Farm Lease - Death of Landlord and Option to Purchase by Tenants

Here, the parties entered into a ten-year farm lease agreement. Seven years into the agreement the landlord died and the executors failed to notify the tenants by mail (as required by Iowa law, creditors of an estate are entitled to notice) of the probate proceedings. The estate was closed and the landlord’s children inherited the farmland. A year later, the tenants notified the children that they were exercising their option to purchase the farmland. The children responded that they had no knowledge of the existence of an option contract. The tenants sued the children, seeking specific performance of the option contract. At trial, the tenants testified that they had rented the land for about 30 years and, had entered into a written agreement which gave them the option to purchase the farmland within two years of the expiration of the lease. The tenants also testified that the landlord did not want her children to know about the option. The agreement was signed by both parties and notarized, but was not recorded.  However, during the timeframe of estate administration, the children became aware of the tenant’s option right under the lease – which gave the tenant the right to notice as a creditor of the decedent’s estate.

In accordance with the agreement, the tenants paid the landlord each year and wrote “option” on each of the checks. The children received these checks, but claimed that they did not understand the significance of the notation. The trial court granted the tenants the right of specific performance on the option contract. 

The children appealed and the Iowa Court of Appeals first examined the requirement of Iowa Code §633.304 in regards to notice of will probate. Basically, the executor must notify those people they know to have claims against the property by mail. The children knew the address and names of the tenants and failed to give notice to the “reasonably ascertainable claimant.”  

 Based upon evidence presented at trial, it was clear to the appellate court that the children were aware of the option agreement during the administration of the estate, but remained silent because they stood to inherit the farmland should the option not be exercised. Accordingly, the appellate court upheld the option agreement and the tenants were allowed to complete the purchase of the property.  Dillenburg v. Campbell, No. 9-1044/09-0315, 2010 Iowa App. LEXIS 152 (Iowa Ct. App., Mar. 10, 2010).