Pasture Lease Items


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Pasture Lease Items

  1. 1. PASTURE LEASE ITEMS Bill Taylor, UW Extension Northeast Area Community Development Educator
  2. 2. Many Details <ul><li>To develop a good lease and see that both parties are covered there are many items that should be included and considered. </li></ul><ul><li>The old practice of agreeing over a cup of coffee and a handshake is not sufficient in today’s business world and this method has gotten ranchers and livestock owners in trouble. </li></ul>
  3. 3. Items to Include in Lease <ul><li>Name and address of parties to the contract </li></ul><ul><li>Property description </li></ul><ul><ul><li>Complete legal description of each parcel </li></ul></ul><ul><ul><li>Approximate size </li></ul></ul><ul><ul><li>County and state </li></ul></ul>
  4. 4. Example Property Description <ul><li>“The landlord hereby leases to the tenant, to occupy and use for pasture purposes, the following described property: ______________ </li></ul><ul><li>________________________________ </li></ul><ul><li>consisting of approximately _____ acres situated in ______ County, ________ (State) and on any other land that the landlord may designate by mutual written agreement.” </li></ul>
  5. 5. Items to Include in Lease (cont.) <ul><li>Lease term </li></ul><ul><ul><li>Specify whether annual contract or for multiple years </li></ul></ul><ul><ul><li>Specify year(s) covered </li></ul></ul>
  6. 6. Example Term – Multiple Years <ul><li>“The term of the lease shall be _____years, commencing on the ______ day of _________, 20__, and shall continue in effect from year to year thereafter unless written notice of termination is given by either party to the other at least ____ days prior to expiration of this lease or the end of any year of continuation. </li></ul>
  7. 7. Example Term – Annual <ul><li>“ The term of this lease shall be _____ year(s), commencing on the ______ day of ________, 20__, and ending on the ______ day of __________. 20__. </li></ul>
  8. 8. Items to Include in Lease (cont.) <ul><li>Review of lease </li></ul><ul><ul><li>Either party should be able to request a review of the lease before giving a termination notice </li></ul></ul><ul><ul><li>Example – “A request for general review of the lease may be made by either party at least _____ days prior to the final date for giving notice to terminate the lease.” </li></ul></ul>
  9. 9. Items to Include in Lease (cont.) <ul><li>Amendments and alterations </li></ul><ul><ul><li>In writing and signed by both parties </li></ul></ul><ul><ul><li>Example – “Amendments and alterations to this lease shall be in writing and shall be signed by both the landlord and tenant.” </li></ul></ul>
  10. 10. Extreme Environmental Changes <ul><li>What if severe drought, wildfires, insects, floods, etc. change the picture? </li></ul><ul><ul><li>Use the review and amendment process outlined in previous slides </li></ul></ul><ul><ul><li>Do a reassessment of how much pasture usage has been lost </li></ul></ul><ul><ul><ul><li>Take into account amount of grass needed for rejuvenation, reseeding needed, etc. </li></ul></ul></ul><ul><ul><ul><li>Talk to an Extension range specialist or other range personnel to determine how many AUMs can still be used without damage to the property and how it should be timed. </li></ul></ul></ul>
  11. 11. Extreme Environmental Changes (cont.) <ul><li>If tenant is going to continue on the pasture discussion between landlord and tenant is necessary to evaluate how much the capacity has decreased, plus how much each is willing to put into restoration. </li></ul><ul><ul><li>The tenant will be able to increase numbers with restoration </li></ul></ul><ul><ul><li>The landlord will gain increased property value with restoration </li></ul></ul>
  12. 12. Items to Include in Lease (cont.) <ul><li>No partnership created </li></ul><ul><ul><li>Specifically state that a partnership is not being created </li></ul></ul><ul><ul><li>Partners are liable for each other’s debts and obligations </li></ul></ul><ul><ul><li>Example – “This lease shall not be deemed to give rise to a partnership relation, and neither party shall have authority to obligate the other without written consent, except as specifically provided in this lease.” </li></ul></ul>
  13. 13. Items to Include in Lease (cont.) <ul><li>Binding on heirs </li></ul><ul><ul><li>Should bind heirs and estate executors </li></ul></ul><ul><ul><li>Example – “The terms of this lease shall be binding upon the heirs, executors, administrators, and successors of both landlord and tenant in like manner as upon the original parties, except as provided by mutual written agreement otherwise.” </li></ul></ul>
  14. 14. Items to Include in Lease (cont.) <ul><li>Transfer of property </li></ul><ul><ul><li>Only as subject to the terms of the lease </li></ul></ul><ul><ul><li>Example – “If the landlord should sell or otherwise transfer title to the farm or ranch, such action will be done subject to the provisions of this lease.” </li></ul></ul>
  15. 15. Items to Include in Lease (cont.) <ul><li>Right of entry </li></ul><ul><ul><li>The landlord will want to be able to enter the property for certain purposes </li></ul></ul>
  16. 16. Example – Right of Entry <ul><li>“ The landlord, as well as agents and employees of the landlord, reserve the right to enter the farm at any reasonable time for purposes (a) of consultation with the tenant; (b) of making repairs, improvements, and inspections; (c) after notice of termination of the lease is given, of performing customary seasonal work, none of which is to interfere with the tenant in carrying out regular operations. Landlord also may request right of entry to hunt and fish.” </li></ul>
  17. 17. Items to Include in Lease (cont.) <ul><li>Hunting rights </li></ul><ul><ul><li>Owner, tenant hunting </li></ul></ul><ul><ul><li>Sale of hunting rights </li></ul></ul>
  18. 18. Example – Hunting Rights <ul><li>Example – “The landlord reserves the right for family members and friends to be allowed to hunt on the property. If the tenant sells hunting rights to a third party or to the public, the landlord hunting rights for family and friends will be reserved. The landlord will receive 50% of any income from the sale of hunting rights. If the sale of hunting rights is to a third party outfitter, the outfitter shall pay 50% of the agreed upon fee directly to the landlord.” </li></ul>
  19. 19. Items to Include in Lease (cont.) <ul><li>Compensation for crop expenses </li></ul><ul><ul><li>If crops are raised on part of the land, provision needs to be made for crop share or fixed rate. </li></ul></ul><ul><ul><li>Additional issues for crops – fertilizer, seed, tillage, harvesting, storage, weed control, etc. </li></ul></ul>
  20. 20. Items to Include in Lease (cont.) <ul><li>Right to sublet </li></ul><ul><ul><li>Can the lessee sublet the property? </li></ul></ul><ul><ul><li>Example – “The landlord does not convey to the tenant the right to lease or sublet any part of the farm or ranch or to assign the lease to any person or persons whomever.” </li></ul></ul>
  21. 21. Items to Include in Lease (cont.) <ul><li>Cost of improvements, establishing hay or pasture </li></ul><ul><ul><li>Who pays what part of these costs? </li></ul></ul><ul><ul><li>The lessee receives the improved harvest during the lease, but the landlord receives improvement to property </li></ul></ul><ul><ul><li>Example – “The costs of establishing hay or pasture, new conservation structures, or improvements (except as identified in other sections of this lease) shall be the cost and responsibility of the tenant.” </li></ul></ul>
  22. 22. Items to Include in Lease (cont.) <ul><li>Building maintenance </li></ul><ul><ul><li>If the tenant is using any buildings, will they need to provide upkeep? </li></ul></ul><ul><ul><li>Example – “The tenant agrees to provide the unskilled labor necessary to maintain the farm and its improvements during the tenant’s tenancy in as good condition as it was at the beginning. Normal wear and depreciation and damage from causes beyond the tenant’s control are excepted.” </li></ul></ul>
  23. 23. Items to Include in Lease (cont.) <ul><li>Erection of non-removable buildings </li></ul><ul><ul><li>Example – “The tenant shall not (1) erect or permit to be erected on the farm any non-removable structure or building; (2) incur any expense to the landlord for such purposes; or (3) add electrical wiring, plumbing, or heating to any building without written consent of the landlord.” </li></ul></ul>
  24. 24. Items to Include in Lease (cont.) <ul><li>Use of dwelling or other buildings </li></ul><ul><ul><li>If buildings are present, lease needs to specify which the tenant can use </li></ul></ul><ul><ul><li>Example – “This lease does not include the use or occupancy of the dwelling or any other buildings upon the property by the tenant. The landlord reserves the right to use or lease such dwelling and buildings to other parties as the landlord sees fit. The tenant will allow free access of the landlord or tenants thereof to such dwelling and/or other buildings.” </li></ul></ul>
  25. 25. Building Use – Another Example <ul><li>“ The landlord shall not be responsible to replace or repair the dwelling or any other building regularly used by the tenant that may be destroyed or damaged by fire, flood, or other cause beyond the control of the tenant. Any replacement shall be determined by written agreement between the landlord and tenant. The landlord shall not be responsible for any property or belongings of the tenant. It is advised that the tenant carry tenant insurance on any such property and/or belongings.” </li></ul>
  26. 26. Items to Include in Lease (cont.) <ul><li>Temporary improvements or changes </li></ul><ul><ul><li>Can the tenant make any temporary changes? </li></ul></ul><ul><ul><li>Example – “The tenant may make minor improvements of a temporary or removable nature, which do not mar the condition or appearance of the farm or ranch, at the tenant’s expense. The landlord agrees to let the tenant remove such improvements even though they are legally fixtures at any time this lease is in effect. The tenant shall have no right to compensation for improvements not removed except as mutually agreed.” </li></ul></ul>
  27. 27. Items to Include in Lease (cont.) <ul><li>Weed control </li></ul><ul><ul><li>Who’s responsibility is it to control weeds? </li></ul></ul><ul><ul><li>Were there lots of weeds before the lease? </li></ul></ul><ul><ul><li>The tenant may get more grass, the landlord long-term reduction of weeds </li></ul></ul>
  28. 28. Weed Control - Example <ul><li>“ In order to operate the farm efficiently and maintain it in a high state of productivity, the tenant agrees to use diligence to prevent noxious weeds from going to seed on the farm. Treatment of noxious weed infestation and cost thereof shall be paid _____ percent by the landlord and _____ percent by the tenant. Noxious weeds will not be allowed to spread or increase beyond present conditions. Control will be maintained subject to inspection and advice of ________ County Weed and Pest.” </li></ul>
  29. 29. Items to Include in Lease (cont.) <ul><li>Soil erosion </li></ul><ul><ul><li>Example – “The tenant agrees to control soil erosion as completely as practicable; to keep in good repair all terraces, open ditches and drains; and to preserve all established water sources.” </li></ul></ul>
  30. 30. Items to Include in Lease (cont.) <ul><li>Existing contracts or agreements </li></ul><ul><ul><li>Agreements with NRCS, FSA, Forestry, Weed & Pest, etc. </li></ul></ul><ul><ul><li>Example – “The tenant agrees to use the land in such a manner as meets government agency regulations. The ranch is covered in a cooperative agreement between the landlord and NRCS, FSA, and Wyoming State Forestry, and the tenant agrees to operate the farm in accordance with these agreements.” </li></ul></ul>
  31. 31. Items to Include in Lease (cont.) <ul><li>Other possible items: </li></ul><ul><ul><li>Plowing pasture </li></ul></ul><ul><ul><li>Cutting trees </li></ul></ul><ul><ul><li>Pasturing of new seeding </li></ul></ul>
  32. 32. Items to Include in Lease (cont.) <ul><li>Operation and maintenance </li></ul><ul><ul><li>Livestock owner agrees: </li></ul></ul><ul><ul><ul><li>Remove livestock that break fences </li></ul></ul></ul><ul><ul><ul><ul><li>Example – “Not to pasture livestock that continue to break through fences. Should any animal be found outside the pasture on at least three occasions, the pasture owner may request its removal.” </li></ul></ul></ul></ul><ul><ul><ul><li>Not assign rights and duties </li></ul></ul></ul><ul><ul><ul><ul><li>Example – “Not to assign rights and duties under this lease without the written consent of the pasture owner.” </li></ul></ul></ul></ul>
  33. 33. Items to Include in Lease (cont.) <ul><li>Operation and maintenance (cont.) </li></ul><ul><ul><li>Livestock owner agrees: (cont.) </li></ul></ul><ul><ul><ul><li>Approval for cattle </li></ul></ul></ul><ul><ul><ul><ul><li>Example – “Not to put any cattle in the pasture without getting specific approval from the pasture owner in advance regarding number, health, sex, breed, and age.” </li></ul></ul></ul></ul><ul><ul><ul><li>Provide health certificates </li></ul></ul></ul><ul><ul><ul><ul><li>Specify when required </li></ul></ul></ul></ul>
  34. 34. Items to Include in Lease (cont.) <ul><li>Operation and maintenance (cont.) </li></ul><ul><ul><li>Both parties agree: </li></ul></ul><ul><ul><ul><li>Not to obligate the other </li></ul></ul></ul><ul><ul><ul><ul><li>Example – “Neither party hereto shall pledge the credit of the other party hereto for any purpose whatsoever without the consent of the other party. Neither party shall be responsible for the debts or liabilities incurred, or for damages caused by, the other party. </li></ul></ul></ul></ul>
  35. 35. Items to Include in Lease (cont.) <ul><li>Operation and maintenance (cont.) </li></ul><ul><ul><li>Both parties agree: (cont.) </li></ul></ul><ul><ul><ul><li>Assign percentage, time or dollars to following responsibilities </li></ul></ul></ul><ul><ul><ul><li>One column for landlord, one for lessee </li></ul></ul></ul><ul><ul><ul><ul><li>Inspect fences and corrals not less than once per ____ </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Furnish labor for repair of fences and corrals </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Furnish materials for repair of fences and corrals </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Supervise supply of water to livestock </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Furnish labor for repair of water system </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Furnish materials for repair of water system </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Furnish salt and mineral </li></ul></ul></ul></ul>
  36. 36. Items to Include in Lease (cont.) <ul><li>Operation and maintenance (cont.) </li></ul><ul><ul><li>Both parties agree: (cont.) </li></ul></ul><ul><ul><ul><li>One column for landlord, one for lessee (cont.) </li></ul></ul></ul><ul><ul><ul><ul><li>Count livestock not less than once per ___ </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Return stray animals to pasture </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Call veterinarian in case of emergency </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Pay veterinary expenses </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Provide loading and unloading facilities </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Furnish supplementary feed, if needed </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Notify other party of shortage in count of ______ </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Provide facilities for fly control </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Keep fly-control facilities in working order </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Liability insurance </li></ul></ul></ul></ul>
  37. 37. Items to Include in Lease (cont.) <ul><li>Any additional agreements </li></ul><ul><ul><li>No list can cover every situation and your situation may be unique </li></ul></ul><ul><ul><li>Add any other items that need to be covered after discussion and agreement by both parties </li></ul></ul>
  38. 38. Determination of Rent <ul><li>Include explanation of how numbers and animal unit months (AUMs) are determined </li></ul><ul><ul><li>If AUMs used, include definition and rating of various classes of livestock (i.e. bulls, yearlings, horses, calves, etc.) </li></ul></ul><ul><li>Include rate/charge per animal unit or acre or other unit of measurement, or lump sum if used </li></ul><ul><li>Payment may be made to escrow account </li></ul><ul><li>Include due date(s) for rent and any penalties for late payment </li></ul>
  39. 39. Arbitration and Differences <ul><li>Even with a detailed lease, differences or disagreements may occur </li></ul><ul><li>The contract should include a process for dealing with issues of disagreement that may arise </li></ul>
  40. 40. Arbitration and Differences - Example <ul><li>“A. Any differences between the parties as to their several rights or obligations under this lease that are not settled by mutual agreement after thorough discussion shall be submitted for arbitration to a committee of three disinterested persons, one selected by each party hereto and the third by the two thus selected. The committee’s decisions shall be accepted by both parties. </li></ul>
  41. 41. Arbitration and Differences – Example (cont.) <ul><li>“B. If any party willfully neglects or refuses to carry out any material provision, the other party shall have the right, in addition to compensation for damage, to terminate the lease. Written notice shall be given to the party at fault specifying the violations of the agreement. If violations are not corrected within 30 days, the lease shall be terminated.” </li></ul>
  42. 42. Execution <ul><li>The contract is executed when it is signed by both or all parties </li></ul><ul><li>May wish to sign in presence of notary and have contract notarized </li></ul>
  43. 43. Legal Advice <ul><li>Any and all contracts should be reviewed by a contract attorney </li></ul><ul><li>Discussing and reaching agreement on the items we have suggested will greatly decrease the time and expense of an attorney </li></ul><ul><ul><li>However, that does not mean you shouldn’t have every contract checked for proper language and applicable state laws </li></ul></ul><ul><li>After agreeing on terms have an attorney draw up the final document – the money will be well spent and provide peace of mind </li></ul>
  44. 44. QUESTIONS?