Part 1 in our “Horse Farm Leasing” Series. An article for owners that covers the 10 key components to have in your lease agreement when you are renting out your horse farm.
There is no standard lease agreement for renting out your horse farm. Each lease is going to be tailored to you and your property as are the clauses you decide to include.
We highly recommend contacting a lawyer to either write up the lease for you or review the lease prior to signing it with a new renter!
Although you can customise your lease agreements, here are the 10 key components we think every horse farm lease agreement should include.
1. The Rental Amount & Rent Due Date
This is fairly standard (and obvious).
Your lease should outline the agreed upon rental amount and what day each month those payments are due. Most often payments are made on the 1st of every month, but this isn’t always the case or necessary.
It is important to outline the payment date mainly because, if that date is missed, even by one day, you may want to start the eviction process.
Nothing revolutionary here but a key component nonetheless.
2. Length of the Lease & What Happens At The End of The Lease
You can make the lease length as long as you like. Three or more years is typical.
It is important to outline what happens after the lease ends as well. Give the lessor the option to extend the lease or allow them to switch to a year-to-year or month-to-month basis. Typically we like to see a new lease signed for at least a year once the old one expires. This offers a bit more security for the horses, boarders and trainers. Of course, you’ll only agree to this if the renter has been good and if you don’t have any plans to sell in that year.
Here, you would also indicate how much notice you would like prior to the end of the lease if the lessor decides to vacate the property. 60 to 90 days would be normal for their notice to you.
3. Insurance Requirements of the Tenant
This might be the most important part of the lease. If you are relinquishing your horse farm to a renter, you want to make sure you are NOT going to be liable for damages, injuries, lawsuits, and accidents.
Naturally, you should have your own insurance that covers buildings and other liability – just to be safe. Definitely speak with your insurance agent to understand when you might be liable for something. For instance, if a barn fire is caused as a result of faulty wiring – is that something you are liable for or not?
We recommend putting language in the lease that clearly stipulates your insurance DOES NOT cover or protect the tenant in any way.
On that note, it is recommended that you require the tenant to have insurance throughout their term as part of the rental agreement. And to provide proof of this insurance prior to giving them possession.
They should have an insurance policy that covers extensive liability (commercial if they are running a boarding operation), loss in finances as a result of lawsuits or injury, and if applicable, workers compensation insurance and some form of contents insurance as well.
Find out more about insurance with HEP here.
4. Outline Who is responsible for Repair and Maintenance Obligations.
It takes a lot of work to list the items that are to be repaired by you versus those that need to be maintained by the tenant. But doing the work upfront makes it clear who is responsible for what, and it helps to avoid any headaches in the future.
As a landlord, you can technically put as much or as little responsibility on yourself to maintain the property as you like… but remember, it is your asset and you want to make sure it is looked after. No one should look after it better than you – as such, you might want to maintain control of the maintenance or repair of larger items. That is, it would be reasonable for you to maintain utility systems like septics and wells. The same would go for items like roofing, plumbing and wiring. But it is not uncommon to see leases that ask the tenant to look after maintaining some of these items as well.
However, if there is damage caused as a result of incorrect use, you can put language in the lease that would make the tenant responsible for paying the bill for repairs as a result of damage by them. For example, if a tenant were to run water sprinklers in the outdoor arena all day and night causing a problem with the well, this is something you might ask them to foot the bill for.
Manure removal, fence repairs, weeding paddocks, snow removal, lawn maintenance, gutter cleaning and interior barn maintenance should be the tenant’s responsibility.
There will also be language to protect the tenant where “wear and tear” is a reasonable expectation to having horses on a property.
Occasionally, you might also see a lease that asks the tenant to be responsible for repairs up to a certain maximum amount, e.g. $500 of cost but you as the landlord agree to cover anything that exceeds this amount.
5. Care of Horses
You can get pretty detailed here. Asking the tenant to guarantee good care of the horses from head to toe, literally, is an option.
Even though it might seem obvious, It is still advisable to include this your rental agreement. Make sure it is noted that it is the sole responsibility of the tenant to look after the care of the horses – without exception.
You can write in that the tenant agrees to ensure – all horse’s hooves are trimmed, horses are fed, all immunisations are up to date and administered routinely, horses are exercised, horses are monitored daily, horses needing veterinarian care are attended to promptly, etc.
Here, you can also detail how many horses can be kept on the property at any one time. You don’t want your fields overgrazed so stipulating the number of horses you allow on the property is reasonable.
Nine times out of ten, the tenant will pay the utilities on the property. Especially on one that is an operating training and boarding facility.
If you’ve owned the property for a while without a full barn, the increase in number of horses and boarders will drastically increase your utility costs. It is advisable then that you charge rent plus utilities.
If you are still using part of the barn you can do partial utilities (e.g. 20,80 or 40,60 whatever the appropriate ratio is that works).
If you live on the property and are renting out just the barn, it would be worth installing a separate hydrometer. Newer built barns often come with separate meters already.
7. Responsibility, Liability and Warranty
As a landlord, you don’t have control of the day to day runnings or activities at the barn, BUT you are still at the end of the day, the owner of the property. As such you will definitely want to include clauses related to your responsibility and liability (or lack thereof).
In simple terms, you’ll want to state that you assume no reliability of risk. The tenant agrees to hold you harmless from any damage, claims, penalties, costs, injury or sickness that may result from equine-related activities or their use of the property and buildings.
They further understand that you make no guarantees or warranties about the premises and that it is the responsibility of the tenant to do their due diligence on the property prior to signing the lease.
8. When the Residence Comes With The Facility
If you are renting out the residence on your property to the trainer as well, this will not fall under the Residential Tenancies Act. It will be exempt from the RTA because the use of the house is based on the use of the facility.
However, this is only the case if you stipulate this as such in the lease! You should state all terms relating to the use of the residence in the same lease as the barn. You need to have all terms under ONE lease.
Residential Tenancies Act Exempt:
(h) living accommodation located in a building or project used in whole or in part for non-residential purposes if the occupancy of the living accommodation is conditional upon the occupant continuing to be an employee of or perform services related to a business or enterprise carried out in the building or project;
(j) premises occupied for business or agricultural purposes with living accommodation attached if the occupancy for both purposes is under a single lease and the same person occupies the premises and the living accommodation;
So, if for whatever reason you need to evict someone from the barn, or they decide to cease barn operations, they are not legally protected from remaining in the home as well.
9. Who is Responsible for Modifications & Upgrades
Typically the lease will have some sort of language where the tenant agrees to take the property “as is”.
Big upgrades like installing drainage systems, putting up new fencing, putting in new footing would typically be done at the landlord’s cost. Unless you have plans to do these items, they wouldn’t be included in the lease as items you are going to upgrade.
You might want to have the tenants ask for permission before making any alterations to the property. I wouldn’t be overly concerned with changes like adding hooks to stalls for hay nets or minor changes like that but larger changes to items like stall doors, flooring, painting, should be discussed first.
10. Termination Stipulations
You’ll want to stipulate reasons for possible causes for early termination – like non-payment of rent, inability to properly care for the horses and serious damage to the property.
If you decide to sell the property, let the tenant know immediately! There isn’t a strict rule on this with regard to equestrian properties and leases but we can go off of typical commercial and farm leases. If for example, they are in year 4 of a 5-year lease agreement and you sell the property in that year, the new owners will have to wait to move in until the lease is up with your current tenant.
If you decide to list at the end of their lease, you should give them as much notice as possible! Once the property sells, let them know if they need to vacate again, by giving them plenty of time to find a new barn.
According to Kurtis Andrew Law, a lawsuit for an agricultural tenant was settled and required thereafter landlords to give tenants 6 months’ notice should you wish to end their tenancy while they are on a year-to-year lease agreement. I would use this as a good benchmark.
These are only ten out of many other possible clauses you might need for your specific horse farm. So again, be sure to have a lawyer look over your lease agreement to ensure all your i’s are dotted and t’s crossed. Or better yet, have them write one up for you
This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.