Having a well-written farm lease is vital in today's farm rental marketplace. The purpose of this article is to provide tips to consider when constructing a cash farm lease in Illinois. Landowners and farmers can find farm lease templates online. Commonly used lease templates in Illinois are available at the University of Illinois Farmdoc website (farmdoc.illinois.edu/agricultural-law). Both the landowner and farmer should want a written lease to protect their interests and should seek professional legal advice before signing the contract. This article is meant only for educational purposes and is not exhaustive or to be considered legal advice.
Hire an Attorney
Hiring an attorney to help construct your farm lease is vital to the success of your farm. Templates are generic and not specific to your farm and situation. An attorney with agricultural experience will help you avoid pitfalls associated with leasing your land, which could save you legal expenses in the future.
Protect Your Identity
Lease templates often include a space for the parties to provide their tax identification numbers. There are reasons why the parties in the lease need to share tax numbers; however, leases can end up being passed around by different people, physically lost, stolen by hackers, or sent to the incorrect email address. Sharing your tax ID on the lease form may not be in your best interest.
Legal Description of the Property
The landowner can find the legal description for the farm on the deed, which a licensed surveyor crafted. Use an exact copy of the legal description when identifying the property. Have your attorney review your legal description for errors. Disputes can arise over property boundaries and acreage in the lease.
Length of Tenure
When livestock farms were common, it made sense to have lease terms run from March 1st to the end of February. For cash grain farms, it has become more common for leases to run from January 1st to the end of December. This change can help avoid conflict should an existing tenant be terminated, as it gives the new tenant more time to prepare the farm for planting.
Unneeded Information
Legal experts design generic lease forms to cover various leasing methods and scenarios, some of which do not pertain to your farm. Have your attorney customize your lease for your farm. This will remove the unnecessary information.
Look Over Your Duties Carefully
Read your lease duties carefully. Parties sometimes sign lease agreements without a clear understanding of these duties. For example, many templates include wording for the landowner to provide limestone for pH adjustments, but this duty now commonly falls on the farmer.
University of Illinois provides recommendations for maintaining optimal soil test levels of phosphorus, potassium, and soil pH. Landowners can include university-recommended levels for these fertilizers and lime in the lease, which the farmer is responsible for maintaining. Landowners should be aware of these recommendations or hire someone to review them on their behalf and require their farmers to provide soil test records.
The duties of farmers in lease templates are vague. Consider the responsibilities carefully and provide specific details. If necessary, request more detailed information about the responsibilities outlined in the lease, including conservation practices and the storage of chemicals. Some leases specify that the farmer co-insure the landowner against liability if the farmer's actions cause damages to others. Landowners can require or prohibit specific farm practices, which should be detailed in the lease contract. Farmers should be specific about what they are willing to provide.
Conservation reserve program (CRP) waterways need to be respected as part of the duties. Some farmers' tillage and chemical programs can reduce and damage CRP areas, and these areas should be monitored and repaired. As the maintenance of the CRP (mowing) constitutes an additional expense for the farmer, the owner should consider including a provision for compensation within the contract.
Guaranteeing Payment
Many leases still require an initial lease payment in March of the production year, followed by another in the fall to cover the remaining rent. However, lease payment due dates range from 100% payment before planting to 50% upfront. If the landowner is concerned about payment, your legal advisor will have suggestions, such as the Illinois state-prescribed “Landowners' Lien,” as per the state's compiled statutes (735 ILCS 5/9-316) (from Ch. 110, par. 9-316) or other remedies such as a bank guarantee letter.
Terminating the Lease
Both parties should be clear about the requirements for terminating the lease. Landowners are reluctant to inform a farmer about a non-renewal. Harvest season may not be the best time to terminate, as planning begins before harvest.
Other Considerations
Landowners should require yield reporting, which the farmer can prove yields through a combination of elevator receipts, combine harvest records, and farmer-reported crop insurance yields. Yield records are crucial for understanding the farm's performance.
FSA Form 578 contains acreage information and maps showing crop locations. Providing copies to the landowner may be required. Acreage should closely match the harvest combine records and contracted acres. Artificial Intelligence (AI) and other information generated by modern crop production on farms are expanding rapidly. Landowners should consult legal professionals on the handling of information disclosures.
Read the lease carefully before signing. Requiring initials on each page provides evidence that both parties have reviewed and acknowledged the content of the entire document. Two- and three-year leases are standard; however, either party may be disappointed by changes in grain markets over time. Renegotiating a new contract annually or utilizing a flexible lease can help mitigate issues surrounding changing economic conditions. Extensions can lead to a cursory review, missing errors, or needed changes.
Kevin Brooks is a Commercial Agriculture Educator with the University of Illinois Extension in Havana, Illinois, and holds an Illinois Managing Broker License. Farmers and landowners can contact Brooks for further information at kwbrooks@illinois.edu. Search for other articles at https://extension.illinois.edu/blogs/farm-coach.
University of Illinois Extension develops educational programs, extends knowledge, and builds partnerships to support people, communities, and their environments as part of the state's land-grant institution. Extension serves as the leading public outreach effort for University of Illinois Urbana-Champaign and the College of Agricultural, Consumer and Environmental Sciences in all 102 Illinois counties through a network of 27 multi-county units and over 700 staff statewide. Extension’s mission is responsive to eight strategic priorities — community, economy, environment, food and agriculture, health, partnerships, technology and discovery, and workforce excellence — that are served through six program areas — 4-H youth development, agriculture and agribusiness, community and economic development, family and consumer science, integrated health disparities, and natural resources, environment, and energy.