Leasing swine buildings is becoming more prevalent as your production and financial needs change.
The Iowa Pork Producers Association developed this checklist to help both parties in the leasing process better develop and understand their business arrangement.
While this list is targeted for Iowa producers, anyone in any state can use it as a starting point. Always check with your attorney and/or financial advisor before signing any lease agreement.
Here’s a list of some of the terms you’ll be dealing with:
1 . Designation of parties. The lease must list who owns the buildings and who is leasing the buildings to the producer.
2. Definitions. The lease must define terms used throughout the lease. Most important, the lease should define what buildings and structures are to be leased.
3. Premises leased. List the county, number of acres, number of buildings and capacity of each.
4. Term. Set the length and any extensions of the lease.
5. Rental rate. These can be calculated many ways, such as monthly, yearly, per pig space or per head.
6. Utilities and other services. Allocate payment of all utilities and services to the specific party.
7. Taxes. Most often, the owner pays the real estate taxes on the premises.
8. Repair and maintenance. This is a major issue. The most common arrangement is for the owner to be responsible for most if not all repairs and maintenance.
9. Owner’s representations regarding premises. This includes any warrants that represent all buildings constructed within all applicable laws, rules and regulations.
10. Restrictions on assignment and subletting. Most leases prohibit the tenant from subletting to another tenant.
11. Environmental requirements – manure storage and removal. Spell out each party’s responsibility for compliance with all environmental laws.
12. Insurance. Set out each party’s responsibility for insurance, including property casualty and general liability.
13. Construction of other structures. Be aware of the location of other structures as it may raise the risk of disease concerns.
14. Default. Set a procedure and time period for the defaulting party to cure the default following notice from the other party.
15. Easement and ingress. Depending on the location of the buildings on the owner’s property, the tenant may want easement for access to the buildings.
16. Option to purchase. The parties may want to provide an option for the tenant to purchase the property at the end of the lease or any time during the lease.
17. Right of first refusal. If a buyer offers to buy the property from the owner, the tenant may want the opportunity to have the first option to buy the land.
18. Limitation of liability and indemnification. Each party wants to limit their liability to actions they take and to not be liable for the other party’s actions.