Farm Leasing Arrangements July 2014 - Iowa State University

100 Pages·2009·5.4 MB·English

Farm Leasing
Arrangements
July 2014
The Farm Leasing Arrangements booklet offers many
farmland leasing publications and resources in a single
document. It is designed for use by farmland owners,
tenants, and agricultural professionals.
The book complements farmland leasing meetings, the
Farm Leasing Arrangements online course, and provides a
comprehensive set of current leasing publications.
Table of Contents

Improving Your Farm Lease Contract 3
Iowa Farm Leases – Legal, Economic, and Tax Considerations
(footnotes not included) 13
Reducing Nutrient Loss: Science Shows What Works 26

Surveys
Farmland Value Survey (Iowa State University) (2013) 30
Farmland Value Survey (Realtors Land Institute) (April 2014) 35
Cash Rental Rates for Iowa 2014 Survey 37
Iowa Farmland Rental Rates, 1994-2013 (USDA) 49
Farm Building Rental Rate Survey (North Central Farm
Management Extension Committee) 50
Iowa Farm Custom Rate Survey (2014) 52
Survey of Iowa Farm Leasing Practices 54

Worksheets
Computing a Cropland Cash Rental Rate 62
Flexible Farm Lease Agreements 66

Data
Cash Corn and Soybean Prices (July 2014) 70
Iowa Corn and Soybean County Yields 72
Estimated Cost of Crop Production in Iowa – 2014 76
Historical Costs of Crop Production 89
Iowa Production Cost Report (Bi-weekly June 2014 report) 91

Example Written Forms
Iowa Cash Rent Farm Lease (Short Form) 92
Notice of Termination of Farm Tenancy 95

Appendix
Leasing Glossary 96
ISU Extension Farm and Campus Farm Management Specialists 99

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color,
national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited
bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of
discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW,
Washington, DC 20250-9410 or call 202-720-5964.

Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of
Agriculture. Cathann Kress, Vice-President for Extension and Outreach, Iowa State University of Science and Technology, Ames,
Iowa.
Improving Your Ag Decision Maker
Farm Lease Contract
File C2-01
A guide to help you better understand the business of farmland leases
Importance of Leasing Many young farm families cannot afford to purchase
More than half of Iowa’s farmland is rented to tenant farmland because they do not have enough capital
operators. In parts of central and northern Iowa half for a down payment, or the income will not be
to two-thirds of the land is tenant-operated. On the suffi cient to meet the fi nancing payments. Young
other hand, in south central and southeast Iowa, families often have labor, some operating capital,
slightly less than one-half of the land is farmed by machinery and management ability that they wish to
a tenant. use in a farm business to produce income for living
expenses and future investment or debt reduction. If
The trend over the past several decades has been they are not in a position to purchase land, they can
for more of Iowa’s farmland to be leased rather rent land and build equity for a future purchase. A
than operated by its owners. In many cases, retired common trend is to operate a combination of owned
farmers or their heirs wish to continue to own farms, and rented land. This allows the operator to have a
but do not want to operate them. Farmers with home base with machinery and grain storage while
limited capital also fi nd that they can more easily leasing additional acres.
reach an effi cient scale of operation by renting rather
than owning. Many individuals or institutions that own land
are looking for someone to farm it to provide a
Leasing farmland involves a business agreement return on their investment as well as maintain its
between the owner and the operator. A farm lease productivity. Land ownership can also provide a
is a legal instrument that describes that agreement. hedge against infl ation through appreciation in
The lease provides the basis for combining the land values over time. Many landowners are former
landlord’s and the tenant’s resources of land, labor, farm operators who have retired and who wish
capital, and management to effi ciently produce to retain their investment in the land for security,
farm commodities. retirement income, income tax deferral, and
sentimental reasons.
Variations in leasing arrangements occur because
of the differences in the productive capacity of the
Common Types of Leases
land and improvements, the contributions made by
The four most common types of leases used in
each party, and the personal goals of the tenant and
Iowa are the fi xed cash lease, the fl exible cash
owner. Rental terms need to be revised periodically
lease, the crop-share lease, and the custom farming
to keep them up to date. The lease agreement also
contract. The common terms of these leases are
protects the legal rights of all parties involved.
described below.
Reasons for Farm Leases
Fixed Cash Lease
Land is an expensive resource. A large capital Under a fi xed cash lease the tenant pays a given
investment is required to purchase enough land to amount of cash rent per acre per year for the use
provide the farm family an opportunity to earn a of the farm resources. The landlord may put some
satisfactory living. A typical full-time farmer in Iowa restrictions on what crops can be grown, or what
today operates more than 800 acres. The average tillage, conservation and pest control practices can
value of Iowa farmland is over $8,000 per acre. be used. Other than this, the tenant has a free rein in
Therefore, the land investment for a commercial planning the crop and livestock production program
farm today can easily exceed $6 million.
FM 1564 Revised July 2014
3
Page 2 Improving Your Farm Lease Contract
on the farm unit, and receives all the crop and USDA exist, however. Publication FM 1811 (AgDM C2-15),
commodity program payments. Survey of Iowa Farm Leasing Practices, provides
more details about the sharing of expenses under a
Flexible Cash Lease
crop-share lease.
A variation of the fi xed cash lease is a fl exible lease,
in which the actual rent to be paid depends on the Custom Farming Contract
actual yields attained and the selling prices available Under a custom farming contract the operator
during the lease period. This ensures that the rent supplies all the labor and equipment needed to
paid is in line with the profi tability of the crops perform tillage, planting, pest control, harvesting
grown that year. Sometimes government payments and storing of crops. The landowner pays all
and crop insurance benefi ts are also included in other expenses, and receives all the crop and
calculating the gross revenue. The landowner shares USDA payments. The custom operator receives a
some of the risk of low yields or declining prices, fi xed payment per acre from the owner, or a fi xed
but also shares in the extra profi ts when prices and/ payment for each operation performed.
or production exceed expectations. Some fl exible
Some agreements pay the custom operator a
leases also take into account crop input costs when
bonus for meeting certain planting date or yield
determining the fi nal rent or bonus. Publication
FM 1724 (AgDM C2-21), Flexible Farm Lease goals. Others provide for the operator to receive a
percentage of the crop instead of a cash payment,
Agreements has more details.
generally from 20 to 25 percent. This is sometimes
Crop-share Lease referred to as a “net share lease.” If the custom
The distinguishing characteristic of a crop-share operator takes responsibility for purchasing and
lease is that the owner receives a share of the delivering crop inputs, the cash payment or share
crop and USDA payments as a return for the land of the crop is generally higher. Publication FM 1823
resources used, but no cash payment. In Iowa, a (AgDM A3-15) Custom Farming: an Alternative
typical division for corn and soybeans is for the to Leasing has more details.
landlord to receive one-half of the grain. A recent
Advantages and Disadvantages of
variation is a 50-50 crop-share lease with a small
cash payment to offset some of the seed technology Different Types of Leases
fees or reduced tillage. In other regions where All types of leases have advantages and disadvantages
farmland values are lower, the owner may receive to each party. The tenant and owner should consider
only 25 or 30 percent of the crop. The owner’s share them before choosing the type of lease and the terms
of a hay crop varies, depending on how the costs for that should be incorporated in it.
establishing the seeding were shared. In some cases,
Fixed Cash Lease
the tenant pays a cash rent for land in pasture or hay.
Advantages of a fi xed cash lease are:
There may be a separate rental charge for a good set
(cid:129) The lease is simple with relatively few chances for
of buildings or grain storage facilities.
misunderstanding.
The owner normally furnishes land and buildings (cid:129) The owner is relieved of making day-to-day oper-
and pays half of the costs of inputs such as fertilizer, ating decisions.
seed, and pesticides when the crop is divided (cid:129) The owner has very little fi nancial risk.
50-50. Owners are usually responsible for drying,
(cid:129) The tenant has maximum freedom in planning
storing and marketing their share of the crop, as
and developing the cropping and livestock pro-
well. The tenant usually furnishes all the labor, grams.
fuel, equipment, and the other half of the shared
(cid:129) The tenant has fewer records to keep when mul-
expenses. Many variations on sharing of expenses tiple landlords are involved.
4
Improving Your Farm Lease Contract Page 3
Disadvantages and potential problems of the fi xed (cid:129) Adjustments for sharing costs for storage and dry-
cash lease are: ing facilities, herbicides that reduce fi eld work, or
fertilizer and pesticide application may have to be
(cid:129) A fair cash rental rate may have to be renegoti-
made.
ated each year.
(cid:129) The cropping plan to be followed and whether or
(cid:129) Cash rents are likely to be too low in times of ris-
not the farm participates in government programs
ing prices and increasing yields, and too high in
must be agreed on.
times of low prices or low yields.
(cid:129) Added cash rent for the use of buildings and stor-
(cid:129) Selling prices and production costs may be higher
age facilities may have to be negotiated.
or lower than anticipated when the rental rate is
set. (cid:129) If the owner’s and tenant’s grain is stored in the
same bin, marketing decisions have to be made
(cid:129) Tenants are required to supply more operating
jointly.
capital.
(cid:129) The landowner may be considered a material
(cid:129) Tenants bear all the risk of production shortfalls.
participant, and farm income will be subject to
Flexible Cash Lease self-employment taxation.
Advantages of a fl exible cash lease are:
Custom Farming Contract
(cid:129) The amount of rent to pay increases or decreases Advantages of a custom farming contract are:
automatically from year-to-year as prices and
(cid:129) There is very little fi nancial risk for the operator.
yields change.
(cid:129) The owner benefi ts from any unexpected high
(cid:129) The need for the owner and tenant to renegotiate
prices, yields or government program payments.
the rental rate each year is signifi cantly reduced.
Disadvantages and potential problems of the fl exible (cid:129) Only one party is responsible for marketing grain
cash lease are: and making production decisions.
(cid:129) Agreements are usually fairly simple to negotiate.
(cid:129) Both parties must agree on a formula for setting
the cash rent each year. Disadvantages and potential problems of custom
farming contracts are:
(cid:129) Both parties must agree on how to determine the
prices and yields to include in the formula. (cid:129) The owner bears all the risk of low yields or
prices, or high input costs.
(cid:129) There is uncertainty about how much the tenant
will pay and the owner will receive each year. (cid:129) The number and timing of fi eld operations to be
done each year may have to be modifi ed, depend-
Crop-share Lease
Advantages of a crop-share lease are: ing on weather conditions.
(cid:129) The operator has to set priorities among the cus-
(cid:129) Risks associated with price and yield variations
are shared. tom farmed land and other rented or owned land.
(cid:129) The owner is more involved in making decisions (cid:129) The owner must communicate to the custom op-
and marketing the grain during the year. erator the cropping system, fertility program, and
(cid:129) Both parties share the benefi ts from adoption of type of pest control to be used.
yield-increasing technology, or unexpected high
(cid:129) Crop inputs such as seed, fertilizer and pesticides
yields or prices.
must be purchased and delivered in a timely
(cid:129) The owner receives more information about
manner.
yields and inputs used each year.
(cid:129) The landowner may be considered a material
(cid:129) A second USDA payment limit is created.
participant, and farm income could be subject to
Disadvantages or potential problem areas of a crop-
self employment taxation.
share lease include:
(cid:129) The landlord and tenant must agree on how pro-
duction expenses will be shared.
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Page 4 Improving Your Farm Lease Contract
Key Areas of Decision Making Maintaining Fertility
There are certain key areas in developing a farm Farm owners often worry about whether a tenant
lease that should be given very careful consideration will maintain or improve the level of fertility on
by both parties. The answers to these questions will the farm. Regular soil testing can establish whether
depend on the intent of the parties in the leasing additional nutrients are needed. While tenants
arrangement and the bargaining position of each. should be discouraged from “mining the soil,”
applying additional fertilizer (especially phosphorus
Sharing Costs
and potassium) when levels are already testing high
A question that frequently comes up is the landlord’s
or very high not only wastes money, it contributes to
responsibility in sharing herbicide costs for weed
nutrient run off and downstream pollution.
control that may be a partial or complete substitute
for cultivation or other tillage methods. Most Applying lime to soils contributes to productivity
landlords agree to furnish half of the cost of these by controlling the acidity of the soil. Since lime
materials under a crop-share lease. Some feel that applications usually last for several years, their cost
where no-till or minimum tillage practices are used is usually the responsibility of the landowner, and
they should not have to pay a full 50 percent of the is refl ected in the rental rate of the land. Tenants
cost of herbicides. See publication FM 1811 (AgDM may pay for the lime and pro-rate the cost of the
C2-15), Survey of Iowa Farm Leasing Practices lime over future years with the landlord agreeing to
for more information. reimburse the tenant if the tenant doesn’t rent the
land in future years. Some long-term crop-share
There are many variations in how the costs for
tenants may divide the cost of lime.
custom application of fertilizer and pesticides are
divided. Therefore, it is advisable to discuss these Controlling Weeds and Maintaining Buildings
items in advance and state in the lease whether or Weed control in crops has improved considerably
not the landlord will share in any of these costs. in recent years with the introduction of herbicide
resistant seeds. However, many landowners also
Harvesting
place a high value on controlling weeds along fence
How will costs associated with combining, drying,
rows, in ditches and around building sites. Indeed,
transporting, and storing crops be shared under a
cutting or spraying weeds classifi ed as noxious
share lease? When the corn drying facilities are part
is required by law. Iowa Code Section 314.17
of the rental unit, the landlord often furnishes the
(amended 2010) prohibits mowing ditches before
dryer and storage facilities. If the corn drying unit
July 15, except within 200 yards of dwellings and in
is portable it may be jointly owned, or either party
certain other situations.
may own it and charge the other party an established
amount for its use. The fuel and power costs for Maintaining the appearance and functionality of
drying are normally shared in the same proportion farm buildings and fences is often a high priority for
as the crop is divided. In some cases the tenant is landowners, as well. Even if some buildings provide
paid extra for delivering the owner’s share of the no substantial benefi ts to the tenant, he/she may be
crop from farm storage to an elevator or processor. able to provide labor and machinery for carrying
out repairs at a considerable savings to the landlord.
Removing Corn Stover
Owners should generally pay for materials and
Under Iowa law a farm tenant has the right to
supplies, especially if the tenant is providing labor.
remove stover (stalks, leaves, cobs) left in a fi eld
after harvesting unless the lease states otherwise. While such practices may have little economic
Stover can be used as feed or bedding, or sold off the payoff for a tenant, they can contribute to a longer
farm. Tenants and landowners can specify a different and more harmonious leasing agreement, and often
arrangement in a written lease, or limit the amount require a minimal amount of time and cost.
of stover removed.
6
Improving Your Farm Lease Contract Page 5
Financing Improvements person bearing the risk. With a fl exible cash lease,
There are three ways to handle the costs of making the commodity program payment can be included in
permanent improvements to a farm property such the gross revenue used to determine the rental rate
as buildings, storage structures, conservation each year. Under a crop-share lease the owner and
structures, fences, waterways, and drainage tile. tenant usually share in the program benefi ts in the
same proportion as they share the crop. If there is
Option 1. The landlord provides the improvement
a cost to participate in the program, the owner and
as part of the rental agreement with an under-
tenant must carefully analyze the potential benefi ts
standing that the rental rate will be increased
to each party. Government program decisions can
as a result.
affect the rental value of a farm for several years.
Option 2. The cost of the improvements is shared
Conservation programs may offer short-term
by the landlord and tenant in some form. If the
payments for following certain practices, as well as
improvement is constructed on the farm, the ten-
long-term benefi ts in the form of reduced erosion,
ant may furnish labor and machinery for the job,
increased fertility, and cleaner water. If the incentive
and the owner may pay for materials. It is useful
payments do not completely offset any extra costs
to negotiate a provision in the lease for the tenant
or reduced income to the tenant for following the
to be reimbursed by the landlord for the unde-
conservation practices, he or she may be reluctant
preciated value of the improvements if the lease
to participate. If the lease has only a short duration,
period ends before the useful life of the improve-
such as one year, the long-term benefi ts of the
ment is over.
practices do not offer much incentive to the tenant.
Option 3. The entire cost of the improvements is The landowner may have to reduce the cash rent to
offset the tenant’s short-term loss of net income.
paid by the tenant. As in Option 2, a provision
for reimbursing the tenant for the undepreciated
Setting the Length of Lease
value of the investment is important.
Many farm leases are in effect for only one year at
a time. In fact, in Iowa oral leases cannot be valid
For more information see:
for more than one year. However, a recent survey
(cid:129) AgDM C2-07 - Lease Supplement for Investing
showed that 43 percent of cash rent leases and 66
in Improvements on a Rented Farm
percent of crop-share agreements had been in effect
(cid:129) AgDM C2-08 - Lease Supplement for Obtain- between the same parties for more than 10 years.
ing Conservation Practices & Controlling The maximum fi xed term for a lease contract in Iowa
Soil Loss is 20 years, but leases can be routinely renewed if
(cid:129) AgDM C2-29 - Lease Supplement for Drainage both parties agree.
Multi-year leases provide owners and operators with
Participating in Government Programs
an incentive to invest in long-term improvements to
Most crop producers in Iowa participate in some
the land and maintain soil fertility and conservation
of the commodity programs offered by the U.S.
structures. They also avoid the uncertainty of
Department of Agriculture. They are usually
building new relationships frequently. In Iowa,
designed to reduce price or production risk for
signifi cant “beginning farmer” income tax credits
major grain crops. Every few years new farm
are available to owners who rent to qualifi ed tenants
legislation is passed which requires landowners
under a 2- to 5-year lease contract.
and tenants to make decisions about program
participation. In determining whether or not a lease is fair and
equitable to both parties, it is necessary to consider
Under a cash rent lease the farm program benefi ts
the lease in total rather than looking only at
usually are paid to the operator, because that is the
individual provisions or sections of the lease. One
7
Page 6 Improving Your Farm Lease Contract
provision in the lease may be favorable to one party, Economic Considerations
while another provision may be more favorable to There are several important economic factors to
the other party, and the two factors may balance out. consider when developing a farm lease agreement.
Some of the key economic questions are:
Factors that Infl uence Leasing Terms
(cid:129) Does the lease provide a business framework
Many factors infl uence the terms of an individual
for the most profi table long-term operation of
farm lease.
the farm?
(cid:129) The productivity of the land as measured by
(cid:129) Does the agreement encourage the use of the
historical yields, its corn suitability rating
most profi table levels of capital, labor, and man-
(CSR2) index, satellite photos, drainage maps
agement in the farm business, as well as adoption
and soil type.
of new technology?
(cid:129) The value of the contributions made by each party
(cid:129) Are the returns shared between the landlord and
in the leasing arrangement, such as labor, land,
tenant in an equitable manner when the value of the
crop inputs, machinery or management.
contributions made by each party is considered?
(cid:129) The bargaining position and bargaining ability of
(cid:129) Is the level of cash rent to be paid consistent with
each party, and the competition for rented land in
the current land market and the productivity of
the immediate area.
this particular tract of land?
(cid:129) What has been customary in the community in
(cid:129) Is the farming unit large enough to achieve an
the past.
effi cient level of operation and provide a satisfac-
(cid:129) Family considerations that cause lease terms to tory return to both landlord and tenant? A larger
be highly favorable to a relative when compared tract of land may be more attractive to potential
with other leases, because the owners do not renters than a small tract.
need as much income, want to help a child get
Legal Considerations
started, or desire to keep the farm in the family.
Several federal and state laws affect lease terms. Such
(cid:129) Improvements and facilities on the farm, and the
legal considerations promote an effi cient business,
condition and usefulness.
ensure that lease provisions are carried out as
(cid:129) Location relative to paved roads, grain processing intended, and protect the interests of each party.
plants, and grain buyers.
Self-employment Income
(cid:129) The USDA farm program crop acreage bases and
A materially participating landowner must report
proven yields assigned to a particular farm. These
farm income as self-employment income rather than
will affect the size of some commodity program
as passive investment income. As such, it is subject
payments that are paid to the operator and
to the normal self-employment tax rate. On the
owner. Incentive payments for following certain
other hand, paying some self-employment tax will
conservation practices may also be attached to
boost Social Security benefi ts in the future. A cash
the land unit.
rent lease rarely qualifi es a landowner as a material
(cid:129) Income tax credits that may be available if the participant, but a crop-share lease may do so. An
land is leased to a beginning farmer. This allows a owner must be in the trade or business of farming
lower rental rate to be negotiated without reduc- in order to deduct certain expenses such as interest
ing the net return to the owner. on operating capital or applications of fertilizer
(cid:129) Contracts for producing seed or other specialty and lime.
crops, or to receive livestock nutrients. Access to
such contracts can enhance the value of a particu-
lar property.
8
Improving Your Farm Lease Contract Page 7
Social Security Benefi ts Communication
Landowners under age 66 or 67 may have their Good communication between tenants and
Social Security benefi ts reduced if they are actively landowners is essential for building a successful
involved. This depends on the amount and timing leasing relationship. Landowners are concerned
of the income received. When landowners reach about the use and care of their farm. Nonresident
full retirement age there is no limit on the amount owners cannot observe conditions fi rst hand. Some
of active income that can be earned with respect to spouses or children who have not been heavily
Social Security benefi ts. See AgDM C2-41, Leasing involved in the management of the property may feel
Arrangements and Self-employment (Social unsure about how to proceed with decisions.
Security) Tax, for more details.
Provide Reports
Estate Tax Valuation Tenants can borrow a technique from professional
Many farm properties can qualify for “special use farm managers who provide their clients with
valuation” when the estate goes through probate, written reports on a regular basis. Obviously, a
which often results in a valuation below current report is more important with a crop-share lease
market value. This can be advantageous for estates than a cash lease. It may be benefi cial for a tenant
large enough to trigger federal estate taxes. However, with a cash lease to develop an abbreviated form
one requirement for special use valuation is that the of reporting, especially for landowners who have
decedent or a family member must have materially a strong interest in the productivity of the farm.
participated in the business fi ve out of eight years Sending photos to a landowner who is not close
prior to death, and a qualifi ed heir must materially enough to observe crop conditions regularly is a
participate for 10 years after the death of the very effective communication tool. Digital camera
decedent. photos or video fi les can be easily transmitted
by email, or pictures can be printed and sent by
Landlord’s Liens
regular mail. Some tenants are setting up password
In Iowa, a statutory (created by state law) landlord’s
protected websites for individual landowners to
lien exists. The lien is applicable whether the lease
provide information such as soil maps, fertilizer
is for cash rent or crop-share. The statutory lien is a
tests, and yield data.
lien “upon all crops grown upon the leased premises,
and upon all other personal property of the tenant For a crop-share lease keep the accounting of
which has been used or kept thereon during the expenses current. Most input suppliers will invoice
term and which is not exempt from execution,” and each party individually. However, informing the
gives the landowner preference over other security owner beforehand that he or she will be receiving
interests such as those of lenders. a bill, and its purpose, is recommended. Tenants
renting from several owners may purchase supplies
The UCC1 form must be fi led with the Iowa
in volume and prorate the bill to each of the owners.
Secretary of State’s offi ce within 20 days of when the
In this situation a copy of the original invoice should
lease goes into effect to perfect the landlord’s lien.
be included. Explain each item on the bill, as names
of farm inputs change frequently. The owner may
More details on legal issues affecting farm lease
agreements can be found in AgDM C2-06, Lease not be familiar with commercial product terms for
seed, herbicides, and insecticides, but nonetheless
Termination and Other Legal Considerations for
may have to categorize the expenses for income tax
Lease Contracts.
reporting.
9
Page 8 Improving Your Farm Lease Contract
Crop insurance policies and some USDA programs Termination of a Farm Lease
require information about historical crop yields A farm lease automatically continues from year to
before a farm can be enrolled. Landowners need to year unless either party gives a notice of termination.
have this information each year for making future In Iowa, a lease termination notice must be properly
decisions about participation in such programs. served by September 1, prior to the end of the lease
year. This applies to both cash and crop-share leases,
Have a Written Lease
but not to custom farming agreements. A written
Written leases make the lease terms more defi nite
lease may state a date earlier than September 1 for
and leave less chance for disagreement and
serving a termination notice. The requirement to
misunderstanding. People tend to selectively recall
terminate a farm lease by September 1 does not
only those portions of conversations that reinforce
apply to tracts under 40 acres in size (in Iowa).
their point-of-view. It protects not only the original
However, even an oral lease is automatically
parties, but also assignees and heirs in case either
renewed if it is not properly terminated in time.
party should die, or the farm is sold.
The termination notice must fi x the termination of
A written lease encourages both parties to consider
the tenancy to take place on the following March 1.
all aspects of the lease before the lease period begins.
If notice is not served, the lease continues for another
Decisions are made before the problems occur. In
crop year under the same conditions and terms.
subsequent years, it provides a basis for changing
However, if mutually acceptable to all parties
provisions when conditions change. Written leases
concerned, a lease can be terminated or modifi ed
also provide documentation in case of a tax audit
at any time, and can have a different stated
or for settling an estate. Lease agreements that
expiration date.
cover more than one crop year are required to be
in writing, and leases written for fi ve years or more Iowa law specifi es three methods of serving a farm
must be notarized and recorded at the county lease termination notice to terminate the tenancy on
recorder’s offi ce by the tenant. the following March 1. The following is quoted from
the Code of Iowa, Section 562.7:
The document should meet at least the following
minimum requirements: “Notice—How and when served. Written notice
shall be served upon either party or a successor of
(cid:129) It should contain an accurate description of the
the party by using one of the following methods:
property.
1. By delivery of the notice, on or before Septem-
(cid:129) It should specify a defi nite period for which the
ber 1, with acceptance of service to be signed by
lease is to run.
the party to the lease or a successor of the party,
(cid:129) It should state the kind and amount of rent, and receiving the notice.
time and method of payment (cash lease).
2. By serving the notice, on or before September 1,
(cid:129) It should specify how production, USDA pay- personally, or if personal service has been tried
ments, and input costs are to be shared (crop- and cannot be achieved, by publication, on the
share lease). same conditions, and in the same manner as is
provided for the service of original notices, except
Sample lease forms are available. See publications
that when the notice is served by publication no
FM 1538 (AgDM C2-12) Iowa Farm Lease Form
affi davit is required. Service by publication is
or FM 1874 (AgDM C2-16) Iowa Cash Rent Farm
completed on the day of the last publication.
Lease (short form).
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