Agreements to Terminate Iowa Farm Leases Must Be In Writing
Last week, the Iowa Legislature enacted new legislation to require that an agreement to terminate a farm lease be in writing. The Governor signed HF 2344 into law on April 13, 2016.
This simple change better aligns Iowa's farm lease termination statute with legislative intent and court-declared policy and may prevent unnecessary court battles. It has long been the case in Iowa that, absent an agreement to terminate a farm lease, a farm tenant or a landlord must abide by strict statutory notice procedures to avoid an automatic renewal of the lease. Under Iowa Code § 562.6, “a farm tenancy is continued beyond the agreed term for the following crop year upon the same terms and conditions as the original lease unless written termination notice is served upon either party…” Iowa Code § 562.7 requires this written notice to be (1) served by certified mail before September 1, (2) personally served on or before September 1 in the same manner as original notice of a lawsuit is served, or (3) delivered to the other party with an acceptance of service signed by the person receiving the notice on or before September 1.
Iowa courts have long construed these rules strictly and liberally to “reduce uncertainty attending the termination of tenancies by informal notification” and to prevent courts from returning to “jousts between landlords and tenants as to whether notice was in fact given.”[i] Nonetheless, there remained in Iowa Code § 562.2, the opening statement, “If an agreement is made fixing the time of the termination of a tenancy, whether in writing or not, the tenancy shall terminate at the time agreed upon, without notice.” This left the door open for the very “jousts between landlords and tenants” the legislature and the courts were trying to avoid.
Such a case unfolded for the first time two years ago. In Auen v. Auen[ii], the Iowa Court of Appeals ruled that a “heated discussion” between family members resulted in an oral agreement to terminate a farm lease. The court ruled that the lease terminated on the day of the encounter, which was August 16, 2012, despite the fact that the tenant remained in possession of the property for the remainder of the lease term. The testimony was reported as follows:
[The plaintiff’s son] testified that he told [the defendant] (who was the plaintiff’s step-grandson), "[S]ince the first of September [is] coming up that I would have to terminate the lease, that I did terminate the lease." He testified [the defendant] replied, "Okay, it's terminated." In his testimony, the defendant stated that he did not agree to terminate the lease in that meeting. Rather, he testified that he stated, "If the rent's got to be raised this high, then the first thing [you need] to do is terminate the lease."
The plaintiff’s attorney did in deed attempt to send statutory notice to terminate the lease four days later on August 20. The notice, however, was either not sent via certified mail or the attorney’s office was unable to produce the certified mail receipt. Either way, the plaintiff could not prove that the notice met the statutory certified mailing requirement. As such, the plaintiff set out to prove the “agreement to terminate.”
The trial court found the plaintiff’s son to be the more credible witness and ruled that the lease was terminated on August 16. The court of appeals affirmed, finding that the plaintiff had sufficiently proven an oral agreement to terminate the lease, which was allowed by the statute.
Seeing a door opening to future attempts to avoid Iowa’s strict statutory termination notice provisions, the Iowa Legislature acted. HF 2344 increases clarity by requiring any agreement to terminate a farm lease to be in writing. This should better complement the statutory notice provisions and prevent courts from having to sort through conflicting testimony regarding whether an oral agreement to terminate a farm lease had been reached. The more "he said, she said" battles that can be averted, the better. The new change is as follows:
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