When to Work with Lawyers

Entity formation is a key legal issue to consider from the very beginning of a farm business. Some business structures (e.g., LLCs and corporations) provide some personal liability protection for the business owner(s). However, choosing a corporate business form can limit your ability to access farmland under state corporate farm laws. A lawyer can help you determine what kind of business structure makes sense for you, considering both your business needs and farmland access laws in your state.

Many legal issues arise at the point of looking for land. These can be broadly grouped into three categories.

• Restrictions on land use – Before you commit to a farmland lease, it is important to be sure that you understand any restrictions on how you can use the land. Two common types of land use restrictions are zoning and conservation easements. For either type, a lawyer can help you determine whether your planned land uses would comply with legal requirements for the land you have in mind.
• Legal authority of the person giving you permission to use the land – Before negotiating a lease, it is important to be sure that the person granting you access to the land has the legal authority to do so. That can sound straightforward, but it is often more complicated with farmland leases. For example, if a farm is family-owned, one family member alone may not have the authority to grant you access to the land without getting permission from other family members first. A lawyer can help you determine who has appropriate decision-making authority so you can trust that your permission to farm the land is legally sound.
• Broker agreements – If you use a broker to help you find farmland or negotiate a deal to use it, a lawyer can help you write a broker agreement. These agreements spell out the rights and obligations of the broker and the farmer, including the broker’s fees.

When negotiating a lease, there are many benefits to working on a written lease rather than a handshake agreement. A written lease:

• provides a roadmap to the landlord-tenant relationship;
• helps anticipate and resolve problems that might arise later;
• provides longer-term leasing options and more stable land tenure;
• can incorporate conservation measures into the agreement;
• and provides clarity on issues such as responsibility for paying taxes, use of equipment, use of water, storage, utilities, maintenance and repairs, use of buildings, the tenant’s rights to construct permanent or temporary structures, option to purchase, conflict resolution, and many others.

Despite these benefits, many farmers are wary of putting things in writing or working with lawyers to do so. They may not wish to be seen as “difficult” tenants, or may have concerns about the cost of working with lawyers. Either way, there are strategies to manage these concerns.

Farmers can present landowners with model lease agreements to work from, rather than starting their own from scratch. Starting with a lease draft from a neutral third party (for example, Farm Lease Builder) can be a non-confrontational way to raise important issues that a lease should cover. It can also significantly lower a lawyer’s time and therefore cost if there is already a good draft lease for the lawyer to review.

Farmers can also be proactive about asking lawyers for their fee estimates and other cost information. And it’s always a good idea to budget for legal services in your farm business plan–a small upfront investment can prevent a lot of costs that could arise later if a dispute occurs and there is no adequate lease in place.

Once a lease is signed and operations have started on the farm, farmers face different legal issues related to running a farm business. These legal issues are beyond the scope of this Toolkit, but they are areas where a farmer may want to consider working with a lawyer again. For example:

• Operating agreement – if there is more than one farm business owner, an operating agreement can be particularly useful in determining how business transition will be managed if a founder leaves or if a farming couple divorces.
• Farm business insurance – lawyers can help determine the right types and levels of insurance coverage for farms conducting a range of business activities, such as agritourism, Community Supported Agriculture (CSA) subscriptions, and farmers market sales.
• Regulatory compliance – this is especially important to consider if food is served on the farm, or if retail sales are conducted on the farm.
• Trademark – if a farmer is building a brand, especially with value-added production, or if the farm wants to prevent its name from being used by an entity that does not share its values, a lawyer can help.
• Employment law – lawyers can help determine a farm’s legal obligations to employees, interns (who must generally be treated as employees under the law), and volunteers. Find more information in the Farmers’ Guide to Farm Internships from the Farmers’ Legal Action Group.
• Written contracts with suppliers and buyers – if a farm business is depending on a big contract for its income for the year, having an attorney review the contract can help protect the business.

Although few leases end up in landlord-tenant disputes, it is worth thinking ahead to how to handle a dispute if one arises.

Lawyers can help with disputes in a couple of ways. They can help negotiate a solution with the other party. At a minimum, they can help a farmer understand his or her rights. Even farmers without leases still have some legal protection, for example, through landlord-tenant laws. Lawyers can help farmers navigate through their options.

For farmers who have leases, the lease is an important tool in dispute resolution. First, it can remind the landlord and tenant what responsibilities were originally agreed upon. If that information is not enough to resolve the dispute, the lease can also direct the landlord and tenant to the agreed-upon process used to resolve problems.

Lawsuits and court orders are rare but serious escalations of landlord-tenant disputes. Court orders or notices of a lawsuit should never be ignored.

Lawyers can help farmers understand court documents and can represent farmers’ interests in court. But ideally, these serious legal consequences would be avoided through advance legal planning that sets out the rights and obligations of both landlord and tenant in writing–a well-drafted lease. Working with a lawyer early in the leasing process can reduce the likelihood of farmers facing the larger amounts of time, money, and stress involved in a lawsuit.

When a lease term ends, there are several ways that having a written lease can help make the transition smoother.

For example, a lease with an automatic renewal provision makes it easy for the farmer and the landowner to continue their existing agreement without any extra paperwork. There is no need to take action until one of the parties wants to end or change the agreement.

Written leases can also help prevent early termination of leases, or protect the farmer if an early termination occurs. Some states have additional protections for farmers written into state laws, by giving farmers a right either to harvest their crops after the lease ends or to be paid the value of the crops they have in the ground when the lease terminates. A lawyer can help farmers determine what their rights are when their lease terminates.

Well-written leases can also provide means for farmers to get out of the lease early if the arrangement isn’t working out. Usually this requires allowing the landlord time to find a suitable new tenant. A lawyer can help draft early termination terms that are fair to both sides.