Oral farm leases will renew automatically for the next growing season on Sept. 1 in South Dakota, unless written notice of intent to terminate or modify the existing lease is given before Sept. 1, says Burton Pflueger, SDSU Extension Farm Financial Management Field Specialist.
"Any lease that renews automatically carries the same terms and conditions as the existing lease. Once such notice is given, the existing lease still remains in effect until March 1, 2013, at which time the new contract becomes effective," Pflueger said.
These rules apply to both the tenant and the landowner. Pflueger says the only exception is when one party fails to live up to the terms of the original agreement. He adds that any landlord or tenant who wants to terminate or modify an existing oral contract must notify the other party by Sept. 1.
"With the uncertainties of expected crop yields and current commodity prices and the effect they may have on economic conditions for this year and for the following crop year, changes in existing leases may be in order," Pflueger says.
Every year, the SDSU Extension receives calls from tenants and landlords who sought to make modifications to their farm leases but did not provide written notice for termination to the other party prior to Sept. 1.
"When wrongful termination occurs and the case goes to court, the injured party is normally awarded a "normal" profit from the land, and sometimes punitive damages," Pflueger said.
The date of automatic renewal was changed from Nov. 1 to Sept. 1 a number of years ago to protect tenants who plant fall-seeded crops such as winter wheat. Sometimes farmers and landlords forget about this change, especially where there are no fall-seeded crops grown or when the agreement is for grassland.
"It should also be noted that any lease agreement for more than one year must be a written lease if it is to be valid. An oral agreement for two or more years cannot be enforced by the courts," Pflueger says. "It is best to have all land lease contracts in writing. Having a written lease can prevent a lot of misunderstanding if one of the parties becomes incapacitated or forgets the details of the agreement."
Source: SDSU Extension