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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.

  1. Preamble. Describes lessor (landowner) and lessee (tenant). Includes mailing address for each. May also describe lease intent.
  2. Description of leased property. Attach map if possible. Use legal description from Preliminary Title Report.
  3. Term. How long does the lease last? Initial length, as well as terms of renewal.
  4. Rent. Lease payment amount, how and when it’ll be paid, installments, deposits.
  5. Use. Allowable uses, restrictions or requirements regarding production and other activities, methods, etc.
  6. 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.
  7. Maintenance, repairs, alterations. Who is responsible for maintenance of land/infrastructure?  Allowable alterations, and whether permission is required.
  8. 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.
  9. Taxes and assessments. Clarifies that owner is responsible for property taxes and tenant is responsible for all personal/business- related taxes.
  10. Initial condition of premises. Okay as-is? Improvements or upgrades required before start of lease?
  11. Assignment or subletting. Allowable or not? If yes, include conditions.
  12. Compliance with law. Reiterates that tenant is responsible for all applicable laws re: hazardous materials, labor, environmental regulations, etc.
  13. Default by tenant. What constitutes breach of lease, how it can be remedied or terminated.
  14. Dispute resolution. To avoid potentially costly attorneys’ fees/court fees, specify mediation and then binding arbitration.

 

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