Verbal farm leases: Understanding the legal risks

For generations, a handshake has been enough to seal many farm rental agreements. While those arrangements are built on trust, they can also create confusion and legal disputes when expectations aren't clearly defined or circumstances change.

In this episode of Straight Talk with NDFB, the Harvesting Legal Knowledge series continues with NDFB CEO and Executive Vice President Jeffrey Missling and attorneys from Ohnstad Twichell Law Firm.

The conversation explores the legal risks and practical challenges of handshake rental agreements. Ohnstad Twichell attorneys David Piper and Tiffany Findlay discuss when verbal lease agreements may be enforceable, the common issues that arise between landowners and tenants, and why putting rental terms in writing can help protect both parties.

Whether you're a landowner leasing farmland, a producer renting ground, or planning for the next crop year, this episode offers practical guidance on reducing risk and avoiding misunderstandings before they become costly legal disputes.

Links

To watch the entire episode:

Harvesting Legal Knowledge video

Contact our host, Emmery Mehlhoff at emmery@ndfb.org

Disclaimer: The statements made and information provided in this podcast are for educational and informational purposes only. The statements do not constitute legal advice, nor are they intended to create an attorney-client relationship. Every situation is unique, so you should not rely on any statements in this podcast as a substitute for personalized legal counsel. Before taking action or making any decisions which may affect your legal rights and obligations, you should consult with an attorney licensed in your jurisdiction.

Transcript

[Straight Talk theme]

[00:10] Emmery: Is a handshake enough to seal a lease? Welcome to Straight Talk with NDFB. I am your host, Emmery Mehlhoff. Farming and ranching are tough businesses, and legal issues can just complicate things. 

That's why this season features Harvesting Legal Knowledge, a conversation between NDFB and the Ohnstad Twichell law firm. NDFB CEO Jeff Missling and the attorneys at Ohnstad Twichell break down key legal topics impacting farmers, ranchers, and ag businesses every day. 

In this episode, we're talking about handshake rental agreements. For generations, many farm leases have been built on trust, a conversation and a handshake. While those agreements work well, they can also create confusion and costly disputes when expectations aren't clearly defined or circumstances change. As always, if you have a specific legal question, be sure to consult an attorney who can address your situation. Let's get into the episode.

[Straight Talk stinger]

[01:15] Jeff: Welcome to something we're calling Harvesting Legal Knowledge. It's a collaboration between NDFB and Ohnstad Twichell law Firm. My name is Jeff Missling. I'll be kind of serving as your host. I serve as the executive vice president and CEO of North Dakota Farm Bureau. And with us today, we have Tiffany Findlay and David Piper. So welcome, folks.

Leasing and tenant issues. Hear a lot of questions about this as well. And what are the downfalls of having a handshake lease? This. This might be obvious, but. And there are some out there, I can't believe this. But there are still people who agree to things on a handshake, which is great. But when it comes to the legal side of it, what are some of the pitfalls or downfalls of that?

[02:00] Tiffany: And I mean, it's. It's great when farmers and tenants, you know, and the landlords can have the handshake deal, but part of our job is to come in when there are issues. So we see the issues and we try to advise our clients on what maybe not to do. So some of those issues that we do primarily see, you know, it. It becomes an issue when, one thing I should maybe point out right away, David, you brought up the fact on when does the lease start and when does the lease end? 

You know, a lot of people assume that a lease should begin January 1st or March 15th, when planting begins and it ends December 31st, or when the crop comes out of the ground. Well, what happens when a tenant or even the landlord passes away or attempts to transfer that land in the middle of the lease or, say, right at the end of the year? Those things can become a Little bit tricky to figure out, well, what rights does the tenant have to get the crops out of the ground and who's getting the rent payments and who has the right to do fall tillage or not? Is it the previous tenant or is it who's farming it next year? There. There's a lot of little nuances that can come where a written lease can be helpful.

[03:21] David: And like Tiffany said, it's fantastic when you know, you've had those long relationships and you farmed next to someone or they've rented your land for decades and you know you can trust them and they know they can trust you to do the right thing. I, I feel like we're getting more and more in this day and age where that's not the case anymore. For whatever reason. It just, it's just not the case. I, I don't want to be like, you know, the technology is bad, but like, there's so much less human interaction that, you know, we don't establish that connection with our neighbors and our, and our tenants and our landlords. 

And so it's, it, it becomes more of a transaction than a relationship and a partnership. And so regardless of how great your relationship is in your partnership, you still need to have something in writing so that both parties know what the expectation is when something doesn't go to plan. Doesn't mean that someone intentionally did something to harm the other party. It doesn't necessarily mean that someone's, you know, acting with malice towards the other person. 

[04:25] Life happens, weird things happen, and we can't plan for all of them. But if we've got an agreement that says here are the fundamental terms that we can agree on, at least gives the court a starting point and the parties a starting point. I wish every landowner could have a handshake deal with their tenant, from a, you know, from a person to person standpoint. That's just not realistic anymore. And especially when you talk, when you think about, okay, you know, grandpa, grandpa bought the land 80 years ago, he passed it on to son, and now grandson has it and, you know, grandson is going to be farming the neighbor's land and he's 80 years old, he didn't have any kids or he does and they don't farm. 

And now this new tenant, who is two generations removed, doesn't have anything in common with the neighbor, wants to farm his land. Like you've got different priorities. You don't, you don't have a relationship with this guy, just is maybe his dad and his grandpa, and maybe that's worth something. But everybody's different. You don't know what's important to him. He doesn't know what's important to you. 

[05:34] There's bad apples in every tree, whether that's landlord or tenant. That's reality. So when you're dealing with someone new, especially, you need to have that in writing. Yeah. And pay a couple hundred bucks to have a lease done. 

It's like insurance. You don't want to have to use it, but it is necessary. Um, if you get in a car crash and don't have insurance, you know, you're going to be in a world of pain financially on top of physically, if... Especially if you cause, you know, damage to someone else's vehicle or to their person. And the lease is kind of the same thing. It's. It's insurance to make sure that you are protected if something goes wrong. 

[06:14] You know, Tiffany made a great point. If you have a written lease or an oral lease, does it, does it start on January 1st or does it start on March 15th or some other date? What happens if it starts on January 1, goes to the end of the year, and then we get a lot of rain in the fall, things don't dry out, the crops don't dry out, and we get snow? You can't get your crop off. So now you've got thousands of acres of corn or whatever sitting in the field December 31st, you can't get it off. You know, does your lease account for that? Does your handshake deal account for that? What if tenant is saying, hey, I'll get it off? And, you know, it's their last year, so they're not renting from the next year. You got someone else lined up. Does that new tenant get to come in in March 15 and take their crop off so they can plant theirs? I don't know.

[07:07] What does the lease say? We don't have a lease. Okay. Well, you know, what happens if it doesn't dry out 'til April or May? You know, there's all those things that. Those are the things we can plan for. There's gonna be some things we can't plan for. And when those come up, we deal with them. Right. Landowners deal with them, tenants deal with them. But those kind of things we can, we can plan for. You can have some language in there about, you know, okay, they get reasonable time to get their crop off. 

And there's other, you know, pitfalls, too, as far as, you know, fall tillage, who's responsible for it, good husbandry, how much herbicide you can use, what kind of herbicide you can use. That's important to some landowners and it should be. It's their land. You know, they have the final say of, of how it's used. But if you don't have that in a written lease and that's not discussed orally and your tenant's using something else, technically you can't stop them. You know, you didn't tell them they couldn't use it. There's no agreement. They can't use, you know, X, Y or Z. 

[08:04] And who mows the ditches, how often the ditches mowed, you know, those kind of things can. Can they run cattle on the, the fields? They have corn stalks that are taken off in October, November, December or, or not. And, and that kind of stuff. So those types of things are things that we can easily address by having a conversation with our client about what's important to you. Are there any restrictions? 

And then, you know, it's also important to have, because no one ever goes into a contract thinking I'm going to breach this or they're going to breach this. Everyone goes into it, hopefully with good faith, like this is going to work out, it's going to be good for me, it's going to be good for them. But you know, do you have a clause in it that says if there's an issue and it goes to court, the winning party gets their attorney's fees paid? Maybe? If you're the landlord, I would probably want that in most scenarios. Sometimes you might not. But again that's going to be kind of fact specific, be fact dependent. 

[09:03] You know, we got to talk through with our clients what they want to do, what they want out of this. How much protection do they want, you know, versus you know, I really trust this guy. This guy specifically has farmed my land for 30 years. I don't think it'll ever get to that point with him. So let's, let's just get all the terms we need in there and not make this, you know, buttoned up to the, just as high as it can go. But with a new tenant you might want to consider that because it's a trial run, it's a new relationship. And I would say trust and verify, right? You got to, you can trust them. But, but that lease will verify what the terms are and make them earn that trust too.

[09:46] Tiffany: And that's a good point too is, is once you get to the point of having a written lease with a good long term tenant, it's also very important to review and renew the lease. You know, I, I've seen it a couple of times actually where farmers will bring their or, or say the landlords will bring in their lease that's been renewed for six, seven, ten years and we find out that the legal description or, or the property description on that lease is wrong. The tenant's been paying the wrong portions of rent or they've been farming land that wasn't ever supposed to be farmed by them. You know, it's important to make sure that, that not only do you have everything written down and have an agreement with, with what should be happening, but also making sure that what you have written down is continuing to be accurate. Throughout the years of the lease.

[10:45] Jeff: We've covered a lot of good information. Tiffany David, thank you so much for your time. If folks want to reach out to you, how do they get a hold of you or in touch with you here at Onsted Twitchell, Just go to the website.

[10:56] David: Yeah, we can go to ohnstadlaw.com [spells out] o h n s t a d l a w.com or they can call us 701-282-3249. That's for the West Fargo office.

[11:08] Tiffany: Hillsboro office, which is where I'm primarily located. Our phone number is 701-636-5700. We're also easily to communicate by email or if you want to stop into one of our offices, we, we have a plethora of offices now, primarily our West Fargo office, our Hillsboro Casselton office, and we even have locations in Page, North Dakota and Maddock, North Dakota.

[11:32] David: Not, not fully staffed all the time in those smaller offices. But we are there at least once a month. So you can call our office, find out when we're going to be there and you know, pop in and pop in and say hi. 

[11:44] Jeff: Sounds great. Thank you both.

[Straight Talk stinger]

[11:47] Emmery: You've been listening to Straight Talk with NDFB, our Harvesting Legal Knowledge season. To watch the entire interview with Jeff and Ohnstad Twichell, please click the link below. If you have any questions, contact us at emmery@ndfb.org.

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