Legal Points for Indiana Farmland Leases

Indiana law requires at least three months advance notice of a lease termination. Because March 1 is the customary start of the lease year in the Mid-west, the lease termination date is before December 1. Term leases, which begin and end on specific dates, may need no termination notice. The critical need is to communicate! If there is a desire to renegotiate the terms of a lease, it may be wise to terminate the lease with a notice.

Tenants may want to terminate a lease they no longer can afford. Settling on a rental rate or share lease terms for 2001 and beyond may require renegotiation. The price outlook for corn and beans is a sobering factor. However, rental rates have not declined. The major reason for the strength in rents is not the market price outlook. A double “Freedom-to-Farm (FTF)” payment for 1999, and the expectation for the same in 2000, and the loan deficiency payment (LDP) helped out a great deal. Farmers may have received an LDP of nearly 30 cents a bushel last fall for all of the corn they produced. For a 150 bushel/acre crop, at 30 cents/bushel the LDP was $45 an acre. When the farmer actually priced his 1999 crop determined the final outcome for 1999 crop year.

The FTF payment for a farm depends on the farms program yield, and base acres. For example, with a program base of 75% of tillable acres, and a program yield index of 120 bushel the 2000 FTF payment for 80 acres would be about$26 per tillable in 2000 (80 acres x .75 x .85 x 120 bu. x 33.4 cents). With a double FTF payment, and LDP at 30 cents on an actual yield of 150 bu. that is $97 per tillable acre, and the farmer still has the corn to sell.

Actual crop yields are an important factor for the LDP payment. Hopefully, a farmer has crop insurance in case of serious deficiencies in yields.

It is important that landowners, and their tenants settle any differences, and set their lease terms soon. Generally, once the FSA provides an advance payment to a certified producer, the FSA does not assist in a return of that advance. This is true even though another tenant may obtain a lease for a given farm for year 2001.

If an existing lease is not terminated, a tenant may be liable for rent or lease terms according to the lease for 2000. This termination notice is generally required even if the land is sold or the owner dies.

Landowners and tenants are reminded to consult their respective lawyers, and other counselors, for help with: evaluating the current conditions, lease termination notices, and drafting new lease provisions.