first.
The bill was passed by the House with only one opposing vote. Even though they supported the bill, some legislators were surprised that handshake deals are still common in the farming community, Kick said.
Such legislation wouldn’t be necessary if all farmers and landowners used well-written leases with clear termination provisions. Stewart said, however, that verbal agreements remain common in the farming community, and “we have to take our clients and industry as is.”
The bill covers termination of a lease by the landowner, but doesn’t outline rules for tenants who want to end a lease. That situation is much less likely to lead to a lawsuit, Stewart said. In fact, he’s never encountered a case where a landowner sued a tenant over a lease termination.
Landowners aren’t as likely to suffer financial damage from the abrupt end to a lease because they are generally not investing in crop inputs, he explained. And the competitive farmland market usually makes it easy for a landowner to find a new tenant.
“Even on short notice, you could find somebody to take it on,” he said.
Disagreements over farmland leases occur most often when a land owner dies or land is sold, Stewart said. For instance, he represented the buyer of a piece of crop land that had been leased out by the previous owner. The leases were written down, but those written leases didn’t mention terms for termination.
The buyer believed all leases had expired, but a tenant had invested in inputs thinking the lease extended for another year. If the proposed law had been in place at the time, that disagreement could have been avoided, Stewart said.
Less litigation
Avoiding litigation over leases benefits both landowners and tenants, and the bill has support from farm organizations, as well as the Ohio State Bar Association.
Amy Milam, director of legal education and member engagement for the Ohio Farm Bureau Federation, testified in support of the bill on behalf of the Ohio Farm Bureau.
Many other states, including Illinois, Indiana, Iowa, Minnesota and Wisconsin, have already created statutes addressing farm lease termination, she told Farm and Dairy.
“This bill would bring Ohio up to date with many other Midwestern ag states,” she said.
Courts in Ohio have reached varying conclusions about whether sufficient notice was given to end leases, Milam said. “The litigation has created some inconsistencies.”
That creates uncertainty for both landowners and tenants, which this legislation would resolve. At the same time, Milam said, landowners and tenants can better protect their interests and head off disagreements by getting lease deals down on paper.
“We very much encourage landlords and tenants to put their leases in writing,” she said, “but we know the reality of how many are not.”
According to tenants and landowners recently surveyed by Ohio State University Extension, about 47% of their farm leases were in writing. That’s something Ryan Conklin would like to see change. He is an attorney with Wright & Moore Law Co. and also chairs the Ohio State Bar Association’s Agricultural Law Committee.
He testified in support of the bill, but he also recommends written leases.
“The ultimate goal of this legislation is to chip away at the continuing presence of handshake leases in the farm community,” he told Farm and Dairy.
