New lease termination law applies to farm lease landlords
Lawsuits over late terminations of farm crop leases might reduce after a new law in Ohio takes effect on July 21, 2022. The law will affect situations where the parties in a farm crop leasing arrangement have not addressed a date or method for terminating the lease--typically verbal leases, although a written lease might also fail to address termination. A landlord in those situations who wants to end the crop lease will have to do so by delivering a written notice of termination to the tenant operator by September 1. A late attempt by the landlord to terminate the lease after September 1 would not be effective and the lease would continue for another crop year, although a tenant operator can choose to agree to accept a landlord's late termination.
Why the new law?
It's been common practice in Ohio for landlords and tenants to enter into a simple farm lease arrangement, usually verbal, that repeats from year-to-year with the only term up for discussion sometimes being the rental amount. Other important leasing details are overlooked, such as when the lease ends and what one party must do to terminate the lease. The lack of these details is especially problematic when the land changes hands due to a sale or a landlord's death, or if another operator tries to "bid up" the leasing amount. Without any termination notice provisions, the landlord might try to terminate the leasing arrangement in late Winter or early Spring, after the tenant operator made investments on the belief that the lease would continue for another crop year. f the operator stands to lose investments and income, litigation is the likely outcome and a court will decide if the landlord attempted to terminate the lease "too late." We'e seen many cases like this in Ohio.
Ohio's new law aims to reduce farm lease termination conflicts by requiring the landlord to give advance notice of the intent to terminate the lease. A termination by the landlord by September 1 should provide the operator with sufficient notice that the lease is not continuing, keeping the operator from making post-harvest and end-of-year investments for the next crop year. This is a common law in other states, and Ohio is one of the last states in the Midwest to enact this type of "statutory termination date" for farm leases.
New law highlights the importance of a written farm lease
We always encourage parties to put their farm lease agreement in writing. A written farm lease can detail important terms such as termination, preventing uncertainty in the future. A written lease also complies with Ohio's Statute of Frauds. That law requires a farm lease to be in writing, meaning that verbal leases aren't automatically enforceable in a court of law. Due to the Statute of Frauds requirement, parties to a verbal farm lease must convince the court that their lease deserves an "exception" from the law and if the exception is granted, would have to prove the terms of their verbal agreement. Verbal leases are always at risk of non-enforcement and disagreement over the terms of the lease.
Using a written lease, the parties may agree to their own termination procedures and dates and the statutory termination law would not apply to their leasing arrangement. The law is simply a default for those crop leasing situations that do not address termination.
Details of the new law
We've developed several questions and answers that help explain the new law, available here and in our newest Law Bulletin, Ohio’s New Statutory Termination Date for Farm Crop Leases, available on farmoffice.osu.edu.
What farm leases are subject to the new law?
The law applies to both written and verbal “agricultural lease agreements” that address the planting, growing, and harvesting of agricultural crops. The law does not apply to leases for pasture, timber, farm buildings, horticultural buildings, or equipment.
What if a lease already addresses termination?
The new law only applies when a leasing arrangement has not provided for a termination date or a method for giving notice of termination. If the landlord and tenant operator have addressed these provisions in their leasing situation, the provisions are unchanged by the law and continue to be effective.
When is the termination effective?
If a landlord gives notice of termination in writing by September 1, the law states that the lease is terminated either upon the date harvest is complete or December 31, whichever is earlier. However, the law allows the parties to establish a different termination date if agreed to in writing.
How must a landlord give notice of termination?
The landlord must give the notice in writing and deliver it to the tenant operator by hand, mail, facsimile, or email by September 1. The law does not require using specific language for the notice, but we recommend including the date of the notice, an identification of the lease property, and a statement that the lease will terminate at the end of harvest or December 31, 20____ unless the parties agree in writing to a different date.
What if a landlord terminates after September 1?
Unless the leasing arrangement provides otherwise, a termination delivered by the landlord after September is not effective and the lease would continue for another period. However, the tenant operator could agree to accept the late termination. If so, the parties should both sign a termination date agreement.
Can a tenant terminate a lease after September 1?
A tenant operator is not subject to the new law and can terminate a lease after September 1 unless the leasing arrangement provides otherwise.
Help with farm leases
Our farmland leasing library contains several resources about the legal aspects of farm leases. We also address the economic side of farmland leasing with data on cash rents and farmland values, custom rates and machinery costs, and enterprise budgets. If you need assistance finding an agricultural attorney who works with farm leases, we can help with that too; contact us by email at email@example.com. We'll do our best to help you reduce the uncertainty and risk of your farm leasing arrangement.