Explain the importance of oral farm leases to farmers in Arkansas?
There’s about 14 million acres in farms in Arkansas, with a large portion of the farming population being over the age of 50. Many farmers and ranchers are not always comfortable with written documents and operate on a handshake. A large portion of Arkansas’s agricultural land is under an oral farmland lease.
What specific act or law defined oral farm leases for landowners?
Act 866 of 1981, which became Arkansas Code § 18-16-105, provided landlords and tenants with a gap filler provision that helped explain what was expected and required when terminating an oral agricultural lease. While the language contained within the Act did not contemplate every aspect of oral leases, it did give Arkansas’ landowners and tenants detailed regulation on what was expected when one party wanted to end the lease. Over the years, the Courts added some more guidance to the Act and develop the rights and expectations that originated in the 1981 Act. That evolution then required land owners to give their agriculture tenants notice on or before Jun. 30 of that year if they intended to terminate the lease. Courts had gone through and made that a requirement, and they applied that to year-to-year leases, not just leases that ran for the calendar year. Ultimately, the Act, with the assistance of the Courts, established notification rights before an oral agricultural lease could be terminated.
Explain what happened in the 2007 legislative session to repeal this Act.
Act 1004 of 2007, popularly referred to as the Arkansas Residential Landlord Tenant Act (ARLTA), repealed Arkansas Code § 18-16-105. The bill, sponsored by Representative Robbie Wills (D-Conway), inadvertently struck the section from the Arkansas Code. Representative Wills has stated that the original intention was to move Arkansas Code § 18-16-105 to another location within ARLTA, but it was inadvertently left on the cutting room floor. Typically, the legislature is viewed as acting with reason and contemplating the effects of their action, so the claims that the section was inadvertently eliminated would likely have little effect on any effort to reinstate Arkansas Code § 18-16-105 without legislative action. Although the ARLTA was purportedly designed to not have any affect on agriculture, it affects the notification requirement and statutory guidance that added that definiteness to the oral farmland leases.
The additional notification requirements are affected, but oral farm leases aren’t invalidated by any means. What will ultimately happen if there’s a dispute over terms of an oral lease, the statuary guidance isn’t there with regard to the notification of termination, but the oral agricultural leases are still good.
So who will this affect?
Potentially, the greatest affect will be on whoever is involved with one of these leases that are terminated, landlord or tenant. In the short-term, the courts will likely apply traditional leasing concepts for year-long leases, which would probably require 6 months notice of termination. This is what was required before, under the spirit of the 1981 Act, but the Jun. 30 date clearly established by statute is no longer.
Why does this matter?
Other factors can now come in and influence the requirements for the termination of an oral agricultural lease. Long-term effects, could either be good or bad in the sense that the Courts could get involved and it could either be more muddled or confusing. On the other hand, the Courts or the legislature now have the opportunity to define the relationship between landlords and tenants involved with agricultural leases even better. Even though the legislature is not scheduled to reconvene until 2009, there is the opportunity now for it to come in and create provisions for oral farmland leases that have more guidance for the requirements of termination. The opportunity is there, but it will not happen, or probably cannot happen, until the next legislative session. In the last 3 to 4 years the Arkansas legislature has held special sessions to address issues with schools, but there has not been a strong movement to hold a special session for the purpose of oral farm leases.
Who should be concerned about the effects of this Act?
This is something that people who are going to make changes in their operations, in terms of who they lease to/from or the amount of acreage leased. If your are leasing new land, as a landlord or a tenant, this may be something that farmers and ranchers need to be aware of whenever making that business decision. The rights of everyone involved seek to be up in the air, with respect to oral leases, and if they are not going to put their agreement into writing, there is an added degree of risk at everyone will have to bear. Consulting an attorney who can put your arrangement into writing will help define your relationship and be cheaper in the long run, if a dispute arises.
Eric is an associate with Smith, Maurras, Cohen, Redd & Horan PLC, in Fort Smith, Arkansas. He received his LL.M. in Agricultural La from with University of Arkansas School of Law in May of 2007. Eric was awarded his J.D. with honors from the University of Arkansas School of Law in May of 2006.