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Transfer, Sale and Sublease

What happens if a leased property is sold to another owner during the lease term?

In this situation, the terms of the lease will govern. The lease will continue to apply to the subsequent owner if so stated in the lease. Or the lease may require that upon transfer, the lease terminates and the existing owner compensates the tenant per the terms in the lease.


What happens if the government takes a leased property by eminent domain during the term of the lease?

A lease should specify what will happen in the event the premises are taken by eminent domain (through a condemnation proceeding), whether the parties reserve the right to terminate the lease, and whether the proceeds of a condemnation will be shared between the parties. A lease may also provide that, depending on the extent of the land taken, either party has the right to decide whether it is feasible to continue the operation of the farm or to terminate the lease without penalty, as well as how such determination should be made.


What happens if one of the parties in a farmland lease dies during the term of the lease?

As a matter of common law, the terms of a farmland lease continue after the death of either party. The deceased party’s interests and/or responsibilities descend to the applicable heirs. However, state laws, the kind of lease involved, and any applicable lease language will determine the outcome in each case.

The parties can also agree to terminate a lease upon the death of either party and can spell out in the lease what happens (e.g., to the crops and any associated income) if this occurs. Additionally, if the landowner dies during the term of a lease, the type of ownership in which the land was held will be relevant. Different states’ laws handle these situations differently. Consequently, it’s worthwhile to address this contingency in a lease.


What happens if one of the parties, either landowner or tenant, is an entity, such as an LLC, and the entity dissolves?

The operating agreement for an entity will dictate who takes on its rights and responsibilities upon its dissolution. If there is no operating agreement, each state’s corporations and/or intestacy (dying without a will) laws will govern who takes the rights and responsibilities of the lease.