Verbal year-to-year leases
Verbal (i.e. unwritten) leases are legally presumed to be year-to-year leases. A year-to-year lease has no fixed time period and is automatically renewed for another year until proper notice has been received by the tenant from the landowner (or vice versa) that the lease is terminated. Many farm leases in Nebraska are unwritten year-to-year leases, and automatically renew for another year unless termination notice has been received by Sept. 1.
Verbal year-to-year lease termination. For year-to-year leases, the Nebraska Supreme Court has ruled that the lease year begins on March 1, Moudry v. Parkos, 217 Neb. 521 (1984). Notice to a tenant to terminate the lease must be given six months in advance of the end of the lease, or no later than the preceding Sept. 1. For example, termination notice received by Sept. 1, 2011 would terminate the lease at the end of the current crop year – on Feb. 29, 2012. The new tenant (or landowner) could take possession free of the lease March 1, 2012. However, termination notice received after Sept. 1, 2011 would not terminate the lease at the end of the current crop year, but would terminate the lease at the end of the following crop year (beginning on March 1, 2012 and ending Feb. 28, 2013).
The Sept. 1 lease termination deadline has important practical implications. The two most common verbal lease questions I receive concern (1) the landowner has sold the land without first properly terminating the verbal lease, and (2) the landowner wants to raise the rent for the next crop year but doesn’t begin rent negotiations with the tenant until after Sept. 1. In the first situation, the landowner has sold the land subject to the lease (probably unintentionally – the landowner should have worked with his/her attorney to avoid this), and the tenant is still entitled to continue the lease for the next crop year. In this situation the former landowner (or new landowner or some combination thereof) may have to buy the tenant out if the new owner wants to farm the land immediately. In the second case, the tenant is under no legal obligation to renegotiate the cash rent after September 1, unless the tenant voluntarily agrees to do so. The landowner cannot force the tenant to pay a higher cash rent, and the tenant has the land for the next crop year (because it is too late for the landowner to terminate the lease if the owner doesn’t get the cash rent the owner wants). If the tenant wants to farm the land beyond the upcoming crop year, however, the tenant should negotiate with the landowner on the rent. To avoid these Sept. 1 deadline issues, landowners can use a properly drafted written lease (see your attorney).