How To Terminate A Farm Lease Tenant and Tenancy in Iowa
2022 Tenancy Terminations MUST be served by
We’ve added a countdown clock this year to help you! This date is set by law and is absolute. It doesn’t mean that the landowner and tenant can agree to break farm tenancy after that date but a landowner can not legally remove the tenant if its against their wishes. If you are serving a notice to a client in 2022 this date is extremely important! Its never too early so get started on it today and ensure you do not miss the deadline.
NOTICE: It is important that you understand we are not offering you legal advice. In the context of our duties as real estate brokers we are offering you a generalized view of the farm tenancy termination process. In our experience 98% of farm leases are straight forward and can be extinguished with this process. That doesn’t mean there isn’t some circumstance in your case that makes it different. Always seek legal advice to have legal questions answered.
Understanding Farm Tenancy in Iowa and Lease Termination Letter
Often referred to as Farm Tenancy in Iowa it is really a reference to an agreement between two people and their rights in a certain parcel of land. Most of our material and answers will talk about how a landowner can terminate a tenant but the same process is true for a tenant that doesn’t want to farm a property in the following year. They must notify the landowner they intend to break the tenancy relationship with as well. It’s an organized system of ensuring stakeholders have made willing decisions by imposing deadlines and rules for tenancy agreements.
Iowa Farmland Leases Automatically Renew
It is important to understand that verbal leases in Iowa automatically renew for another year if you do not notify the other party in writing that you are breaking the tenancy. The actual tenancy lasts from March 1 to the last day of February the following year. Tenancy notifications must be served prior to September 1st to break any tenancy. For example, if you do not want a tenant on your farm during the 2023 crop season, you must notify them BEFORE September 1, 2022. If you do not notify them before September 1, 2022, they have a legal right to tenancy on the farm from March 1, 2023 to February 29, 2024.
Farm Leases Verbal or Written
Farm leases are not required to be in writing in order to be enforceable. A farm lease is a legally binding contract whether its written or not. Written leases are always the best business practices and ensures all terms are easy to evidence.
Steps to Terminating Common Farm Tenancy in Iowa
1. Complete the Tenancy Termination Form properly. It is important you include the best legal description so the farm can be identified.
2. Arrange for delivery or service to the tenant before September 1st. Certified Mail is the best option. Emails, text messages and phone calls will not satisfy the legal requirement.
3. Document your process and service of the form to the tenant. With certified mail you will get a mailing receipt and once mailed service is considered perfected even if its not picked up.
4. File your documents for safe keeping and future needs.
Elements of Iowa’s Farm Lease Law
We partnered with Attorney Adam Ullrich at Reimer, Lohman, Reitz, Saller & Ullrich in Denison Iowa to make a video about Farm Leases and Terminations that provides you a wealth of information. Adam is especially well versed in farmland matters. He is a farmer himself and often handles matters related to farmland ownership, farmland sales, land trusts, farm taxes and estates. His presentation here is the most comprehensive look at how to structure a farm lease and how to terminate a farm lease in Iowa properly.
Jason J Smith, Land Auctioneer
Jason is an experienced farmland broker and auctioneer with extensive experience in farmland and auction sales across Iowa. He recently posted The Ultimate Iowa Farmland Sellers Resource page. Jason has worked with hundreds of clients to create advantageous outcomes and has received very high referral rate. Many of our clients continue to refer other family members to us. If you are exploring selling land you can schedule a consultation with Jason and our team by calling us or using the calendar provided. There is no obligation to receive a consultation. During the consultation we will provide you with aerial and soil maps, an analysis of the current market, helpful insights that will be beneficial in your considerations.
Considerations of Termination of a Farm Tenant
The vast majority of farm tenancy terminations are uneventful and by the book. We offer terminations as a part of our service of selling farms in Iowa so we have served many of them. The September 1st deadline to serve the form is very important from a legal standpoint but if it is not served by September 1 that does not prohibit you from selling your farm. It also does not mean that you can’t make an agreement with the tenant after September 1st to voluntarily give up tenancy on the farm. Sometimes this is done just on a handshake and sometimes the tenant requires payment for any Fall tillage or fertilizer they may have already applied for the following year. The best situation is to serve it before September 1 and if you didn’t to contact us and see what the best options are.
There are more questions relating to farm tenancy where the form was not served before September 1st so I’ll spend a little time answering those questions.
Can I sell my land if there is a tenant?
Yes. Even if you missed the deadline of September 1st to serve the form, you can still sell the farm. The only difference is that the new buyer will become you (the landlord) for the following crop year and someone will need to serve a termination notice to the tenant for the following year. I believe the best practice is to just serve it at the same time of the real estate closing so it is done even if it is more than a year early. Being early isn’t an issue, being late is. If you are considering selling your farm, DreamDirt offers free farmland value analysis and marketing proposals.
Do I have to Offer First Right to Buy to My Tenant
No, you do not. Even if your tenant tries to convince you of this it’s just not true. In order for someone to have a first or last right of refusal to purchase real estate it must be in writing. We often see where a tenant might say “when your dad was alive, he promised me I could buy it” and there simply is no way to verify these claims. The simple truth is, if you have a farmland auction and offer the property the tenant can still buy it. You would not be cutting them out of the process. The only reason a person wants to buy privately without an auction is to avoid paying a top market value. Everybody can understand that but stand your ground and ensure you get the full value when you sell your farmland.
I Didn't Serve A Tenancy Termination Notice by Sept 1, Now what?
It’s not the end of the world. This happens to many people every year. In fact, it seems many families don’t decide to sell the farm until around Thanksgiving or maybe even Christmas when they get together for the holidays. If you missed the deadline it only means the tenant will have the following year to farm it. You can still sell the farm but the income from the tenancy would go to the new buyer. Nothing about the tenancy can change, the rental rate and all terms will remain the same for that year.
There is also the option of mutual agreement. Perhaps your tenant will be understanding of your situation and voluntarily relinquish their farm tenancy. As long as you and the tenant agree to this, you can sell your farm tenancy free.
A final option of buying the tenant out of the tenancy exists. This has become less and less financially viable over the years and the pay offers have gotten higher. When you use the proceeds from the sale to make the payoff it just becomes a financial decision. Unless it becomes necessary for some reason, I believe this is the least desirable option.
My Tenant Applied Fertilizer, Do I Have to Pay Them Back?
If your notice was prior to September 1 and no other terms existed nothing in the law can force you to pay them for anything that was applied or done. Now use caution, if you had an agreement it does not specifically unlink you from any previous obligation. This question is more for those landowners that get a surprise request from their tenant for fertilizer. In most cases the question goes something like this “well if I had known you were going to terminate me, I never would have applied fertilizer this year” and ask you to reimburse you. In some cases, they apply enough fertilizer for multiple years and may have been caught off guard by the termination. This situation was their decision, they were aware termination could come and there is no obligation for you to pay them back for it. We have in a few cases added it to the buyer’s bill at closing but buyers are always informed of this prior to bidding. It is not in my mind the ideal way to handle it but it is possible.
I Own 2 Farms But Only Want to Terminate 1 of Them
Absolutely no problem. Make sure you use the proper legal description on the form of the farm you are terminating tenancy. You might make a clear language note with the notice that it is only for one farm to avoid any misunderstanding.
We Want To Get Top Dollar For Our Farm
And you shouldn’t be ashamed of that fact. We see clients that are fearful of this and feel like they are being greedy or unfair. You aren’t being unfair. We have a myriad of resources to help you understand the value of your farm. Do some research on our current Iowa land values and rents. One thing I notice about my clients is they are often less wealthy than the tenants they are selling too, yet good hearted enough to give a discount. And sometimes a deep discount. Farmers are smart, they are professional negotiators and while it is not their first time, it’s probably the first time you sold a farm. Do yourself a favor and hire representation. Our fees are less than the value we bring to the land transaction and we ensure you are protected in a safe agreement. Take a few minutes and fill out our potential Farmland Seller Questionnaire and we’ll send you a quote.
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