Are you Updating an Indiana Farmland Lease?
Gerry Harrison, Extension Economist and Member Indiana Bar
It has been said, “If you do not use a written rental agreement, and you haven't had a problem, you are leading a charmed life.” What are the rights of a tenant and the duty of a landlord concerning required notice to terminate a lease? Should you deliver a notice to quit if you want major changes in a farmland lease or rental agreement?
If your farmland lease is not in writing, there may be confusion about rights and responsibilities when there is a need to terminate a lease or renegotiate. While a tenant may feel a need to lower a rent or to shift cost in a share lease, a landlord may be opposed to a rent reduction. Your landlord may be looking for and offered a higher rent from a new tenant.
If your farmland lease is in writing it probably spells-out a notice requirement if the landlord or tenant wishes to terminate the lease. A lease or rental agreement may be for a stated term (typically one year) for which no notice is required under an Indiana term-lease law.
Ample advance notice is a good idea when a lease change is needed or planned—especially from a tenant's business management point of view. Your tenant may need to replace land if a new lease cannot be renegotiated with a landlord. Also, the tenant may do fall activities for the next year's crops.
In Indiana, if no other provision applies, a notice to quit may be timely if delivered before the end of November. This timing is based on a three month advance notice requirement in the Indiana law for year-to-year leases. End of the lease year may be presumed to be the last day of February according to a Midwest custom, but this date is not part of Indiana statutes. Facts, in a specific situation, may support a year-end date that makes a November notice tardy.
Landlords may hesitate to give or agree to a late summer or early fall notice for a lease termination. A cash-rent landlord may be waiting for a final payment. And with a share lease, the landlord may wait until the crop is harvested. Disagreements arise over amount of rent and other leasing arrangements and events such as sale of the land or death of the landlord. These events normally do not terminate a lease.
Farmland leases may present income and estate tax issues, not just level of rent or various lease term concerns. Many landlords and tenants may be well advised to seek legal and other professional counsel for a farmland lease including a lease or rental arrangement best suited for the landlord and tenant. More information is in "Legal Aspects of Indiana Farmland Leases and Federal Tax Considerations" online under "Legal Affairs" at: http://www.ces.purdue.edu/extmedia/agecon.htm. Lease forms and other leasing information are also available at this site under "Farm Management."
A source of data for cash rents and land values is the Purdue Agricultural Economics Report (PAER). The August 2006 report on the annual Indiana land value and rent survey is online at: <http://www.agecon.purdue.edu/extension/pubs/paer/>. At this site you may subscribe to the PAER for a free electronic delivery. U.S. Mail delivery is $12 per year with a check payable to Purdue University sent to Gerald A. Harrison, Purdue University, Dept of Ag Econ., 403 West State St., West Lafayette, IN 47907-2056. Gerry will take questions by phone (765) 494-4216 or toll free 1-888-EXT-INFO, ext. 44216 or E-mail: email@example.com.
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