The land is the farmer’s most valuable asset, for supplying food for the family and earning additional revenue from surplus crops. Leasing land is a common occurrence for many farmers and can also help persons who don’t own property or don’t have enough land to meet their demands. For landowners, leasing land to others in exchange for cash or a share of the harvest can provide extra revenue or output.
Risk, security, and trust are the core issues of most of these agricultural land lease agreements and they affect both the tenant and the landowner. The degree of trust that is created between the landowner and the tenant is fundamental to their relationship’s success. A proper agricultural land lease agreement may establish the foundation for such trust by providing flexibility to the landowner and security for the tenant. In this way, many possible conflicts or arguments can be avoided. This blog will help you in understanding the meaning of the agricultural land lease agreement and the information included in such agreement.
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What is an Agricultural Land Lease Agreement?
An agricultural land lease agreement is an arrangement between the property owner (lessor) and the tenant (lessee) that specifies the terms of use for a piece of farmland. The tenancy might be long-term or short-term, but it usually lasts three to five years. A typical lease comprises stipulations such as rent, length of time, rental rates per acre, what types of crops are allowed on the farm (e.g., only vegetables), payment frequency (e.g., every year on January 1st), and who will supply equipment and livestock (if applicable). (1)
What are the essential elements of an agricultural land lease agreement?
An agricultural land lease agreement should include the elements that are listed below. Although all of these components may not be required in a lease, it is best not to leave out too many of them. Otherwise, the security of the agricultural land lease agreement can be jeopardized. Hence, the following are the essential elements that should be there in an agricultural land lease agreement (2):
- Name of the parties
The name of the parties is an important clause in an agricultural land lease agreement. It gives a measure of protection and a foundation for creating a trust for those involved. An agreement between a single tenant and a single landowner is simple and easy. In the case of multiple tenants, an agricultural land lease agreement can be made to ensure that the tenancy continues even if any one of them passes away. This might be accomplished by including the names of all family members who will work together on the leased land.
Mainly, the male head of the household is the only person named on the lease, but if he dies, his family members may lose access to the land they are cultivating. Hence, this clause should contain the name of all the family members or successors of the tenant.
- Commencement date and duration of the agreement
The commencement date determines when the landowner’s responsibility for the property transfers to the tenant. The duration agricultural land lease agreement will vary of course and can take various forms. It can be for a specified period (for example, one year) with or without an option to renew, or it can be periodic (for example, monthly or yearly continuing until one of the parties gives the pre-requisite notice), and is usually subject to a minimum initial term. Some agricultural land lease agreements provide for a “hold-over.” This means that at the end of the lease, the tenant has the option to continue on the land for a specified time.
The tenant must try to match the lease duration to the desired outcomes. This could be about the type of crops that will be grown. For example, some crops have a short life cycle, whilst others (such as coconut trees) have a 50-year life cycle. Both the landowner and the tenant should consider matching the tenure of the agricultural land lease agreement to any family obligations. A landowner, for example, might want to lease the land until the next generation is old enough to farm it.
- Description of the property
In an agricultural land lease agreement, the leased property should be described in detail. The description should indicate how the land’s area is calculated, whether the boundaries are marked by physical features or by surveys or plans. A simple sketch may suffice for a small parcel of land to be leased on a less-than-annual basis (for seasonal grazing). A plan and a written description are preferable for a longer parcel of land leased for long period. This clause should also explain what cannot be included in the agricultural land lease agreement and serves as a foundation for future agreements.
- Rent
Normally, the tenant pays rent for using the land assigned to them.
The rent must be stated and guaranteed for the protection of both the landowner and the tenant. Even if the exact amount of rent is unknown at the outset of the lease, it should clearly state how the rent will be computed and when payment is due. In the long-term agricultural land lease agreement, it may also be required to reserve the right to reassess the rent again in the future because of the inflation or currency fluctuations, the rental rate may also change. Hence, the periodic reviews will help to safeguard the owner’s financial interest in the property and the tenant’s ability to pay.
- Rights to possession and use
One of the primary features of an agricultural land lease agreement is the degree to which a tenant is granted the right to possess and utilize the land. The greatest degree is a “full tenancy,” in which the tenant has complete and exclusive possession of the property. This means that the landowner will have to schedule appointments to gain access to the property, mainly for periodic inspections. The landowner may require access to the property to fulfill certain maintenance or repair duties.
It is a good idea for the tenant to have some control over the crops they are cultivating and give reasonable boundaries to the landowner, though this may be challenging with the short-term agricultural land lease agreement.
- Upkeep of the land
A detailed description of both the landowner’s and tenant’s maintenance and repair responsibilities should be included in an agricultural land lease agreement. This can be determined by the duration and term of the agreement. The long-term agricultural land lease agreement will give a greater obligation to the tenant. This agreement should be used even if only a small portion of land is leased because drainage channels and boundaries often require attention.
- Condition of the land on return
An agricultural land lease agreement should also address the required condition of the land when the tenant returns it to the landowners. Regardless of the distribution of maintenance tasks specified under the section clause “Upkeep of land,” the agreement should also include a promise by the tenant to return the land in the same state as it was at the start of the lease.
Alternatively, the tenant and landlord may agree to restore the property in “good condition” rather than “similar condition.” It is necessary to prepare a detailed statement on the physical condition of the property at the time it was leased, especially if it is a long-term agricultural land lease agreement.
- Making improvements or changes to use
It is an excellent practice to ensure that the tenant does not make any alterations or changes of use to the property without the landowner’s explicit consent. For example, any exceptions to constructing livestock-proof boundaries around a parcel of land should be specified in an agricultural land lease agreement.
- Arrangements for compensation
To make the land appropriate for usage, the tenant may need to make modifications or alterations. In some circumstances, these improvements result in expenses that are not recoverable at the lease’s end. The tenant should be entitled to seek compensation for the rise in the value of land in these situations. Of course, the improvements may have the reverse effect: they could have harmed the land and diminished its value and in this scenario, the landowner can seek compensation from the tenant.
Hence, it is a good idea to negotiate and add a clause in the agricultural land lease agreement for any improvements or alterations. The lease should also state the circumstances under which compensation will be paid and how the compensation amount will be calculated.
- Responsibility for paying taxes and other charges
The landowner may need to transfer responsibility for paying various charges associated with the property under the long-term agricultural land lease agreement, especially when the tenant is given exclusive possession. These charges include local taxes and levies (such as a water charge), a proportion of the maintenance cost of shared resources (such as service roads and drainage), and insurance to cover fire, theft, and other damage.
- Record of the agreement
It is advisable to have an agricultural land lease agreement in writing. It must be written in a specific style or format, or under a legal seal, and should be registered as well. Legal provisions differ by jurisdiction; therefore, landowners and tenants should be aware of what kinds of provisions exist where they are. They should use those provisions to ensure optimum flexibility, security, and protection.
- Dispute resolution
A provision for resolving any issues that may occur should also be included in the agricultural land lease agreement. This clause should cover both general disputes between the parties (for example, disputes over the interpretation of particular wording in the lease), as well as specific disputes relating to issues such as rent reviews, maintenance obligations, and requests to undertake improvements.
Conclusion
The strongly regulated and tenant-protective agricultural land lease agreement may be unacceptable to landowners, who may feel that their authority and flexibility are being limited too much. An agricultural lease agreement that is very informal or under-regulated, on the other hand, is not in the best interests of tenants because it may deprive them of a reasonable amount of security. The key is to find a balance that benefits both landowners and tenants.