“Ground” Rules: Nebraska Farm Lease Termination Requirements John F. Zimmer, V, Cline Williams Wright Johnson & Oldfather LLP Agricultural lenders in Nebraska routinely navigate many challenges, including issues related to farm leases. Lenders might encounter farm lease issues in a variety of contexts, such as dealing with distressed real estate, negotiating financing or workouts with landlord or tenant borrowers, and working with estates in probate. This article briefly reviews the different rules governing termination of verbal and written farm leases under Nebraska law. Diligently observing these rules — including the key Sept. 1 deadline for termination of some leases — can help prevent unintended consequences for lenders and their customers. TERMINATION OF VERBAL FARM LEASES Unlike residential tenancies, agricultural farm leases are not governed by statute under Nebraska law.1 Since the early days of statehood, the common law decisions of Nebraska courts have provided the default rules applicable to farm leases.2 In the absence of an agreement to the contrary, verbal farm leases are governed by the default rules formulated by Nebraska courts. The Nebraska Supreme Court has held that the default term for a yearly lease of farm ground runs from March 1 to the end of February the following year, with rent due upon expiration of the term.3 A verbal year-to-year farm lease does not terminate at the end of the lease term; instead, it automatically renews unless notice of termination is provided. Nebraska courts require that notice of termination be provided six months in advance, effectively creating a Sept. 1 deadline for lease termination.4 For example, if notice of termination is not provided by Sept. 1, 2026, a verbal year-to-year farm lease will automatically renew for the following year, running from March 1, 2027, to Feb. 29, 2028. The same rule does not necessarily apply to written farm leases. WRITTEN FARM LEASE TERMINATION The termination and renewal of written farm leases are governed by the written contractual terms.5 Written farm leases often contain termination deadlines that differ from the default Sept. 1 deadline for verbal year-to-year leases. Unless its terms provide for automatic renewal, a written lease terminates upon expiration of the fixed lease term.6 Importantly, however, if a tenant holds over with the landlord’s express or implied consent following expiration, there is a presumption that the lease is converted into a year-to-year tenancy subject to the Sept. 1 termination deadline.7 As is often the case, carefully spelling out the written contractual terms for termination and renewal can help avoid confusion and controversy. LEASE TERMINATION CONSIDERATIONS For written farm leases, notice should comply with all applicable lease requirements. Beyond lease-specific requirements, there is no statutory or judicial requirement that the notice of termination be provided in any particular form or manner. Generally, written notice is preferred over verbal notice for purposes of proof and documentary evidence. When sending notice by mail, sending by both certified mail and first-class mail can help ensure that the notice is properly delivered. Even in cases where the termination deadline has passed, parties can always terminate a farm lease by mutual agreement. Especially in cases involving workouts and sales, the ability of parties to negotiate a mutually agreeable lease termination should not be overlooked. CONCLUSION When dealing with farm leases, it is critically important to be aware of the type of lease involved and the applicable terms for renewal and termination. Staying on top of these deadlines at the outset can often help prevent confusion and disagreement later. The facts and legal issues will vary in every case. Lenders are encouraged to contact counsel when dealing with particular challenges or complications related to farm leases. John F. Zimmer, V, is a partner with Cline Williams Wright Johnson & Oldfather LLP in Lincoln, Nebraska. He represents banks, agricultural lenders and other creditors in all stages of secured transactions, creditors’ rights litigation and bankruptcy. 1. Neb. Rev. Stat. § 76-1408 (excluding agricultural leases). 2. See, e.g., Critchfield v. Remaley, 21 Neb. 178, 31 N.W. 687 (1887); Holtman v. Lallman, 122 Neb. 183, 239 N.W. 820, 821 (1931). 3. Moudry v. Parkos, 217 Neb. 521, 524, 349 N.W.2d 387, 390 (1984) (citing Holtman, 122 Neb. at 183, 239 N.W. at 820). 4. See id.; Wilson v. Fieldgrove, 280 Neb. 548, 553, 787 N.W.2d 707, 712 (2010). 5. Fisher v. Stuckey, 201 Neb. 439, 444–45, 267 N.W.2d 768, 772 (1978). 6. Critchfield, 21 Neb. at 178, 31 N.W. at 688. 7. See id.; Moudry, 217 Neb. at 523, 349 N.W.2d at 389; Barnes v. Davitt, 160 Neb. 595, 599, 71 N.W.2d 107, 110 (1955). 26 NEBRASKA BANKER
RkJQdWJsaXNoZXIy MTg3NDExNQ==