Notification for Farm Lease Changes Should be Made in Writing

Landowners and tenant farmers who want to renegotiate or terminate farmland leases should deliver clear, timely, written notification of their intentions rather than relying on word-of-mouth, a Purdue Extension agricultural law specialist says.

The Indiana notification deadline is three months before the end of the current crop year unless the two sides have agreed on a different date. By custom, crop years end the last day of February – in this case, Feb. 28, 2017 – meaning the deadline for delivering notification is before Dec. 1, 2016.

If no changes are made to the lease, the existing terms remain in place for the next year.

Gerald Harrison, professor of agricultural economics and a member of the Indiana State Bar Association, said a 2012 ruling by the Indiana Court of Appeals indicated that notification to terminate a lease agreement must be made in writing, properly identify the property and be delivered in a timely manner.

In that case, the tenant had an oral notification to terminate the lease on two farms but only one farm was identified in the written notice.

“Traditionally, oral notification did the job and will likely will satisfy some in the future,” Harrison said. “When a tenant does not want to part with the leased land, even for one more year, is when a proper written notice to quit is important, as it was in the case that went to the court of appeals.”

Harrison suggested that landowners and tenants might also want to agree on an earlier date for the notification deadline rather than waiting until end of November.

“I presume most tenants would like to know by Sept. 1 of the current crop year if they will have a given farm or parcel of land to farm in the coming year for good management reasons,” Harrison said. “Planning ahead for fall tillage, cover crops, lime and fertilizer applications, as well as farm machinery needs, is important so it is important to know what acreage will be farmed in the coming year.”

One problem with setting an earlier deadline could be determining a fixed, cash rent payment. Landlords are typically reluctant to adapt to market changes, Harrison said.

According to the annual Purdue Farmland Value Survey released in August, cash rents in Indiana declined in 2016 from 2015 as grain prices remained weak after several years of big harvests and slackening global demand. Indications are producers could be facing financial struggles again next year.

“Budgets for crop production in 2017 show big losses for producers at the 2016 cash rents,” Harrison said. “Thus considerable pressure exists for lowering cash rents, especially the leases that have fixed cash payments rather than rents based on flexible rates.”

Source: Purdue University