Does One Mare Create An Ag Lease?

 

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Image via flickr.com by Matt Northam

 

This post is not legal advice. 

As we draw closer to summer, I will start reminding many of you that it’s the time to consider terminating a farmland lease to comply with state law. In many states, farmland leases require more than 30 days notice to terminate without a written lease stating a different requirement. For ag leases in Maryland, this means that notice to terminate needs to be given by June 31. But what makes an ag lease and ag lease?  The Iowa Supreme Court has found that one old mare on six acres is not enough to create an agricultural lease that would require longer notice to terminate the lease.

The Hardens had rented a house and six acres from the Porters for twenty-four years. During this twenty-four years, the two parties never had any written lease. At some point, there was a falling out between the Hardens and the Porters and the Porters filed a notice to terminate the tenancy. In response, the Hardens filed a notice that the lease was a farm lease and required six months’ notice under Iowa law. The Hardens also requested reimbursement for various improvements made to the property over the twenty-four years. At the time the notice was given, the Hardens only had one thirty-eight-year-old mare on the property. Before the falling out the Hardens may have kept cattle and more horses on the property and only downsized to one horse after the falling out.

The district court found that the Porters had complied with the law to terminate the lease and one old horse did not create a farm lease. The Hardens appealed this decision, and the Iowa Court of Appeals reversed finding that one horse created a farm lease. The Porters appealed to the state supreme court.

On appeal, the court looks at the language of the farm lease termination statute to determine if the Hardens fall under it. The notice requirement for farm leases applied to a “farm tenancy” which was defined to be “a leasehold interest in land held by a person who produces crops or provides for the care and feeding of livestock on the land, including by grazing or supplying feed to the livestock.” (Iowa Code Ann. § 562.1A). The court of appeals found this definition did not include a numerical requirement. The court agreed that there was no numerical requirement in the law.

The court found this could interpretation could create odd results, such as backyard chickens potentially allowing an urban lease to become a farm lease. The court looked at the definition of “livestock” in the statute was borrowed from an existing definition of livestock. The law’s intent was to avoid productive farmland going to waste by requiring significant notice to terminate a farmland lease. The court of appeals view would create unreasonable results. Based on all of this, the court found it was proper to include a “primary purpose” test for what is a farm lease.

For those reasons, the court found that keeping a single old horse did not establish the primary purpose the property was a farm. But this decision is on a case by case basis; the court highlights that one stallion on the farm could result in the property being considered farmland.

The dissent points out that he would have considered the lease to be a farm lease. His issue is that the record seemed to reflect that the Hardens kept more livestock on the property and had downsized when the falling out had happened. To the dissent, this including a primary purpose test would impact courts to consider the lease at the start or the end and cause additional litigation.

This decision although in Iowa should remind producers of the importance of developing a written lease.  A written lease would allow the parties to specify how much time is needed to terminate the lease.  This decision reminds us all why developing that written lease early on can solve numerous problems down the road.

References

Iowa Code Ann. § 562.1A (West 2017)

Porter v. Harden, No. 15-0683, 2017 WL 942845 (Mar. 10, 2017).

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