Now is a good time to think about cropland rental agreements for the 2014 year. By Iowa law if you wish to terminate your rental arrangement or want to change the terms in your current farmland lease, notice must be given to the other party by September 1. This reminder comes from Melissa O'Rourke, an Iowa State University Extension farm management specialist in northwest Iowa. She is also an attorney.
"For example, if you want to renegotiate your cash rent for 2014 or change any other terms, you can do that now," she explains. If the parties can't come to terms on changes to be made in the lease, either party can serve a termination notice on or before Sept. 1, 2013. Such action would effectively terminate that farm lease effective Feb. 28, 2014. The termination applies whether the lease is a written lease or an oral agreement.
If a current farm lease isn't terminated by Sept. 1, it automatically renews for another year
Of course, a lease can be terminated or modified at any time of year as long as such changes are acceptable by both landlord and tenant. But if the current lease isn't terminated by September 1, it automatically renews for another year on the same terms and conditions of the existing lease.
"There are a couple of changes the 2013 Iowa Legislature made in this law you need to be aware of," says O'Rourke. One thing the legislature did was modify a provision so the law now requires a written termination notice be given on all parcels of land, regardless of size. In the past, the law didn't require written termination notice on parcels of less than 40 acres.
Legislature recently made some changes in Iowa law covering farmland leases
This new change became law July 1, so Iowa Code now requires a written termination notice for leases on all parcels of rented farmland no matter how many acres. There is an exception; if the primary use of a rented acreage of less than 40 acres is for an animal feeding operation, then the written notice requirement does not apply, says O'Rourke.~~~PAGE_BREAK_HERE~~~
Also, the "mere cropper" exception remains in the law. That refers to someone who's hired to plant and/or harvest the crop such as an employee or custom operator. You don't have to provide notice of termination by September 1 if you no longer wish to use their services.
The lease contract is an important part of a good leasing arrangement. Seek advice and counsel of your attorney for answers to specific questions in your arrangement, advises O'Rourke. While oral leases for a term not exceeding one year are enforceable in Iowa, it is recommended that leases be in writing.
The document should meet at least the following minimum requirements: It should be properly signed by both parties; specify a definite period for which the lease is to run; contain an accurate description of the property and state the kind and amount of rent and time and place of payment. Additional items can also be considered when developing a farm lease. For example, soil conservation provisions written into leases are becoming more popular.
Why a written lease? Both parties should be accountable to the lease arrangements they have agreed upon
A written lease is like minutes of a meeting, says O'Rourke. It tells when you met, who was there and what was decided. Written leases make the lease terms more definite and leave less chance for disagreement and misunderstanding. Memories of conversations can be unreliable as people tend to recall only portions of conversations that reinforce their point of view. A written lease protects not only the original parties, but can also protect assignees and heirs in case either party should die.~~~PAGE_BREAK_HERE~~~
A written lease encourages both parties to consider many phases of the lease before the lease period begins. Decisions are made before problems occur. In subsequent years, a written lease provides a basis for changing lease provisions when adjustments are desirable, as well as documentation in case of an IRS audit.
NOTE: A Notice of Termination of Farm Tenancy form, prepared by the Iowa State Bar Association, is generally used by attorneys in terminating leases. This form is available in the leasing section of ISU's Ag Decision Maker website.
You can copy that termination form for 10 cents on a copy machine and fill it out and present the notice of termination to your tenant, or you can pay an attorney considerably more to do so.
Keep in mind by law in Iowa farm leases run from March 1 to the last day of February, unless stated otherwise in a written lease. Termination must be given for cropland by September 1 to be effective the last day of February the following calendar year.
Lease forms can be obtained from the ISU Ag Decision Maker website. For farmland leasing resources, go to the site and look under the section "Whole Farm Leasing", which is file DC-21, to find rental rate survey information, leasing forms, lease agreements and examples of flexible farm leases.