Ins & Outs of Grazing Leases

1. Ins & Outs of Grazing Leases Tiffany Dowell Lashmet Agricultural Law Specialist Texas A&M AgriLife Extension Cattle U ■ Dodge City, KS ■ August 1, 2019

3. Disclaimer This presentation is for educational purposes only as well as to give general information and a general understanding of the law, not to provide specific legal advice. This presentation does not create an attorney/client relationship and should not be used as a substitute for the advice of a licensed attorney.

4. Road Map • Why is a written lease necessary? • Setting payment rates • My father’s favorite section • Grazing lease tips • Hunting lease tips

5. Why is a written lease necessary?

6. 1. The law says so…sometimes. • Generally, an oral contract is valid. • The “Statute of Frauds” says there are certain contracts that must be in writing to be enforceable: • CO: “leasing for longer than period of 1 year of any lands or interest in lands…” • KS: “leases of lands exceeding one year in duration” • NE: “agreements not to be performed in a year” • NM: “agreements that cannot be performed within 1 year” • OK: “leasing for a longer period than one year” • TX: “Lease of real estate lasting one year or more.”

7. 2. The exercise of writing it down is helpful!

8. 3. If you end up in court, you want a written document.

9. 4. Other agencies may require a lease to be produced. • FSA will likely require a copy of a lease for their records if any programs or payments are involved. (i.e. ARC/PLC; LIP) • NRCS may require copies of lease to register for certain programs (EQIP). • CAD may want a copy of a lease for special use valuation confirmation.

10. 5. You never know what might happen.

11. Calculating Payment

12. Three Most Common Arrangements • Cash lease • Crop share lease • Flex/Hybrid lease • NOTE: Your choice here may impact you other places like the FSA office, with the IRS, and when it comes to your social security check!

13. How much should I charge? • Really depends on the facts. • Talk to CEA, landowners, producers in your area. • Numbers from the Government 2018 (USDA NASS) • US Average: Irrigated Crop: $215; Dry Crop: $125; Pastureland: $12.50 • CO: IC: $144 • KS: IC: $131; DC: $58; Pastureland: $19.50 • NE: IC: $238; DC: $150; Pastureland: $22.50 • NM (2017): IC: $140; DC: $18; Pastureland $3.20 • OK: IC: $72 ; DC: $32; Pastureland: $13.50 • TX: IC: $91; DC: $30; Pastureland: $6.70

14. How much should I charge? (cont.) • 2017 Texas Northern High Plains Region • Pastureland: $7.20 • Non-irrigated cropland: $31.50 • Irrigated cropland: $139.00 • 2017 Southwest KS Region • Pastureland: $9.40 • Non-irrigated cropland: $33.50 • Irrigated cropland: $96.00 • 2017 Ford County, KS • Pastureland: $12.50 • Non-irrigated cropland: $33.5 • Irrigated cropland: $131

15. TX Rural Land Trends Report • Texas Chapter of the American Society of Farm Managers and Rural Appraisers

16. My Father’s Favorite Section • Assignment/subleasing • Forum clause • Dispute resolution clause • Attorney Fee provision • Liability clause • Indemnification clause

17. Grazing Lease Pointers

18. 1. Set a stocking rate. • Limit the number of animals that may be on the property during the term of the lease. • Landowner wants this term, tenant may not. • Size of animals—consider animal unit measurement. • This number may need to change based on drought or wildfire…

19. 2. What may be done on the property? • If limitations are not included, they do not exist. • State that lease is for grazing cattle only. • Are any areas that are off limits to the tenant? • Save yourself a tense situation in November….

20. 3. Maintenance of fixed assets. • Who will maintain during lease term? • Fences—require periodic inspection and immediate repair if damage. • Landowner—generally not liable for injuries during lease, but can be liable for failing to make promised repairs or making inadequate repairs.

21. 4. Spell out Termination Requirements • Lease should address termination requirements—who can terminate, how much notice must be given, etc. • Rules differ by state as far as the length of notice and when notice must be given for oral leases or leases not addressing this issue. • Consider providing an incentive for people to timely leave when lease is terminated—i.e. damage of $/day.

22. Hunting Lease Pointers

23. 1. Require EVERYONE to sign lease and waivers. • Cannot terminate lease or sue for breach of contract unless person was a party to the lease itself. • Consider a term allowing only lessee to enter and require any other parties be approved in writing by the landowner. • Obtain written releases prior to them entering the property. • Standard waiver of liability (express & conspicuous) • Language from Agritourism Act

24. 2. Hunting Specific Considerations • Can they use tree stands? Deer blinds? Feeders? • Liquidated damages for injuring/killing livestock. • Can ATV’s be used on the property? • Designated area for carcass cleaning and disposal? • Any requirements regarding photos?

25. 3. Describe leased property & limitations. • Consider including a map clearly showing leased land and any important areas. • Where should property be entered? • Will anyone else have rights? • Consider requiring a security deposit in case there is damage.

26. 4. Require lessee to follow all state and federal laws. • Why should this be in the lease? • If they break the law, they have breached the lease and you can recover damages. • If you want the right to automatically terminate the lease, use the magic words “…or the lease shall terminate.”

27. 5. Study up on Statutes • Differ greatly by state—worth doing some homework! • National Ag Law Center • Statutes to look for: • Recreational Use Statute (CO, KS, NE, NM, OK, TX) • Generally say landowner not liable for negligence if person is on ag land for recreational purpose—may be $ requirements. • AgriTourism Act (CO, KS, NE, OK, TX) • Generally say landowner not liable if person injured during educational/recreational activity on ag land—may require signs • Equine Liability Act (CO, KS*, NE, NM, OK*, TX*) • Generally say animal owner not liable for injury caused by inherent risk of animal activity—type of animals and list of exceptions may differ.

28. Additional Resources • Ranchers’ Agricultural Lease Handbook • Ag Lease 101 Website (aglease101.org)

29. http://agrilife.org/texasaglaw

30. aglaw.libsyn.com

31. Thank you! Tiffany Dowell Lashmet (806) 677-5681 tdowell@tamu.edu Twitter: @TiffDowell Facebook: Texas Agriculture Law Blog: agrilife.org/texasaglaw Podcast: aglaw.libsyn.com