While northeastern North Carolina is famous for the beaches of the Outer Banks, our region also is rich in farmland and internationally recognized as major agricultural production area. Farming is an essential part of our economy. Agricultural leases are commonplace, including farm leases, machinery leases, and crop-sharing leases. When real estate is involved, the leases are generally cash-farm leases, crop-share leases, or a combination of those two types. Understanding the two types — and the laws and practices that apply to them — is extremely important if you are part of our agricultural community.
A lease is a type of contract entered into by two individuals or businesses, in which the parties to the contract agree to exchange use of goods or real property for something of value. The “value” can be money, or it can be something else of value — like crops. The character of the value, called consideration in legal terms, gives rise to two different types of agricultural land leases: cash-farm leases and crop-share leases.
A cash-farm lease is similar to any typical real estate lease. The tenant, also called the lessee, agrees to pay cash in periodic installments in exchange for being able to use the land. A crop-share lease is different: The tenant and landlord agree that the tenant will provide a “share” or portion of the crops as rent. There also may be other payments for pasture, hay, and storage in a crop-share lease.
Like other contracts, the terms of an agricultural lease are negotiated between the parties. In most cases, the terms of a specific lease will govern the relationship between the landlord and tenant. However, in North Carolina, there are also statutory law provisions that apply to agricultural leases and govern the lease and the relationship between the parties. Because of that, it is in your best interest to consult with an experienced real estate attorney when you negotiate an agricultural lease, whether you are the landlord or the tenant.
Under North Carolina law, a lease for less than a three-year term does not have to be in writing. However, it is always better to have a written lease to ensure that the terms are clear to everyone. If there is ever a disagreement on the terms of an oral lease, it is difficult to prove what the parties intended the terms to be if there is no written lease.
Another reason for having a lease in writing is that a written lease can be recorded with the county register of deeds. If the lease is longer than three years, the law provides that recording the lease makes it effective against subsequent purchasers of the property. If the lease is not recorded, another person who buys the property can terminate the lease. If it is recorded, that person cannot terminate the lease before the end of the lease term.
Since leases are negotiated by the parties, the terms of any individual lease will vary. However, in any agricultural lease, the tenant and landlord specify in the lease how the farm or land will be operated and maintained during the lease term. Terms commonly found in both cash-farm and crop-share leases include:
More specifically, for a cash-farm lease, the lease will additionally include provisions that:
If a cash-farm lease does not include these individual provisions, it can provide for one total rental payment for the entire farm unit. In addition, the lease will detail the amount of rental payment and due dates for periodic rent payment.
Because of their nature, crop-share leases are often more complicated than cash farm leases. In a crop-share lease, the landlord and tenant agree on an arrangement under which the tenant’s “rent” is a share of the crops grown on the rented land. The agreement also should include how the landlord and tenant will share the expenses of labor, machinery, and operating expenses. Provisions in a crop-share lease often address:
Most agricultural leases are for a specific number of years or are on a year-to-year basis. Generally, a year-to-year lease may be terminated by notice one or more months before the end of the current year. A lease for a specific term of years terminates at the set end date unless the landlord and tenant agree to renew the lease. A tenant who stays after the end of a lease when no extension has been negotiated can be evicted.
There are special rules that apply to a number of North Carolina counties regarding the term of agricultural leases. One-year or year-to-year agricultural leases in those counties must run from December 1 to December 1, rather than January 1 to January 1. However, the one-month notice requirement still applies to termination.
Agricultural leases are very specific and detailed. If you are renting farmland as a tenant, or if you own land and wish to rent it as the landlord under an agricultural lease, the best way to protect your rights is to consult with an attorney knowledgeable in agricultural leases. Our experienced real estate attorneys at The Twiford Law Firm advise and represent clients in all aspects of North Carolina agricultural lease law.
With offices in Elizabeth City and Moyock, we serve clients throughout northeastern North Carolina, including the Outer Banks. Contact us today at 252-338-4151 or 252-435-2811 to schedule an initial consultation.