Iowa Supreme Court Says 99-Year Lease Valid

October 28, 2016 | Kristine A. Tidgren

The Iowa Supreme Court today issued an opinion clarifying the reach of Iowa Const. art. I, § 24. The Court ruled that the provision does not apply to lands suitable for agricultural purposes if only an incidental portion of the land is used for farming purposes. Iowa Const. art. I, § 24 states:

No lease or grant of agricultural lands, reserving any rent, or service of any kind, shall be valid for a longer period than twenty years.

The land at issue was 300 acres (only a a portion of which was farmed) that was owned by the Iowa 4H Foundation. In 1969, the 4H Foundation entered into a Memorandum of Understanding with the Iowa Arboretum to develop a public arboretum on the property. In 1980, the parties executed a 99-year lease under which the 4-H Foundation leased “to the Arboretum for development as part of the Arboretum, the 300 acre tract of property” described in the Memorandum of Understanding. The lease stated that the 300-acre tract included 250 acres of timberland, which the Arboretum would lease for $1.00 per year. The Arboretum was also given, in effect, an option to lease any portion of the remaining acres of tillable land at a compensation based upon prior net farm income. Under this provision, the Arboretum had leased (and used for non-farming purposes) 7.1 acres of tillable land. The remaining 39.9 acres remained under the control of the 4H Foundation. Most of this property was enrolled in the Conservation Reserve Program, and the remaining portion was farmed by the 4H Foundation’s farm manager.

In 2013, the 4H Foundation sought to terminate the Iowa Arboretum’s tenancy on the grounds that the lease violated Iowa Const. art. I, § 24’s prohibition against leasing agricultural lands for a period of more than 20 years. When the 4H Foundation sought to evict the Arboretum, the district court ruled that the lease was valid and the Arboretum was entitled to stay.

On appeal, the Iowa Supreme Court agreed. The specific question before the Court was whether Iowa Const. art. I, § 24 applies to lands suitable for agricultural purposes that are primarily, but not solely, used for nonagricultural purposes. The Court had already determined in Howard v. Schildberg Constr. Co., 528 N.W.2d 550, 553 (Iowa 1995), that the constitutional restriction does not apply to a lease of land suitable for agricultural use but used solely for nonagricultural purposes.

After reviewing the law of other states, the Court ruled that the evil meant to be thwarted by Iowa’s Constitutional restriction did not arise when the primary purpose of the use of the leased land was non-agricultural. The Court noted that the provision was enacted to prevent lengthy leases that led to oppression of tenants and violent unrest. It was also intended to prevent long-term leases of agricultural land that led to stagnation and alienation of those parcels of land. Here, the Court ruled that the clear intended purpose of the 99-year lease was to establish an arboretum. The Court held that Iowa Const. art. I, § 24 did not invalidate a 99-year lease for land intended to be used primarily for an arboretum, but incidentally for farming.

The Arboretum is thus entitled to continue to possess the property for the remainder of the 99-year term.

This is the second case in 2016 in which the Iowa Supreme Court has interpreted this constitutional provision. In Gansen v. Gansen (decided last January), the Court ruled that only the portion of a lease for agricultural purposes exceeding 20 years is invalid. The Court also ruled that the constitutional restriction could be enforced by either a tenant or a landlord.

The case is Iowa Arboretum, Inc. v. Iowa 4H Foundation, No. 15-0740 (Iowa Sup. Ct. Oct. 28, 2016).