Flexible Cash Lease For Cropland

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Flexible Cash Lease For Cropland


Agdex#:	812
Publication Date:	November 2003
Order#:	03-099
Last Reviewed:
History:
Written by:	Rob Gamble - Finance and Business Structures, Program Lead/OMAFRA

To use this form
Section 1 - Names and Addresses of the Tenant and Landlord Description of Property
Section 2 - Term of Lease
Section 3 - General Terms Of Lease
Section 4 - Amount Of Rent Payable
Section 5 - Tenants Duties
Section 6 - Production Practices And Management Decisions
Section 7 - Resolving Differences, Support Payments, Compensation For Damage And First Rights Of Refusal
Section 8- Additional Agreements

This lease is a guide for landlords and tenants to develop an agreement to fit their individual situation. This form is not intended to take the place of legal advice pertaining to contractual relationships between the two parties.

To use this form:

Complete two identical copies - one for the landlord and one for the tenant. Cross out any provisions not part of the agreement and have both the landlord and tenant initial these. Add any additional provisions desired. Use ink or a typewriter. Suggestions for completing and using this lease form can be found in the OMAFRA Factsheets Land Lease Arrangements, Order No. 01-065 and Flexible Cash Lease Agreements, Order No. 01-069

Section 1 - Names and Addresses of the Tenant and Landlord Description of Property

1. Names and Addresses of the Tenant and Landlord

This lease is entered into on ________________________________________________, 20_______,

Between

___________________________________________________________________________, Landlord,

of (address)___________________________________________________________________, Ontario

and ________________________________________________________________ spouse of Landlord

And

_____________________________________________________________________________, Tenant,

of (address)___________________________________________________________________, Ontario

and _________________________________________________________________, spouse of Tenant.

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2. Description of Property to be Leased

The Landlord rents and leases to the Tenant, to occupy and to use for agricultural purposes only, the following real estate located in the Township of or former Township of ___________________________, in the County, District or Region of ______________________ in the Province of Ontario, legally described as Lot ________, Concession ______, commonly known as the __________________________farm and consisting of approximately _______ acres, hereafter called the leased premises.

Section 2 - Term of Lease

The Term of the Lease

Instructional Note: A lease of this nature cannot extend beyond a term of 21 years; it is suggested that the maximum term of the lease for paragraph (a) below be 20 years.
Only use one of the clauses below. If a continuing lease is desired, use paragraph (a) and strike out (b). If a definite term is desired, use paragraph (b) and strike out paragraph (a). No notice of termination is necessary if paragraph (b) is used.

a) Continuing Lease - The term of this lease agreement shall be _______ year(s) commencing on __________, 20_____, and shall continue in effect from year to year thereafter (as an annual lease) unless written notice of termination is given by either party to the other at least _________ days prior to expiration of this lease or the end of any year of continuation.

b) Annual Lease - The term of this lease shall be _________ year(s), commencing on the _________________, 20_____, and ending on _______________, 20_____. If the Tenant wishes to renew this lease the Tenant must notify the Landlord in writing not less than sixty (60) days prior to the expiry date of the lease of the Tenant's desire to renew. If such a notice is delivered, then the Landlord and Tenant shall seek agreement on the terms of such renewal which must be agreed to within thirty (30) days prior to the expiry of the then current term of the lease failing which this lease shall terminate on the date set for expiration and the Tenant shall give up possession of the leased premises.

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Section 3 - General Terms Of Lease

1. General Clause

Right to Sublet or Assign - The Tenant shall have the right to sublet or assign this lease provided the Tenant obtains the written consent of the Landlord, which consent shall not be unreasonably withheld.

Amendments and Alterations - Amendments and alterations to this lease shall be in writing and shall be signed by both the Landlord and Tenant.

No Partnership Intended - It is particularly understood and agreed that this lease shall not be deemed to be nor intended to give rise to a partnership relation.

Binding on Heirs - This Lease shall be binding upon the Landlord and Tenant and their respective personal representatives, trustees, successors and assigns.

Landlord Liability - The Tenant takes possession of the leased premises subject to the hazards of operating a farm, and assumes all risk of accidents personally as well as for family, employees, or agents in pursuance of farming operations, or in performing repairs on buildings, fences, tile, and other improvements except for any liability arising out of the gross negligence of the Landlord.

2. Right of Inspection and Removal of Livestock or Crops

Landlord's Right to Enter Property - The Landlord reserves the right personally or by agents, employees, or assigns to enter upon the leased premises at any reasonable time to view them, to work or make repairs or improvements thereon, to care for and dispose of the Landlord's share of crops, to develop mineral resources or, after constructive notice has been given that the lease may not be extended, and following severance of crops, to plow and prepare a seed bed, make seedings, apply fertilizers, and any other operation necessary to good farming by the succeeding operator, these operations not to interfere with the Tenant's in carrying out the regular farming operations.

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Quiet Possession - The Landlord gives the Tenant quiet possession of the leased premises in accordance with section 13 of Schedule B to the Short Forms of Leases Act, RSO 1990, c. s.11.

Tenant's Right-of-Way - The Landlord shall give to the Tenant a right-of-way over lands owned by the Landlord which abut the leased premises for the purpose of allowing the Tenant to plant, care for or harvest the crops on the leased premises if such a right-of-way is necessary and such right-of-way shall cease upon the termination of this lease.

Tenant's Compensation on Termination of Lease - The Landlord agrees to reimburse the Tenant at the termination of this lease for field work done and for other crop costs incurred for crops to be harvested during the following year. Unless otherwise agreed, current custom rates for the operations involved will be used as a basis of settlement.

3. Transfer of Property (Strike out unwanted clause)

Sale of Property Recognizes the Lease - If the Landlord should sell or otherwise transfer title to the leased premises, the Landlord shall do so subject to the provisions of this lease.

Or

Lease Terminated on the Sale of the Property - In case the Landlord should desire to sell the leased premises and premises during the term of the lease, the lease may be terminated at any time by giving ______ day's notice to the Tenant. The Tenant shall, at the expiration of the notice period, peaceably and quietly give up possession of the leased premises to the Landlord. The Landlord shall, after the Tenant has delivered up possession in manner aforesaid, and paid to the Landlord the full proportion of rent up to the beginning of the notice period will compensate the Tenant for the value of the crops sown and then growing, or of the field work done on the leased premises in preparing for a crop, the amount of such compensation to be determined by arbitration if the parties cannot agree thereon.

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4. Termination of Lease

Grounds for Termination of Lease - If either party fails to carry out substantially the terms of this lease in due and proper time, the lease may be terminated by the other party by serving a written notice citing the instance(s) of default and specifying a termination date of ___________ days from the date of such notice. Settlement shall then be made in accordance with the provisions under the Right of Inspection and Removal of Crops section of this lease and any amendments to this lease.

Section 4 - Amount Of Rent Payable

The payments per acre will be determined by adjusting for the following:

_____ crop price only

_____ crop yield only

_____ crop price and crop yield

A base price per acre will be set at ___________ per acre.

_____ A base price will not be used.

The formula for calculating the payments per acre will be as follows:

_________________________________________________________________________________

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The price of the crop will be established by the following method:
(State the time of the year and the source used to establish the price.)

__________________________________________________________________________________

The yield of the crop will be established by the following method:
(State the time of the year and the source used to establish the yield.)

___________________________________________________________________________________

The rent shall be payable as follows:

$___________ on or before the _______ day of ___________, 20______.

If rent is not paid when due, the Tenant agrees to pay interest on the amount of unpaid rent at the rate
of _______ percent per annum from the due date until paid.

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Section 5 - Tenants Duties

1. The Use Of The Land

The Tenant further agrees to perform and carry out the stipulations below. (Strike out any not desired.)

a) Activities Required

Condition of Land at End of Lease - The Tenant agrees to leave the leased premises in the same condition as at the beginning of the lease.

Compensation to Landlord for Damages - When leaving the leased premises, the Tenant agrees to pay the Landlord reasonable compensation for any damages to the leased premises for which the Tenant is responsible.

Good Stewardship - To cultivate the leased premises faithfully and in a timely, thorough, and business-like manner and in accordance with normal farm practices.

Weed Control - To prevent noxious weeds from going to seed on the leased premises and to destroy the same and keep the weeds and grass cut.

Soil Erosion - To control soil erosion as completely as reasonably possible; keep in good repair all terraces, open ditches, inlets and outlets of tile drains; preserve all established watercourses or ditches including grassed waterways; and refrain from any operation or practice that will injure such structures.

Repairs - To keep the fences and other improvements in as good repair and condition as they are when the Tenant takes possession or in as good repair and condition as they may be put by the Landlord during the term of the lease, ordinary wear, loss by fire, or unavoidable destruction excepted.

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b) Activities Restricted

The Tenant further agrees, unless the written consent of the Landlord has been obtained:

No Alterations - Not to remove, alter or change the style or position of any building or fence on the leased premises

No Other Activities - Not to permit, encourage, or invite other persons to use any part or all of this property the leased premises for any purpose or activity not directly related to its use for agricultural production

No Cutting of Trees - Not to cut live or dead trees for the purpose of sale or personal uses

No Signage - Not to erect or permit to be erected any commercial advertising signs on the leased premises.

No Mineral Rights - Nothing in this lease shall confer upon the Tenant any right to minerals underlying the land. Such mineral rights are hereby reserved by the Landlord together with the full right to enter upon the premises and to bore, search, excavate, work, and remove the minerals, to deposit excavated rubbish, to pass over the premises with vehicles, and to lay down and work any railroad track or tracks, tanks, pipelines, power lines and structures as may be necessary or convenient for the above purpose. The Landlord agrees to reimburse the Tenant for any actual damage the Tenant may suffer for crops destroyed by these activities and to release the Tenant from obligation to continue farming the leased premises when development of mineral resources interferes materially with the Tenant's opportunity to make a satisfactory return.

2. Environmental Matters

The parties hereto hereby acknowledge that the Tenant intends to use the leased premises for agricultural purposes and that such use of the leased premises may have an environmental impact; accordingly, the parties agree as follows:

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Use of Normal Farm Practices - The Tenant shall conduct its operations on the leased premises in accordance with normal farm practices including, but not limited to, the application of fertilizers, pesticides and herbicides and shall only engage licensed applicators of such substances or shall ensure that the Tenant is appropriately licensed for such applications.

Nutrient Management Strategies and Plans - The Tenant shall not, without written consent of the Landlord, allow this land to be incorporated into a nutrient management plan or strategy, of a person other than the Tenant, that is required under the Nutrient Management Act 2002 or municipal by-law. If there is a nutrient management plan or strategy for the leased premises, then the Tenant shall store and manage all manure, nutrients, biosolids or other materials prescribed by the Nutrient Management Act 2002 or municipal by-law, in accordance to that plan or strategy and maintain records in accordance with the applicable law.

Manure - The Tenant will ensure that all manure and other material containing nutrients and any other material applied to the land is applied in accordance with all applicable laws. The Tenant will not allow, without the written permission of the Landlord, any manure or other by-products, other than those produced by the agricultural operation of the Tenant, to be applied to the land.

Farm Waste - All containers (e.g. pesticide and oil containers) and other waste of farm operations, with the exception of crop residue and manure, will be removed from the leased premises and disposed of in accordance to all applicable laws.

Sewage Biosolids or Pulp and Paper Biosolids - The Tenant shall not, without the written consent from the Landlord, apply or give permission to have applied, any municipal waste or sludge on the leased premises. Where the Landlord has granted permission, any municipal sludge or waste shall be applied in accordance to the Environmental Protection Act (Ontario) and Nutrient Management Act 2002 as they apply.

Chemical Spills - The Tenant shall immediately report any spill or misuse of chemicals to the Landlord and to comply generally with all environmental laws including the provisions of the Environmental Protection Act (Ontario) including the requirement to attend to the immediate clean-up of any such spill at the sole cost of the Tenant.

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Chemical Storage - The Tenant shall insure that no chemicals will be stored on the leased premises for longer than is required for the current years application or use and in no greater amounts than are required for the leased premises. The Tenant shall ensure that such chemicals are stored in a secure dry location away from all wells and watercourses in closed, tight containers above ground and clearly marked. No chemicals or chemical containers will be disposed of on the leased premises.

Noise - The Tenant shall ensure that no undue noise or other nuisance emanates from the leased premises or from the operations of the Tenant on the leased premises.

Spill Insurance - The Tenant shall obtain and maintain during the currency of this lease adequate policies of insurance, the content and policy limits thereof to be satisfactory to the Landlord acting reasonably, naming the Landlord as an additional insured party for the risks attendant with any environmental matter including, but not limited to, the improper disposal of wastes or the application or misapplication of toxic substances. In setting the policy limits the Landlord shall act reasonably having regard to the potential risks associated with such a spill.

Landlord Not Responsible for Costs - For separate consideration, the Tenant hereby agrees to indemnify and save harmless the Landlord from any costs incurred by the Landlord arising directly or indirectly from any breach by the Tenant of this provision.

Tenant Must Carry Insurance - For the term of the lease, the Tenant shall maintain insurance, insuring the Tenant while performing on the leased premises. The Tenant shall furnish a Certificate of Insurance at the Landlord's request and agrees that all applicable insurance policies shall name the Landlord as an additional insured and require the insurer to give to receive notice of termination of coverage to the Landlord.

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Section 6 - Production Practices And Management Decisions

1. Production Practices and Management Decisions (choose one under each heading)

Cropping Plans - The Tenant shall make all decisions with respect to growing of crops on the leased premise unless stated otherwise in this lease. The Tenant shall, prior to the beginning of each lease year, provide a plan of operation for the Landlord's information.

Or

The Tenant and Landlord will agree on an annual cropping plan by the beginning of each lease year. The cropping plan will include crops to be grown, pesticides to be used and conservation practices to be employed for each year, unless stated otherwise in this agreement.

Or

The extent to which the Landlord will participate in management decisions shall be governed by provisions attached to this lease form and hereby incorporated as a part of the terms of this lease.

Pesticides - The Tenant and Landlord will jointly make all decisions with respect to which pesticides can be used on the land.

Or

By December 31 of each year of this lease, the Tenant must supply the Landlord with a listing of what pesticides were applied to crops growing on the land, plus by April 30 of the last year of this lease, a proposed pesticide usage plan for the final crop year.

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Or

The Tenant is prohibited from using the following pesticides, unless mutually agreed upon:

List Pesticides:

_____________________________________________________________________________________

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Section 7 - Resolving Differences, Support Payments, Compensation For Damage And First Rights Of Refusal

1. Resolving Differences

Disagreements Will Be Submitted to an Arbitrator(s) - Any differences between the parties as to their several rights or obligations under this lease and to the affairs of the leased premises that are not settled by mutual agreement after thorough discussion, shall be referred to the arbitration of a single arbitrator, if the parties hereto agree upon one; otherwise to three arbitrators, one to be appointed by each party and a third to be chosen by the first two named before they enter upon the business of arbitration. The award and determination of such arbitrator or arbitrators, or any two of such three arbitrators, shall be binding upon the parties hereto and their respective heirs, executors, administrators and assigns.

2. Income Support Payments, Subsidies and Reimbursements

Tenant Receives Government Payments for Crops - In the event that any payment, subsidy or other reimbursement is made under any government agency or any marketing agency in connection with income support to the actual producer of crops grown on the leased premises during the term of this lease the amount paid in respect of the land leased in this agreement the leased premises shall be paid to the Tenant.

3. Compensation for Repairs to Buildings, Fences, and Improvements

Tenant Responsible for Normal Repairs - The Tenant shall leave the leased premises in good repair in accordance with section 9 of Schedule B to the Short Forms of Leases Act, RSO 1990, c. S.11.

Responsibility for Major Improvements - The Tenant shall not make major improvements to the leased premises without written permission from Landlord. Such permission shall be attached to and form part of the lease. The amount of compensation payable to the Tenant by the Landlord for a major improvement shall be agreed upon by the Landlord and the Tenant and if they cannot agree the dispute shall be resolved by arbitration in accordance with paragraph 7-1. Title to such improvements shall vest in the Landlord upon completion and no improvement shall be sold, bartered encumbered, disposed of or removed from the leased premises without the permission of the Landlord. For the purposes of this provision and without limiting the generality of the term, "major improvement" shall include water development, erosion control, fencing, construction of buildings, clearing, breaking and seeding of land to pasture and hayland.

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4. Compensation for Crop and Property Damages, Oil and Gas, Utilities, Roads and Rights-of-Way

Compensation Paid to Party who Suffers the Loss - Compensation for reasons such as, but not limited to, property damage and inconvenience from oil and gas exploration, pipeline development, power and telephone line installations, or road construction, shall accrue to the party that has suffered the loss. The Landlord will have the final say on who has suffered the loss except as follows:

a. Crop Damage - where the compensation is for crop damage, the compensation will be paid to the Tenants.

b. Work Completed by Tenant - where the compensation is for work completed by the Tenant such as, but not limited to, fence re-construction, grass reseeding or topsoil leveling, the compensation will be paid to the Tenant.

c. Compensation for Nuisance - where the compensation is for the creation of a nuisance situation such as, but not limited to, gates being left open, dust or noise, the compensation will be paid to the Landlord.

d. Land Damage or Loss - where the compensation is for a decrease in the land's value such as, but not limited to, loss of acres from the development, severing a parcel of land or topsoil disturbance, the payment shall be made to the Landlord.

Or

Compensation for reasons, such as, but not limited to, property damage and inconvenience from oil and gas exploration, pipeline development, power and telephone line installations, or road construction, shall be paid to the Landlord.

Or

Compensation for reasons such as, but not limited to, property damage and inconvenience from oil and gas exploration, pipeline development, power and telephone line installations or road construction, shall be determined by mutual agreement between the Landlord and Tenant. If mutual agreement cannot be reached, it shall be submitted to arbitration.

5. Rights of First Refusal

In the event that the Landlord receives a bona fide offer to purchase the leased premises which the Landlord is willing to accept, then the Landlord shall provide a copy of such offer to purchase to the Tenant within 48 hours of the receipt of such offer at which time the Tenant shall have a further 48 hours to confirm to the Landlord that the Tenant wishes to purchase the leased premises upon the same terms and conditions as set out in the offer to purchase failing which the Landlord shall be at liberty to sell the leased premises pursuant to the offer to purchase.

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Section 8- Additional Agreements

_____________________________________________________________________________________

_____________________________ Witness

_____________________________ Date

_______________________________________________________
Landlord / Date

_______________________________________________________
Spouse of Landlord / Date

_______________________________________________________
Tenant / Date

_______________________________________________________ Spouse of Tenant / Date

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For more information:
Toll Free: 1-877-424-1300
Local: (519) 826-4047
E-mail: ag.info.omafra@ontario.ca

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