Farm Leasing Basics
ASAP Business of Farming Conference, February 22, 2014
Eric Mine – Land Loss Prevention Project

All R...
So You Want to Lease Land for Farming
• What will the agreement look like?
• What will I be leasing?
• How and what will I...
What will the agreement
look like?
-Written vs. Oral
-Required contents

All Rights Reserved 2014 - Eric Mine, Esq., Land ...
Lease Agreement
• Should I have a written
lease?
– Yes
• Could I use an oral lease?
– Yes, in some cases. But
don’t.
• Sho...
Lease Agreement
• What MUST be in the lease?
– Identity of landlord
– Identity of tenant
– Description of land to be lease...
Lease Agreements – Writing Required
• NCGS § 22-2. Contract for sale of land; leases.
– … all other leases and contracts f...
Lease Agreements – Writing Required
• NCGS § 47-18. Conveyances, contracts to convey,
options and leases of land.
– (a)
No...
Lease Agreements – Minimum Contents
• Purchase Nursery, Inc. v. Edgerton, 153 NC App 156
(2002)
– A valid lease contains f...
What exactly am I leasing?
- Property descriptions
- Length of lease
- Use and entry rights

All Rights Reserved 2014 - Er...
Property Description
-Land
-Metes and Bounds
-Maps
-Buildings
-Descriptions
-Use
-Equipment
-Descriptions
-Use
All Rights ...
Length of Lease
• How long should the lease last?
– Short Term
– Long Term
• Recording requirements
• Lease renewal
• Earl...
Use and Entry Rights
• Rights of Way
– What’s on the other side of the property?
• Right of Entry
– When can the landowner...
How and What Will I Pay?
-Cash vs. Crop Share
-Timing of Payment

All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Pr...
Types of Consideration
Cash Lease

Crop Share Lease

• Pros

• Pros

– Fixed cost

– Risk sharing

– Little landowner
invo...
Types of Consideration, continued
Flexible Lease
• Hybrid
– Base Rent + Bonus = Total
• Base rent - $/acre
• Bonus - % of ...
Types of Consideration – Cash Lease

All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
Types of Consideration – Crop Share Lease

All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
Types of Consideration – Flexible Lease

All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
Timing of Payments
• Cash Leases
– Typically paid on a certain date

• Crop Share
– Dependent upon harvest date and market...
Who is responsible for
what? And what can I do?
- Terms of the lease

All Rights Reserved 2014 - Eric Mine, Esq., Land Los...
Terms of Lease Will Depend on Negotiation

All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
Rights and Responsibilities
• Land Use
• Maintenance
• Labor
• Insurance
• Construction
• Damage
• Record Keeping
All Righ...
Rights and Responsibilities
• Land Use Limitations
– Organic certifications
– Conservation practices
– Use of additives
– ...
Rights and Responsibilities
• Maintenance
– What must be maintained?
– Who will do maintenance and repair?
– Who will pay ...
Rights and Responsibilities
• Insurance
– Hazard and Casualty
• Property Insurance
• Comprehensive General Insurance

– Cr...
Rights and Responsibilities
• Construction and Improvements
– Removable Structures
– Permanent Structures
– Compensation f...
Rights and Responsibilities
• Damage to leased property
– Who will repair?
– Who will pay?
– Maximum contribution from lan...
Rights and Responsibilities
• Record Keeping
– Will you be required to keep records?
•
•
•
•

Farming practices
Additives
...
Rights and Responsibilities
• Other Considerations
– USDA farm payment agreements
– Environmental inspections prior to lea...
What if I Want to End the Lease
or Something Goes Wrong?
-Notice
-Disputes

All Rights Reserved 2014 - Eric Mine, Esq., La...
Terminating the Lease
• Required Notice; NCGS §42-14
– Year-to-Year Leases
• Most common
• One month prior to end of lease...
Terminating the Lease
• Disputes
– What if I stay after the lease is over?
– What if I can’t complete a harvest before the...
Could or should I use a
business entity to lease the
land?

All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Preventi...
Business Entities
• What sort of entities are possible?
– Sole Proprietor
– General Partnership
– Limited Partnership
– Co...
Business Entities
• Advantages of LLC formation
– Management plan
– Succession planning
– Limitation of liability
• Must m...
Questions?
Contact Info:
Eric Mine, Staff Attorney
Land Loss Prevention Project
1-800-672-5839
www.landloss.org
All Rights...
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2014 Business of Farming Conference: Farm Leasing Basics

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2014 Business of Farming Conference: Farm Leasing Basics

  1. 1. Farm Leasing Basics ASAP Business of Farming Conference, February 22, 2014 Eric Mine – Land Loss Prevention Project All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  2. 2. So You Want to Lease Land for Farming • What will the agreement look like? • What will I be leasing? • How and what will I pay? • Who is responsible for what? And what can I do? • What if I want to end the lease? • Could or should I use a business entity to lease the land? All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  3. 3. What will the agreement look like? -Written vs. Oral -Required contents All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  4. 4. Lease Agreement • Should I have a written lease? – Yes • Could I use an oral lease? – Yes, in some cases. But don’t. • Should I record the lease? – Yes (sometimes required) All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  5. 5. Lease Agreement • What MUST be in the lease? – Identity of landlord – Identity of tenant – Description of land to be leased – Length of the lease – Consideration to be paid – Signatures of parties to be bound • What SHOULD be in the lease? – Everything else you can possibly think of All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  6. 6. Lease Agreements – Writing Required • NCGS § 22-2. Contract for sale of land; leases. – … all other leases and contracts for leasing lands exceeding in duration three years from the making thereof, shall be void unless said contract, or some memorandum or note thereof, be put in writing and signed by the party to be charged therewith, or by some other person by him thereto lawfully authorized. All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  7. 7. Lease Agreements – Writing Required • NCGS § 47-18. Conveyances, contracts to convey, options and leases of land. – (a) No … (iv) lease of land for more than three years shall be valid to pass any property interest as against lien creditors or purchasers for a valuable consideration from the donor, bargainer or lesser but from the time of registration thereof in the county where the land lies, or if the land is located in more than one county, then in each county where any portion of the land lies to be effective as to the land in that county... All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  8. 8. Lease Agreements – Minimum Contents • Purchase Nursery, Inc. v. Edgerton, 153 NC App 156 (2002) – A valid lease contains four essential elements: (1) identity of landlord and tenant, (2) description of land to be leased, (3) a statement of the term of the lease, and (4) rental or other consideration to be paid. All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  9. 9. What exactly am I leasing? - Property descriptions - Length of lease - Use and entry rights All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  10. 10. Property Description -Land -Metes and Bounds -Maps -Buildings -Descriptions -Use -Equipment -Descriptions -Use All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  11. 11. Length of Lease • How long should the lease last? – Short Term – Long Term • Recording requirements • Lease renewal • Early cancellation clauses • Special terms in certain counties; NCGS §42-23 All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  12. 12. Use and Entry Rights • Rights of Way – What’s on the other side of the property? • Right of Entry – When can the landowner come onto the property? • Water Rights – Wells, streams, ponds and other property • Hunting Rights – Who can grant access? All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  13. 13. How and What Will I Pay? -Cash vs. Crop Share -Timing of Payment All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  14. 14. Types of Consideration Cash Lease Crop Share Lease • Pros • Pros – Fixed cost – Risk sharing – Little landowner involvement – Landowner cash inputs • Cons – You bear all risk – Price re-negotiations All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project – Landowner buy-in • Cons – More complicated – More trust required
  15. 15. Types of Consideration, continued Flexible Lease • Hybrid – Base Rent + Bonus = Total • Base rent - $/acre • Bonus - % of yield or revenue All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  16. 16. Types of Consideration – Cash Lease All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  17. 17. Types of Consideration – Crop Share Lease All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  18. 18. Types of Consideration – Flexible Lease All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  19. 19. Timing of Payments • Cash Leases – Typically paid on a certain date • Crop Share – Dependent upon harvest date and marketing • Hybrid – A mixture of the other two (as you might expect) All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  20. 20. Who is responsible for what? And what can I do? - Terms of the lease All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  21. 21. Terms of Lease Will Depend on Negotiation All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  22. 22. Rights and Responsibilities • Land Use • Maintenance • Labor • Insurance • Construction • Damage • Record Keeping All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  23. 23. Rights and Responsibilities • Land Use Limitations – Organic certifications – Conservation practices – Use of additives – Crop limitations – Subleasing and Assignment All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  24. 24. Rights and Responsibilities • Maintenance – What must be maintained? – Who will do maintenance and repair? – Who will pay for maintenance? – Condition of property at expiration of lease • Labor – Will one or both parties provide labor? All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  25. 25. Rights and Responsibilities • Insurance – Hazard and Casualty • Property Insurance • Comprehensive General Insurance – Crop Insurance – Worker’s Compensation Insurance • Limitations on Liability All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  26. 26. Rights and Responsibilities • Construction and Improvements – Removable Structures – Permanent Structures – Compensation for improvements – Depreciation of structures All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  27. 27. Rights and Responsibilities • Damage to leased property – Who will repair? – Who will pay? – Maximum contribution from land owner All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  28. 28. Rights and Responsibilities • Record Keeping – Will you be required to keep records? • • • • Farming practices Additives Expenses Conservation plan – When can land owner request/review those records? – What are the consequences of bad record keeping? All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  29. 29. Rights and Responsibilities • Other Considerations – USDA farm payment agreements – Environmental inspections prior to leasing – FSMA – Arbitration agreements All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  30. 30. What if I Want to End the Lease or Something Goes Wrong? -Notice -Disputes All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  31. 31. Terminating the Lease • Required Notice; NCGS §42-14 – Year-to-Year Leases • Most common • One month prior to end of lease term – Month-to-Month Leases • Less common • One week prior to end of lease term – Week-to-Week Leases • Unlikely • Two days prior to the end of lease term All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  32. 32. Terminating the Lease • Disputes – What if I stay after the lease is over? – What if I can’t complete a harvest before the lease ends? • Special provisions in certain counties; NCGS §42-23 – What if landowner sells? – What if I can’t pay? • Crop Liens • Misdemeanors All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  33. 33. Could or should I use a business entity to lease the land? All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  34. 34. Business Entities • What sort of entities are possible? – Sole Proprietor – General Partnership – Limited Partnership – Corporation – Limited Liability Company • So what’s the difference? – Taxes and Liability All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  35. 35. Business Entities • Advantages of LLC formation – Management plan – Succession planning – Limitation of liability • Must meet certain requirements – Taxation • Disadvantages of LLC formation – Management plan – Yearly filings All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project
  36. 36. Questions? Contact Info: Eric Mine, Staff Attorney Land Loss Prevention Project 1-800-672-5839 www.landloss.org All Rights Reserved 2014 - Eric Mine, Esq., Land Loss Prevention Project

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