A common issue that comes up with the sale of agricultural real estate in Kansas is whether the real estate is currently leased to a farmer or rancher and when that tenancy ends. Simply put, if you purchase real estate that is currently leased to another person, you take the property subject to that lease. This could mean that even though you purchased the real estate and received a deed, you may not have possession of that real estate until many months in the future! If you know this fact in advance, it may be addressed in the contract to protect the interests of the buyers.
The information in this post is meant to educate the buyer of rural real estate so that there are no unexpected surprises following closing. In Kansas, absent a written agreement to the contrary, leases are governed by the Kansas Landlord Tenant Act. This is basically a series of statutes (laws) that dictate the arrangement between land owners and tenants. Again, written agreements may change this arrangement so long as they do not violate the Landlord Tenant Act.
Basically, all farm tenancies are year-to-year beginning and ending on March 1 of each year. If the owner of the real estate does not properly terminate the lease, it will automatically renew for another year. One section that causes continuous issues, is the termination of farm tenancy statute. If the owner of the real estate wishes to terminate a farm tenancy, written notice must be given to the tenant at least 30 days prior to March 1 and set the termination date for March 1. Now, there are typically 28 days in February, which sets the typical termination date at January 29. In a leap year, the termination date would be January 30. As there are 31 days in January, this is counterintuitive as the termination dates do not fall on the last day of the month. However, if there are already fall planted crops (typically wheat) on the real estate at the time of termination, the termination does not take place until the harvest of the crops or August 1, whichever is sooner.
Often, agricultural real estate is sold in February-April. A contract for sale could foreseeably close after the tenancy termination deadline has expired and the Buyer would be subject to the existing lease. An easy solution before entering into a contract during this time of year would be to request that the contract would be contingent upon adequate proof of termination of the tenancy. Lastly, if there is a written contract, they often run on the calendar year and not the March 1-March 1 statutory term. In order to avoid issues with written agreements, one needs to simply ask to review the contract, and any termination notice, prior to entering into an agreement to purchase.
Kansas agricultural leases can be a complicated subject. Should you have any questions regarding your rural real estate transaction, feel free to call and ask to discuss the issue.