There is allot of agricultural land in our region that is being farmed by someone other than the land owner and many of these ground leases are not written. Usually when I ask to see a copy of the lease, the land owner cannot provide any documentation. I’m all for handshakes and trusting relationships, but in today’s fast paced world of real estate this common practice is too risky. In most cases, the farmer has invested many hours of labor and many dollars in fuel, fertilizer and seed. When the owner decides to sell the property the farmer could be significantly damaged.
In many cases it takes years to cultivate the ground in order to make it produce a good crop. That investment could be at risk once a new owner takes possession. A lease is a property right, but it should be in writing to be properly enforced. A good written ground lease should probably have duration that lasts longer than a year to allow the farmer time to recoup their investment.
The current Land and Acreage Addendum that accompanies rural Purchase Agreements states that, “Seller shall have the right to harvest all crops in the ordinary course of business until the Possession Date.” In most cases, this is just not adequate! Consider the sale scheduled to close in July but the grain crop cannot be harvested until later in the summer. The buyer wants to build a home and will damage a couple of acres of crop in the process of building. Who compensates the farmer for that loss and does the farmer even have the right to access the property after the closing date to remove the standing emblements? The law generally favors the farmer, however things can get so contentious before a court decides the outcome that it probably isn’t worth fighting.
A written lease would spell out exact terms and is much easier to communicate to the new landowner. With a written ground lease and a properly negotiated Purchase Agreement, the terms of both contracts can be communicated with clarity and honored by the new purchaser.
If you have a handshake deal with the farmer next door and you are preparing to sell, it would be wise to put that agreement on paper so the farmer can be properly compensated even when there is damage to the crop.