Oral leases on farmland renew automatically on Sept. 10
August 13, 2010
BROOKINGS, SD – Oral farm leases will renew automatically for the next growing season on Sept. 1, unless written notice of intent to terminate or modify the existing lease is given before that date.
South Dakota Cooperative Extension Farm Financial Management Specialist Burton Pflueger said any lease that renews automatically carries the same terms and conditions as the existing lease. Once such notice is given, the existing lease still remains in effect until March 1, 2011, at which time the new contract becomes effective.
These rules apply to both the tenant and the landowner and the only exception is when one party fails to live up to the terms of the original agreement. Pflueger said any landlord or tenant who wants to terminate or modify an existing oral contract must notify the other party by Sept. 1.
“With the uncertainties of expected crop yields and current commodity prices and the effect they may have on economic conditions for this year and for the following crop year, changes in existing leases may be in order,” Pflueger said.
Every year, the South Dakota Cooperative Extension Service receives calls from tenants and landlords who had sought to make modifications to their farm leases but did not provide written notice for termination to the other party prior to Sept. 1, Pflueger said. When wrongful termination occurs and the case goes to court, the injured party is normally awarded a “normal” profit from the land, and sometimes punitive damages.
The date of automatic renewal was changed from Nov. 1 to Sept. 1 several years ago to protect tenants who plant fall-seeded crops such as winter wheat. Sometimes farmers and landlords forget about this change, especially where there are no fall-seeded crops grown or when the agreement is for grassland.
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“It should also be noted that any lease agreement for more than one year must be a written lease if it is to be valid. An oral agreement for two or more years cannot be enforced by the courts,” Pflueger said. “It is best to have all land lease contracts in writing. Having a written lease can prevent a lot of misunderstanding if one of the parties becomes incapacitated or forgets the details of the agreement.”
Pflueger can answer questions you may have on farmland leases. Call him at 605-688-4141.