Recent Blog Posts

Peggy Kirk Hall, Asst. Professor, OSU Extension Agricultural & Resource Law Program

A written lease is a valuable tool to use in a farm lease situation, but many farm lease arrangements never progress beyond a conversation and a handshake.    A written lease brings certainty to the farming arrangement by laying out important terms such as lease duration, notice of termination, payment provisions and conservation practices. Verbal farm leases are risky; problems can arise with legal enforceability and disputes over rights and obligations.  For those dealing with a verbal lease agreement, here are a few strategies for protecting interests in the verbal farm lease situation.

Put the verbal lease in writing.  The first recommendation is no surprise; attorneys have long encouraged farmers to use written farmland leases rather than relying on verbal agreements.  But many landowners and tenants are uncomfortable using a written lease, for a variety of reasons.  Consider the following concerns and recommendations for addressing them:

• “We’ve always operated on a verbal agreement and a handshake.”  Transitioning from a long-time verbal agreement to a written lease can be awkward and uncomfortable, and the landowner or tenant farmer who wishes to make the change may be uncertain about how to introduce the change.  To address an awkward transition, consider using a third party to “intervene” and facilitate the process of converting to a written agreement.  Have a farm manager, attorney or accountant explain the reasons for moving to a written agreement and begin the process of discussing lease terms.  Provide the other party with ample time to respond and to consider its own concerns and suggested lease terms.
• “We don’t want everyone to know the terms of our lease.”  Landowners and tenants often express concern that a written farm lease must be recorded in the county recorder’s office, thus revealing private terms such as the price paid for the lease.  In this case, the parties may utilize a provision under Ohio law referred to as the “memorandum of lease.”  Ohio Revised Code section 5301.251 allows the parties to record a shortened form of the farmland lease.  The only provisions the parties must include in a recorded memorandum of lease are the names and addresses of the landowner and tenant, the date of executing the agreement, a description of the leased property, the starting date and duration of the lease and any rights of renewal or extension.   With the recorded memorandum of lease, there is public notice that the lease exists but key terms remain confidential between the landowner and tenant.  The parties can include a term in the written lease verifying their agreement to execute and record a memorandum of lease rather than recording the entire lease.
• “A written lease is overwhelming or too much detail.”  It is true that farmland leases can be lengthy and detailed, although attorneys usually have sound reasons for drafting detailed leases.   Note that the parties can make a gradual transition.  Even a simple lease or a checklist can bring certainty to the relationship by outlining key obligations or providing resolutions if problems arise in the future.  Additionally, there are many good resources that simplify and explain farm lease provisions, and a few good “model” leases for reference.  For helpful resources, visit the website http://aglease101.org .

Pay attention to lease payments and possession.  If the parties can’t convert a verbal lease to a written lease, be aware that one problem with a verbal lease is that it’s not clear when the lease agreement actually begins.  In the event of a dispute, Ohio courts often look to factors such as possession and lease payments to determine the term of the lease.  Two indicators that a farm lease agreement is in place are possession of the property by the tenant coupled with acquiescence by the landowner, or a lease payment made by the tenant and accepted by the landowner.  Both parties should be mindful of these important actions and should maintain records to document these occurrences.

Address financial fairness.  Determining the payment amount for a farm lease is a challenging task, particularly when the farm economy is in flux.  Disagreement over the lease price can quickly end a verbal farm lease relationship.   Thorough research and equitable approaches can maintain the lease relationship by ensuring a financial arrangement that is responsive to the market and fair to both parties.   OSU’s Farm Management website at http://aede.osu.edu/programs-and-research/osu-farm-management contains data on farmland values and cash rental rates.  Consider a flexible cash lease to accommodate economic changes; information on flexible cash leases is also available through OSU’s Farm Management website and at http://www.aglease101.org.

Maintain records of the lease relationship.  Good records that document the leasing history can help establish a “course of dealing” between the parties.  While a written farm lease is preferable, a record of how the parties managed the lease or handled issues in the past can be a useful point of reference for ensuring consistency in the relationship.  If there is litigation over the lease, a court might rely on proof of the parties’ course of dealing to help resolve an issue.  Both parties should maintain thorough records of payments, agreements, farm management practices, soil sampling, nutrient applications, improvements and any other facts or data that establish the details of the leasing relationship.

Maintain communication.   Don’t underestimate the power of good communication between the leasing parties.  A landowner can provide a tenant with valuable certainty by keeping the tenant informed on potential changes with land ownership or financial management.  Tenants can keep a landowner apprised of the condition of the farm property by providing reports on a regular basis, especially in the case of an absentee landowner or a crop share lease.  A report that includes pictures and a brief summary of improvements made,  management practices adopted or crop share calculations may go a long way toward ensuring a solid leasing relationship.

A written and comprehensive farm lease is a valuable tool for farmland owners and tenant farmers alike; those who still rely on verbal farm leases should carefully consider making a transition to a written lease.  Parties that continue to use a verbal farm lease face legal and financial risks, but can adopt some practices to help protect the verbal farm lease situation.  For resources and examples of written farm leases, see http://aglease101.org.

A new rule establishing general regulations for improving the traceability of U.S. livestock moving between states became final on December 20, 2012 and will become effective on March 11, 2013.  The USDA has established the animal disease traceability rule to help target when and where animal disease occurs and to facilitate a rapid response that should reduce the number of animals involved in a disease investigation.  According to USDA Secretary Tom Vilsack, “The United States now has a flexible, effective animal disease traceability system for livestock moving interstate, without undue burdens for ranchers and U.S. livestock businesses. The final rule meets the diverse needs of the countryside where states and tribes can develop systems for tracking animals that work best for them and their producers, while addressing any gaps in our overall disease response efforts.”

The animal disease traceability rule differs from the National Animal Identification System launched by the USDA in 2006 and later discontinued for lack of voluntary participation by producers.   An important guiding principle for the new rule is that it is state-driven. The traceability framework will be owned, led and administered by the States and Tribal Nations with federal support. The rule proposes to provide maximum flexibility for the States, Tribal Nations and producers to work together to find identification solutions that meet their local needs and to maintain traceability data at their discretion. The intent of the rule is to address only those animals moving interstate and to encourage the use of low-cost technology.

We will take a closer look at the rule in the next few months, but for now will share a few important notes about the rule:

• Unless specifically exempted, livestock moved interstate must be officially identified and accompanied by an interstate certificate of veterinary inspection or other documentation, such as owner-shipper statements or brand certificates.
• The use of brands, tattoos and brand registration will be accepted as official identification when accepted by the shipping and receiving States or Tribes.
• Backtags remain an alternative to official eartags for cattle and bison moving directly to slaughter.
• All livestock moved interstate to a custom slaughter facility are exempt from the regulations.
• Chicks moved interstate from a hatchery are exempt from the official identification requirements.
• Unless moved interstate for shows, exhibitions, rodeos, or recreational events, beef cattle under 18 months of age are exempt from the official identification requirement (traceability requirements for this group will be addressed in separate rulemaking)

USDA will work with states to implement the rule in the coming months.  For more information on the new rule, visit http://www.aphis.usda.gov/traceability/.

A claim that the Ohio Department of Agriculture’s (ODA) anhydrous ammonia regulations are unreasonable and fail to protect public health and safety has again been rejected by the courts.  A recent decision by Ohio’s Fifth District Court of Appeals concluded that the challenge by Sharon Township’s Board of Trustees in Medina County failed to establish a valid legal claim.

The case raised considerable controversy in Sharon Township, where the owner of South Spring Farms requested ODA approval to install a 12,000 gallon anhydrous ammonia storage tank.   Ohio law grants ODA the authority to adopt rules concerning the handling and storage of anhydrous ammonia and other fertilizers and also prohibits any local regulation of fertilizers.   ODA created anhydrous regulations in the late 1970s; those regulations require ODA approval of the location and design of a stationary ammonia system.

ODA approved South Spring Farms’ application in 2010 and granted a permit for installation of the tanks.  Sharon Township filed a lawsuit against ODA, asking the trial court to grant an injunction prohibiting the ODA from permitting the installation of anhydrous storage tanks “until the ODA established regulations which would reasonably protect the health, safety, and welfare of people and property which can be reasonably foreseen to be exposed to the toxic and deadly effect of an uncontrolled release of this dangerous material, anhydrous ammonia.”

The legal basis for the denial of Sharon Township’s request for an injunction by both the trial and appeals courts concerns the issue of whether there is a “real and substantial controversy” that necessitates injunctive relief by the court, rather than “an opinion advising what the law would be upon a hypothetical state of facts.”  The Court of Appeals could not find any support for Sharon Township’s claim that the ODA regulations are unreasonable or fail to protect public health and safety.  Without such support, the court concluded that there was no controversy it could resolve.  Granting the township’s request for an injunction would thus amount to “judicial legislation,” said the court.

The case is one that raises questions about the relationships between agriculture and its surrounding communities.  Are communities becoming less willing to tolerate agricultural activities, even though Ohio laws are often set up to support and encourage agriculture?

The use of anhydrous ammonia is a routine practice farmers have engaged in for several decades, yet it upset a surprising number of local leaders and residents in this instance.  The large size of the tank may have been a factor, as well as the extent of non-farm residents in the area.  In addition to the possibility of a leak or spill, concerns raised by the community included proximity to many residents, fear of tampering by methamphetamine producers, an earlier chemical spill by the farm and lack of requirements for fencing.  Whether these are real or perceived threats, the fact that they were raised so strongly and taken to the court of appeals gives us cause for concern.

The case is Bd. of Twp. Trustees Sharon Twp. v. Zehringer, 2011-Ohio-6885 (Dec. 28, 2011).

Ohio attorneys involved in AALA's 32nd annual conference

The American Agricultural Law Association (AALA) has hosted another excellent educational event, recently concluded on October 22 in Austin, TX.  Approximately 250 attorneys, law students and professionals across the United States attended the conference.  Ohio attendees were visible on the program in several ways, including:

• Paul L. Wright of Wright Law Co., LPA presented on “Estate Planning in a Climate of Change.”
• Robert Moore of Wright Law Co., LPA presented on “Partnerships:  the Neglected, the Disaster and the Desirable Plan.”
• Peggy Hall of The Ohio State University presented on “Animal Welfare Litigation Impacting Livestock Producers: Emerging Issues.”
• Larry Gearhardt of Ohio Farm Bureau Federation received an AALA Excellence in Agricultural Law award.
• Peggy Hall of The Ohio State University was inducted as the AALA’s President Elect.

Nashville, Tennessee is the site of the AALA’s 2012 conference, which will take place October 19-20.  For more information on the AALA, visit http://aglaw-assn.org.