How to cover all the bases with a land rental agreement
This information presented in this article is in respect to Canadian common law. To learn more about written land rental agreements in the context of the Civil Code of Quebec, please read our article on this topic.
It doesn’t make sense to pay to use a piece of land, invest time and effort into raising a crop, and not even have a paper outlining an agreement with the owner.
A written land rental agreement is a critical, yet often neglected, piece of farm business.
Yet it’s something lawyer James Steele, of Robertson Stromberg LLP, says he sees repeatedly, as well as handshake agreements and handwritten rental deals. Across the country, none of these informal agreements are sufficient if there's a disagreement and the rental matter ends in court. Overall, having a written land rental agreement in place is a critical, yet often neglected, piece of farm business that could save both parties time and money if anything with the rental ever went wrong.
The foundations of a rental agreement
A rental agreement needs to include the following:
Include all the details
A rental agreement needs to be longer than a one—to two-page document and include as many details as possible. Steele says he often sees producers show up with an agreement where the term and rate have been determined, but not much else.
A rental agreement document must spell out the obligations and consequences, and what happens if conditions aren’t met. For example, who is responsible for repairing and paying for the fence or who pays the property tax?
If this basis is not covered, both the landlord and the tenant will be left confused about their rights and obligations.
Agreements may also include details like only growing specific crops or the need to be organically certified.
While it’s OK for the landlord to have housekeeping items like removing weeds in the agreement, ensure the tasks aren’t too difficult for you as a renter, such as perfect weed maintenance throughout the entire property.
And what about buildings? Do you plan to build a shop or a make-shift structure as a renter?
Renters must clarify ownership of structures built during the rental and confirm they can load that building onto a semi and truck it elsewhere once the lease concludes. Otherwise, it can become the landlord’s property.
Canadian landlords also need to ensure the proper insurance is in place for what’s on the land, such as existing buildings like a farmhouse. If there is a farmhouse, a tenant also needs to carry insurance.
Transition planning
When transitioning the farm to the next generation involves rented land, Steele notes again the importance of details.
The land you rent could be sold as part of the landlord’s transition, or the landowner could die during your rental period. Thinking ahead and having a plan as part of the land rental agreement will help if the situation arises.
Steele says it's also essential to ensure the signatures of all the landowners are on the rental agreement so it stands up in court.
“Let’s say there are four siblings on the title because their dad left the land to all four of them; however, only one lives in the area, and that person is the only one doing the dealing,” Steele says. Nationwide, if a dispute ends up taking the rental agreement to court, one signature would not be enough – all landowners must sign.
What happens if the agreement is breached?
When the agreement is put together, be sure to include what the next steps are if the terms of the document are not met. For example, if the rent is missed, the renter has 15 days to remedy the situation before further action is taken.
If the agreement falls apart because one or both parties fail to uphold their side of the agreement, it’s in these instances that you will be most thankful you have an agreement in place.
Do your research
Know what you’re renting. Find out the background of the property to avoid any surprises later. If there are liens against the property or if criminal activity has happened on the land, the property may be seized from the owner, leaving you without rental land.
This is also why it's essential for you as a renter to register the lease against the title. In most provinces, what you see in the title is what you get.
Overall, Steele says that having a detailed land rental agreement will help protect your considerable investment in the land you're farming.
Once an initial agreement between the landowner and renter is reached, it’s time to get the details down in writing. Visit a lawyer to ensure the document is binding and nothing has been overlooked. You can also check out online resources. Steele says to make sure any resources are applicable for your province. If not, the agreement won’t help settle any disputes.
Article by: Craig Lester
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