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Lease Termination August 2015
Farm Lease Termination
Author's note: The Need for Personal Legal Advice. Farm leases and real estate transactions require a
consideration of law and facts unique to each case. The information provided in this newsletter is for
educational purposes only: It is not a substitute for competent legal advice.
Many farm leases, especially those between family members, are not written but are verbal "hand-
shake" agreem ents. Because nothing is in writing, the parties may have different recollections of their
agreement, making lease disputes more difficult to resolve. The most common legal issue associated with
verbal farm leases is how a lease may legally be terminated. For unwritten leases, six months advance
notice must be given to legally terminate the lease. In contrast, the termination of a written lease is deter-
mined by the terms of the written lease. If nothing is specified, a written lease terminates automatically on
the last day of the lease with no automatic renewal.
Rising crop prices lead many landowners to seek higher cash rents; falling crop prices lead
tenants to seek lower cash rents. Many Nebraska leases are unwritten, which means that notice of
termination must be given at least six months in advance, usually by September 1. If–during rising crop
prices--the landowner cannot terminate the lease, the landowner cannot require the tenant to accept a
higher rent in order to avoid immediate lease termination. However, prudent tenants would renegotiate the
lease with the landowner in order to keep the lease longer. If a tenant refuses to renegotiate the rent, the
tenant could end up ultimately losing the lease. The opposite dynamic operates during periods of falling
crop prices. If the tenant does not terminate the lease by September 1, the tenant is bound to last year’s
cash rental rate (which may be more than the tenant wants to pay).
Verbal year-to-year leases. Verbal (i.e. unwritten) leases are legally presumed to be year-to-year
leases. A year-to-year lease has no fixed tim e period and is automatically renewed for another year until
proper notice has been received by the tenant from the landowner (or vice versa) that the lease is termina-
ted. Many farm leases in Nebraska are unwritten year-to-year leases, and automatically renew for another
year unless termination notice has been received by September 1.
Verbal year-to-year lease termination. For year-to-year leases, the Nebraska Supreme Court has
ruled that the lease year begins on March 1. Moudry v. Parkos, 217 Neb. 521 (1984). Notice to a tenant to
terminate the lease must be given six months in advance of the end of the lease, or no later than the pre-
ceding September 1. For example, termination notice received by September 1, 2015 would terminate the
lease at the end of the current crop year–on February 29, 2016. The new tenant (or landowner) could take
possession free of the lease March 1, 2016. However, termination notice received after September 1,
2015 would not terminate the lease at the end of the current crop year, but would terminate the lease at
the end of the following crop year (beginning on March 1, 2017 and ending February 28, 2018).
The September 1 lease termination deadline has important practical implications. The three
common verbal lease questions I receive are (1) the landowner has sold the land without first properly
terminating the verbal lease; (2) the landowner wants to raise the rent for the next crop year but doesn’t
begin rent negotiations with the tenant until after September 1; and (3) the tenant wants a lower cash rent
for the upcoming crop year but September 1 has passed.
In the first situation–the land was sold without first terminating an unwritten lease--the landowner
has sold the land subject to the lease (probably unintentionally–the landowner should have worked with
his/her attorney to avoid this) and the tenant is still entitled to continue the lease for the next crop year. In
this situation the former landowner (or new landowner or some combination thereof) may have to buy the
tenant out if the new owner wants to farm the land immediately.
In the second case–landlord wants a higher cash rent for the upcoming crop year--the tenant is
under no legal obligation to renegotiate the cash rent after September 1 unless the tenant voluntarily
agrees to do so. The landowner cannot force the tenant to pay a higher cash rent, and the tenant has the
land for the next crop year (because it is too late for the landowner to terminate the lease if the owner