Elements of a Good Lease
The following is a partial list of important conditions to cover in a written agricultural lease. It is meant to guide the lease negotiation process, but it is not exhaustive and should not be used as a template for an actual lease.
- Preamble. Describes lessor (landowner) and lessee (tenant). Includes mailing address for each. May also describe lease intent.
- Description of leased property. Attach map if possible. Use legal description from Preliminary Title Report.
- Term. How long does the lease last? Initial length, as well as terms of renewal.
- Rent. Lease payment amount, how and when it’ll be paid, installments, deposits.
- Use. Allowable uses, restrictions or requirements regarding production and other activities, methods, etc.
- Operating Costs. Water district fees, electrical use, etc. How these will be assessed, who pays, how they’ll be billed. Usually tenant must pay all business-related costs.
- Maintenance, repairs, alterations. Who is responsible for maintenance of land/infrastructure? Allowable alterations, and whether permission is required.
- Indemnification and liability insurance. Holds owner harmless (might also be written to also hold tenant harmless as well). Must tenant hold general liability policy? If so, specifies amount of coverage.
- Taxes and assessments. Clarifies that owner is responsible for property taxes and tenant is responsible for all personal/business- related taxes.
- Initial condition of premises. Okay as-is? Improvements or upgrades required before start of lease?
- Assignment or subletting. Allowable or not? If yes, include conditions.
- Compliance with law. Reiterates that tenant is responsible for all applicable laws re: hazardous materials, labor, environmental regulations, etc.
- Default by tenant. What constitutes breach of lease, how it can be remedied or terminated.
- Dispute resolution. To avoid potentially costly attorneys’ fees/court fees, specify mediation and then binding arbitration.