Many farming arrangements rest on handshake deals – essentially trusting another person’s word. When there is not much at stake, and flexibility is important, unwritten handshake deals can be a helpful tool. However, when farmers are investing money, time, and other resources in a farm operation, it is generally a big mistake to rely on a lease agreement based on a handshake.
“It is a common scene in U.S. agriculture: A landowner and a tenant talk for a few minutes over a cup of coffee, then shake hands to clinch a one-year deal to rent a farm or piece of land. No fuss, no bother, no paperwork.” – Jonathan Knutson, Ag Week (Dec. 11, 1989)
Handshake agreements can be a mistake because they often lend themselves to uncertainty and misunderstanding. For example, parties to a handshake lease might simply forget commitments previously made. Leases tend to last at least a year, and most people have trouble remembering what they did last week – let alone the terms of an oral agreement entered into years before. It’s also possible that two farmers might walk away from a handshake deal with entirely different views about the agreement they reached. In this kind of situation, because it is impossible to go back and look at a written document, nobody can be entirely sure about the terms of the original agreement.
Additionally, farmers who use an informal oral agreement instead of a written lease miss a great opportunity to create a strong foundation for the landlord-tenant relationship, and to iron out any potential issues before they arise.
Finally, in most circumstances, handshake deals cannot create a legally enforceable lease. If the relationship sours, for example, farmers without a written lease likely have no legal defense against eviction from the property.
Ben Flanner, of Brooklyn Grange LLC, has an engineering background. After a work trip to Australia, and visiting farms on weekends, Ben realized he did not want to spend his life behind a desk.
Although oral agreements (handshake deals) are relatively common in the farming community, this kind of arrangement leaves both parties legally vulnerable. For example, in some states (such as Vermont) an oral lease agreement amounts to a “tenancy at will.” That means that the “lease” can be terminated by either party with little to no advance notice.
Also, when a handshake deal fails, there is little evidence surrounding the arrangement, given that nothing was written. Therefore, it might be difficult for a wronged party to later vindicate their rights – or for a simple misunderstanding to be cleared up by referring to the original written document.
As a result, if you are counting on a lease agreement – or any type of agreement – it makes sense to get it in writing.
Some farmers are hesitant to ask for a written agreement because they worry the request could signal lack of trust in the other party. However, as discussed below, a written lease can actually foster a stronger landlord-tenant relationship because the process of creating the lease helps make sure that everyone is on the same page.
It’s often said that a verbal agreement is as good as the paper it’s written on.
Written leases do not have to be formal. However, it’s a good idea to think through the details of the tenant’s proposed farm operation and include key points in the lease if possible.
At a bare minimum, a lease should contain at least the following basic terms in order to be legally enforceable:
The Farm Lease Builder in this toolkit can help tenants and landlord create a draft written lease that can be edited together and brought to a lawyer for review. See below for additional resources.
It’s not an attorney’s job to make decisions for farmers or to set farm transfer goals. Instead, attorneys can provide information about pros and cons of different options, advice about what is common versus unusual, fair versus unfair, etc. Attorneys can help farmers understand the universe of possible farm transfer goals and help narrow down individual options so that farmers can make final decisions.
The Center for Agriculture and Food Systems is an initiative of Vermont Law School, and this toolkit provides general legal information for educational purposes only. It is not meant to substitute, and should not be relied upon, for legal advice. Each farmer’s circumstances are unique, state laws vary, and the information contained herein is specific to the time of publication. Accordingly, for legal advice, please consult an attorney licensed in your state.