Published in the Firelands Farmer on Monday, September 2, 2013
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By: Mark Coriell
Every farmer has come across a farm cash lease at some point in his career. In many cases, it’s a relatively straightforward document that sets forth the number of years of the term, the amount to be paid per acre, and perhaps a few other more specific terms pertaining to that particular farm. More complex leases might include rights of first refusal or even options to purchase. Many landowners and tenant farmers will even take the appropriate step to have signatures notarized. Then, believing that the transaction is finished, the tenant farmer will place the lease in a desk drawer someplace until it’s time to renegotiate – but should there be another step?
A tenant farmer who is in the process of negotiating a farm lease should always consider having a memorandum of lease recorded in the county recorder’s office. A memorandum of lease is simply a statement of the name of the tenant, the name of the landowner and the length of the term of the lease, i.e., the amount of rent doesn’t have to be made public.
Why take that extra step?
Consider the following example: Suppose a landowner enters into a 5 year lease with a tenant farmer. Suppose further that, after 2 years, the landowner gets an offer to sell the land that he can’t refuse and decides to sell the farm. If the buyer of the land doesn’t know about the lease when he purchases the land (or believes it’s only a year to year lease), the tenant farmer can be forced off the property and will lose out on the final 3 years of the lease. The ejected tenant could always try to sue the seller, but he won’t get back on the land.
Had the tenant farmer recorded a memorandum of lease, the buyer of the land would have been deemed to have known of the longer term at the time of the purchase, meaning; the farm tenant could better enforce his right to remain on the land for the final 3 years of the lease term.
A farm tenant might say: “My landowner will never sell his farm – I’ve got nothing to worry about.”
That’s frequently true, but it’s also true that (unfortunately) landowners sometimes pass away during the term of a farm lease. In that case, the farm tenant might not have the same relationship with the heirs as he did with the original landowners. The memorandum of lease protects the farm tenant when the heirs eventually want to sell the farm or even farm it themselves.
In sum, for very little cost, farm tenants can avoid future headaches and save a lease that might otherwise be in jeopardy by recording a memorandum of lease at the conclusion of the negotiations.
Mark Coriell is an attorney at Laycock & Coriell in Norwalk. He practices primarily in estate planning, business transactions, real estate, elder law and probate. This article is intended as general information only and may not be construed as legal advice.