Friday, February 15, 2013
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Nebraska: Adjusting Pasture Leases for Drought

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Start Landlord-Tenant Communications Early to Avoid Problems

One of the harder phone calls to deal with in early September 2012 was from a land owner who was concerned that the tenant had left cattle on a pasture too long given the drought and the pasture was turned into a “road.” The landlord was willing to take less rent and get the cattle off. The tenant, who had a lease valid until October 15, was unwilling to take the cattle off early, as this meant that the tenant would need to start feeding the cattle with expensive hay. For the tenant, the pasture rent was already paid for and that was cheaper than other alternatives.

Cattle grazing drought-damaged pasture

It is easy to see how this is difficult for both parties. Everyone understands that leaving the cattle on the pasture too long reduces the long-term health of the pasture. The pasture will basically take a lot longer to recover if it has been severely overgrazed.

 

Lease Clauses to Consider

The easier way to handle this situation in the future is to include a clause in your written pasture lease for dry conditions. When it is too dry to continue using a pasture, the tenant should be required to take the animals out. In addition, the rent owed should be decreased accordingly.

Other important clauses should be considered. What if there is severe hail? What if the pasture burns in a fire? The clause for drought should probably be expanded to include these two disaster situations too.

The landlord and tenant should be visiting now about when grazing will start. If there’s adequate rain and grass starts normally, this is a moot point; however, if it doesn’t rain, or if the grass is slow starting due to overgrazing in 2012, delaying the start of grazing would be a reasoned approach. The rent owed should also be adjusted accordingly.

If re-growth is slow this year, stocking rates also should be adjusted to fit the moisture available and the growing conditions. Pricing leases on an Animal Unit Charge (AUM), and not by the acre, may be a reasoned approach to handle this change in stocking rates. In most situations, water for livestock is not an issue, but a clause should be added to include provisions for livestock water in case the water source goes dry.

Another concern is that drought-damaged pastures that do receive moisture this spring could become overrun with weeds. This would never be a problem when the pasture is grazed appropriately; however, when that thatch canopy is opened, seeds which have been in the ground for years can start to grow. A landlord-tenant discussion on weed control expenses would be appropriate.

Typically, pasture weed control is a landlord expense, but in this case, the tenant overgrazed the pasture, causing the weed flush when moisture occurred.  Tenants didn’t mean to overgraze in 2012, but the record-setting drought was severe. Managing the weed control in the next couple of years will be something that clearly needs to be discussed to reach an equitable agreement.

As you can tell, there aren’t many concrete suggestions to solve these situations. The key point of providing this information is intended to encourage the tenant and landlord to start discussions early and plan ahead for 2013 in case the drought continues.

I have always maintained that with any lease, communication is the key.  Discuss how the pasture is to be managed and what both parties expect. The tenant should keep the landlord informed about pasture conditions and the landlord should communicate expectations for the pasture. The bottom line is: “Hope for the best, but plan for the worst.”

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