How to Amend Your Farmland Lease Mid-Season

Farmland contracts can be tricky things. They're a legal document, binding you to fulfill the terms of the contract, whatever might happen.

But every farmer knows that Acts of God happen. The Midwest floods of 2019, the derecho of 2020, and, of course, the COVID-19 pandemic of 2020 were all unexpected. Yet they significantly impacted farmers and their operations. 

So what happens next time? What if you find yourself unable to fulfill your contract? What are your options? Read this article to find out. 

DISCLAIMER: This article is for educational purposes only and is not intended as legal advice. Please consult professional counsel for official advice. 

Reasons for amending a contract mid-season

Farming isn't without its risks. While these risks can cause you to have to amend a contract mid-season, it's best to be proactive and try to manage the risks as much as possible. Here are the four most common types of risk a farmer will face. 

Production risks

Every farmer takes the risk that their yield or output will be lower than projected. This can be due to adverse weather conditions, pest damage, equipment failure, and more. When production falls short, the farmer’s income is negatively affected, and they may be unable to fulfill their lease. 

To manage production risks, consider federal crop insurance and NAP coverage, diversify your enterprise, regularly maintain your equipment, and adopt risk mitigation practices like drip irrigation, tile drainage, trap crops, or resistant varieties. 

Marketing risks

Another factor outside your control is the market. Prices rise or fall due to global factors outside of your control. To manage marketing risk, you can enter into sales or price contracts with buyers, join a marketing cooperative to guarantee a market, increase direct marketing efforts, or purchase Whole-Farm Revenue Protection to cover unexpected market declines. 

Financial risks

Farming carries with it financial risk, most of which come from production and marketing risks mentioned above. Other financial risks can include increased input costs, high interest rates, excessive borrowing, lack of cash or credit reserves, or unfavorable changes in exchange rates. 

To mitigate financial risks, it’s important to control key farm expenses, find off-farm employment for family members, defer household expenditures, or use non-farm investments to diversify your asset portfolio. It may also be worthwhile to purchase Whole-Farm Revenue Protection. 

Legal and environmental risks

Every legal agreement comes with its own risks—including your farmland rental agreement. These can include high legal fees, tort liability, or environmental liability due to poor water quality, erosion, or pesticide use. To manage legal risk, make sure your insurance policies carry sufficient liability coverage, make sure you understand the details of your legal agreements, and know and follow state and federal regulations. 

What happens if you can't fulfill your contract?

You know what they say about the best-laid plans. Despite all your planning and risk management, sometimes the unforeseen could happen. So what happens if you’re unable to fulfill the obligations set forth in your land rental contract? 

If you can’t make your payments, this is what’s called a lease default. 

Keep in mind that for most landowners, achieving an amicable resolution is ideal. They don’t want to have to spend large sums of money on legal bills, when a simple adjustment to the lease term will suffice. In that case, you should be able to reasonably renegotiate the lease.

However, sometimes the landowner brings down the hammer. The specifics of what happens next vary by state. For example, in Iowa, the landowner must first issue a notice of default and provide an opportunity to cure. If you still are unable to pay, the landowner may initiate eviction proceedings under Iowa Code Chapter 648. 

Note that Iowa state law does require the landowners offer paying tenants the opportunity to find other farmland to lease before terminating the agreement. But this protection does not apply to tenants who default on their payments.

Tips for a mid-season contract renegotiation

If you do end up having a mid-season negotiation with the landowner, here are some tips to make that conversation as productive and fruitful as possible.

Have a clear plan of action

Dealing with a disaster is emotional enough, and a legal discussion will only make tensions worse if you let it. That’s why you should begin with a clear plan of action, and remain calm during the discussion. State what you think the new reasonable expectations might be, and expect a counteroffer. If the landowner is willing to come to the table, they’re likely doing so in good faith, which means you’ll eventually arrive at a reasonable compromise. 

Be open and honest

Legal negotiations are no place to sugarcoat things. It’s better to be honest about the state of the operation, both before and after the disaster. Sometimes, a landowner is being obstinate because he simply doesn’t know how bad things have gotten. Honesty can open the door to difficult, but productive conversations. 

Be respectful

Remember: you’re the one in violation of the contract. A renegotiation can be helpful, but it’s technically not required—not unless you want to pursue further litigation. Coming in with an attitude of entitlement won’t just hamper your ability to achieve your goals, but it’s just the wrong thing to do. Treat the landowner with respect. After all: it’s their land you’re farming. 

Have reliable legal counsel

Any legal matter should be handled under the advice of counsel, but especially difficult situations like this one. If you don’t have a trustworthy lawyer in your corner, make sure you do before you start the conversation.

Final thoughts

Sometimes, the worst happens. In those cases, it’s important to understand your obligations and rights as a farmer tenant. 

Best case scenario, you should find a way to renegotiate your lease to account for the changing environment. Hopefully, you’ll have a landowner who understands the situation and is willing to come to the table. 

Regardless, the most important thing you can do now is to take steps to manage your risk as best you can. That way, you won’t end up in this position in the first place.