RENTING LAND WITHOUT A WRITTEN CONTRACT
like many traditional farmers, Ian Greydanus still does business on trust and a handshake; but his trust extends a bit farther than most. The Northumberland County cash cropper farms 3,400 acres between Cobourg and Brighton through a series of land use agreements he has established with approximately 50 landowners, only four of which involve written contracts. On average, each field is 22 acres; but he does farm one 100 acre field. The smallest piece of land he rents from a single owner is eight acres.
“I won’t drive any type of distance for just that small of a parcel, it has to fit in when we are there,” says Greydanus. “But sometimes you go get one small piece and one leads to another one. You’re across the road and the neighbour says ‘did you want this piece too?’, and that’s kind of how it happens to get that many small pieces.”
With each new landowner he tries to establish an initial three-year deal that will allow him to put the land into proper condition and then he continues to rent from them on an annual basis.
“I try and talk to everyone at least once a year; it’s time consuming,” says Greydanus, “but the landowners want to feel like they have a stake in what we are doing and I have to pass their wishes onto my employees.”
PHOTO: IAN AND TRAVIS GREYDANUS.
a lawyer’s perspective
Sarah Jacob, a lawyer with SMM Law in Cobourg and a member of the Canadian Association of Farm Advisors, isn’t surprised that Greydanus has established such a large network of trust. “My experience is that land lease agreements are more frequently an oral contract than a written one, especially if it involves farming families that have known each other for years. There seems to be standard expectations that they all know.” However, she suspects there will be a change in this dynamic as more non-farmers buy land and younger farmers feel a need to put things in writing.
Dealing with dozens of landowners means Greydanus has to be willing to adapt some of his crop management techniques, or have patience in explaining the need for certain improvements in order for the land to be viable. Greydanus describes one situation where he tried to grow corn on a 21 acre parcel of land with very wet soil.
“Even though I talked to the landowner about tiling, he was unsure about the idea. But after one year when we ended up with 60 bushels on his field and right across the railroad track we ended up with 198 bushels of corn, I had to tell him we couldn’t afford to grow on his land anymore. He talked to a few neighbours and a month later he called me back and said go for it. I now have a ten year deal on it.”
But it doesn’t always work out so well. Greydanus has learned to trust his instincts when dealing with landowners. “I had another situation where I invested money into the land and I was going to carry on with improvements but I just didn’t feel good. So I didn’t move on it, and I’m glad I didn’t because we did lose that land.”
Jacob says, without a written agreement, it can be very complicated for a farmer trying to make improvements to the land. There is no guarantee they will be able to farm on that land long enough to recoup any of the costs of the inputs they put into the soil. However, once a crop is in the ground, the farmer does have the right to continue working the land through harvest.
“You legally have the same rights anyone else would as an occupant who has paid the rent and honoured the terms of the agreement,” explains Jacob. “Preventing access to the land is not a very manageable thing for the owner to do, particularly when our laws are relatively clear because of the agricultural background of our province. And I think that’s why oral agreements work so well because these rights, and the customs and the courtesies that go along with them, have been respected for so long.”
For farmers who want a written contract, Jacob says there is nothing wrong with doing it yourself. The contract needs to be as detailed as possible and should make it clear what both parties are agreeing to in terms of land management practices, improvements, rental rate, and when the lease will expire. However, once it is on paper, Jacob recommends having a lawyer review it.
“What we do as lawyers in that particular situation is look at the document and say this particular phrase could be interpreted two ways, which did you mean? Or, I don’t actually understand what you mean by this, explain it to me, because if I don’t understand it then maybe other people won’t either,” she says. “I find that is often the biggest issue with documents written by non-lawyers – they create ambiguity where they don’t realize it.”
Despite the extra time and risk involved with having his operation comprised of small fields and verbal agreements with dozens of landlords, Greydanus says it’s worth it. “I don’t know any other way, it’s what we’ve always had.” •
Option to Purchase vs. Right of First Refusal
An explanation from Sarah Jacob, a lawyer with SMM Law in Cobourg and a member of the Canadian Association of Farm Advisors.
“I think some realtors, and even some lawyers, use the terms ‘option to purchase’ and ‘right of first refusal’ interchangeably, but they are different.
An option to purchase is simply the landowner promises if they are going to sell they will go to the tenant farmer first. Sometimes, an actual purchase price will be noted in the written land lease agreement or they will agree to fair market value. The tenant farmer can then see if they can make the purchase happen. The written agreement may also state the length of time the tenant has to commit to the purchase.
A right of first refusal says if the landowner gets an offer from a third party purchaser that they wish to accept, they must bring it to the tenant. The tenant then has a specified time frame in which to say they will meet and match the offer and close with the landowner on the same terms or let the deal go.”
How does Greydanus make his operation work?
To get the most out of his small pieces of land, Greydanus plants his crops in blocks while adhering to a five year rotation of corn, soybeans and wheat. All fields within the same area are planted with the same crop in order to increase efficiency. For example, Greydanus explains that when he and his workers plant corn they have a tandem truck set up with the fertilizer tender unit on it and an area on it with seeds and a fuel tank. When the operator leaves in the morning, he has everything he needs for the day.
All of his equipment is stored at the home farm, but during busy times Greydanus says they do leave equipment around instead of bringing it home every night. It’s risky, but so far he hasn’t had any problems with theft. “It doesn’t sit there long enough. Maybe one or two nights and then it is gone again.”
However, Greydanus has dealt with some vandalism. “Once we had some kids from a nearby campground who put gravel in the fuel tank of our combine. I had the dealer come down and he used a special pump to clean out the fuel tank and filter and put it back in. It wasn’t too bad, except we lost four or five hours.”
Moving from field to field during harvest time, Greydanus uses two combines, two grain buggies and four tractor trailers to make sure he doesn’t miss a field. Greydanus says he can drive the corn head down the road, but notes he can lose an hour each time he has to drop the flex head to move it, and sometimes they have to drop it three or four times a day. That’s why he tries to buy equipment that fits on the roads in his region.
“I think the biggest challenge is roaming, safely going up and down the roads without annoying the neighbours too much and trying to do it safely,” says Greydanus. •