Oral Farm Lease Termination Rules and Calculation of Damages

August 20, 2011 | Erin C. Herbold-Swalwell

 

A landowner had orally leased 80 acres (64.55 tillable acres) of farmland to her nephew since 2000, but did not allow the nephew to farm the land in 2008.  The nephew sued for lost profits and improper termination of a year-to-year farm lease pursuant to Nebraska law. 

Note:  Under Nebraska common law, written notice of termination of an oral farm lease must be given six months before the date the landlord wants the lease to end.  Because Nebraska common law treats oral farm leases as year-to-year leases running from March 1 through the following February, that means that the notice must be given by September 1 to timely terminate an oral lease.  Notice later than September 1 may be given if the tenant agrees. 

The trial court ruled for the nephew and held that the aunt did not give timely written notice of termination which resulted in the nephew’s lost profits in the amount of $24,885.  The aunt appealed, arguing that even though she did not give written notice of termination six months in advance (i.e., by September 1, 2007), she and her nephew had orally agreed that the nephew would not be farming the ground during the 2008 crop year because he “breached” the lease.

Testimony at trial revealed that the parties “renegotiated” the lease in 2005 and the nephew had agreed to pay the same rental rate, and that he had agreed to pay for $1200 for conservation work to the property per crop year. The aunt argued that the conservation work should have been done before spring planting to satisfy the terms of the agreement. The nephew countered that the work could be done at any time during the lease year. The nephew testified that he received a written notice of termination of the farm tenancy on Oct. 23, 2007.  He considered the notice invalid because it was not sent by September 1, 2007.  As a result, he wrote his aunt a check in February of 2008 for the first half of the rent.  The nephew calculated his damages for the 2008 crop year by using the number of tillable acres as certified by the FSA for the farm multiplied by the forward contract price for soybeans he had with a buyer of $11.73 per bushel.  From that sum, he subtracted his estimated expenses. The nephew calculated his damages for lost profits to be $24,885.  The trial court agreed that the aunt had not properly terminated the lease and that the nephew had computed his damages correctly.

On appeal, the aunt argued that the trial court improperly found that a lease was in place for 2008 because the nephew had failed to comply with the parties’ agreement as to the conservation work to be done.  She also argued that if a lease did exist, the nephew’s damages calculation was based on speculation and hearsay. But, the appellate court held that even if the nephew did not comply with the conservation work agreement, the aunt still had to notify him in writing that she intended to terminate the year-to-year lease by Sept. 1.  The nephew had not agreed to a notice later than September 1.  So, the nephew had the right to farm the ground, and was entitled to damages that would fulfill his contract expectations – the value of the harvested crop less the cost of producing the crop.

However, the appellate court determined that the trial court was imprecise on how it handled the evidence of the nephew’s damages and reversed the trial court’s award of damages and remanded the case for a new trial solely on the damage issue. 

The court’s decision is designated as not for permanent publication.  Kennedy v. Kennedy, A-10-941, 2011 Neb. App. LEXIS 112 (Neb. Ct. App. Aug. 16, 2011).