Remember to Terminate Unwanted Farm Leases before September 1

It’s that time of the year to again think about Iowa’s farm lease auto-renewal law. Tenants or landlords who do not wish to continue a farm lease into 2022 should be aware that their 2021 farm lease will automatically renew under the same terms and conditions if neither party takes action by or before September 1.  

Iowa Code § 562.6 generally provides that Iowa leases for a farm tenancy automatically renew for another year under the same terms and conditions as the original lease unless either party provides written termination notice on or before September 1. Iowa farm leases run from March 1 to March 1. The auto-renewal provision applies equally to oral leases or written leases. It also applies equally to one-year leases or multi-year leases that are set to expire. Regardless of the length of the term of the original lease, the auto-renewal provision extends the existing lease for just one additional year. However, a lease continues to yearly auto-renew under the statute, unless either party issues a notice of termination. In other words, without statutory notice, an automatically renewed lease will renew again.

Termination of Farm Tenancies

Iowa law provides three options for providing proper termination notice.

• By delivery of the notice, on or before September 1, with acceptance of service to be signed by the party to the lease or a successor of the party.
• By serving the notice, on or before September 1, personally, or if personal service has been tried and cannot be achieved, by publication, on the same conditions, and in the same manner as is provided for the service of original notices, except that when the notice is served by publication no affidavit is required.
• By mailing the notice before September 1 by certified mail to the last known mailing address of the other party to the lease.

Iowa Code § 562.7. The easiest method is option three: sending a termination notice by certified mail before September 1. The law states that service is complete when “the notice is enclosed in a sealed envelope, with the proper postage on the envelope, addressed to the party or a successor of the party at the last known mailing address and deposited in a mail receptacle provided by the United States postal service.” The courts have interpreted this statutory requirement very strictly. Notice sent via regular mail will not suffice, even if the recipient acknowledges receipt of the notice. Because the procedural requirements are so strict, the sender of the notice must keep the receipt from the certified mailing in case a dispute arises.

The form of the notice itself is not prescribed. However, the termination date must be set at March 1. Farm tenancies in Iowa run from March 1 to March 1, unless the parties have entered into a separate written agreement to terminate (see below). A sample termination notice form can be found here.  

Exceptions to Auto-Renewal

There are several important exceptions to the auto-renewal provision. First, parties can enter into a written agreement to terminate. This agreement cannot be part of the lease, but must be separate and subsequent to the actual lease. Only in that situation will the lease automatically terminate without statutory notice. Otherwise, a lease providing a specific termination date will still be subject to the statutory auto-renewal provisions even if the parties agree to waive their right to statutory notice.

Another exception exists for Animal Feeding Operations that are less than 40 acres. The auto-renewal statute does not apply to a farm tenancy with less the 40 acres where an animal feeding operation is the primary use of the land. An "animal feeding operation" is defined as “a lot, yard, corral, building, or other area in which animals are confined and fed and maintained for forty-five days or more in any twelve-month period, and all structures used for the storage of manure from animals in the operation.” Thus, it appears that only operations such as feedlots and animal confinement facilities fall under the statutory exception. Those leasing pasture ground should follow the termination notice procedures.

Another exception to the auto-renewal statute is where one of the parties breaches a material provision of the lease. If the tenant fails to pay rent, for example, the landlord can follow procedures to terminate a lease, and auto-renewal will not override that process.

For more information on farm leases, read Iowa Farm Leases: A Legal Review.