Agricultural Leases: Handshake Agreement or Written Contract?

By Laura Paine, Grazing Broker, Southwest Badger Resource Conservation and Development

“Experience teaches you that the man who looks you straight in the eye, particularly if he adds a firm handshake, is hiding something.” — Clifton Fadiman (1904-99), American humorist, radio and TV personality

Handshake agreements are made every day and in many situations. And they serve our society well, offering equal parts simplicity, efficiency, and trust.

When it comes to agreements about land, a handshake is every bit a “signed contract.”  That is, our laws recognize verbal contracts as legally binding.

However, it’s often the words left unsaid that ignite disagreement. Hence, the importance of a written contract.

Many believe formal written leases send a message of mistrust, especially when there is a social relationship, as between neighbors. In reality, though, written contracts are the best guarantee to avoid misunderstandings. Here are a few of the many advantages to having a written lease for your land.

Advantages of a written contract

First, they foster discussion; you (the lessor) and the lessee need to agree on important issues and expectations. Otherwise, each party may make assumptions, only fertilizing misunderstanding. Likewise, contracts help both parties remember the agreed-upon terms.

Second, they help navigate the unexpected. What happens if one of you dies? What if the lessee’s crop is a complete loss?  How are both parties and their families protected when the unexpected arises?

Third, although most leases are year-to-year, many landowners tend to develop long-term relationships with their lessee. A longer term lease allows you and your renter to implement soil improvements and conservation practices that require time and money, but, after several years, benefit both parties. In Wisconsin, a lease longer than one year legally needs to be in writing.

In short, written contracts are a powerful tool. And once completed, of course, you can still “shake on it.”