6 Common Questions About Leasing An Equestrian Facility

6 Common Questions About Leasing An Equestrian Facility

This entry is part 1 of 3 in the series Horse Farm Leasing
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Part 3, and the final part to your “Horse Farm Lease” series. These are some common questions we’ve been asked and thought it a good idea to share the answers with you all.

What should I do if I am leasing out my facility to a trainer and keeping my horses at the facility?

This isn’t uncommon.

We recommend keeping the arrangements at a two arms-length transaction.

For example, if you want to keep your horses in training with the trainer you are leasing the property to, it is advisable to do it the following way: The trainer pays you to lease the facility, you pay them for training board.

It is better to do this than discount the lease price to keep your horses at the property – it keeps things very clear and simple. Your trainer might be your friend but at the end of the day, if they are running a business it should be treated as such.

What are my insurance requirements?

Both the landlord and the tenant should have insurance.

For the landlord/owner:

You want to make sure your barn and facility are covered under your own insurance and protect yourself from liability, damages and any lawsuits. Before signing any lease, you need to talk to your insurance agent about where your liability lies with renting our your barn and facility.

For the tenant:

As a tenant, you should have insurance that covers extensive liability (commercial if you are running a boarding or training operation). You should also look into contents insurance coverage as well as coverages for loss in finances as a result of lawsuits or injury. If applicable, workers’ compensation insurance is also recommended.

How do I figure out what rent to charge (Landlord) / pay (Tenant)?

Rental amounts are going to depend on the following:

    1. The Location of The Property

      You are going to see higher rents being asked in more desirable areas. Places like Caledon, Halton Hills, Burlington, Flamborough and Guelph. Those within close proximity to horse show venues, vets, and trainers. However, you’ll need to factor in the condition of the property and facility as well.

    2. Property Dependant

      Simply put, the condition and the type of property is going to determine the rent as well. A run-down property is not going to fetch top rent. One with only a farm and no arena will fetch low rent as it will only appeal to a certain demographic of horse owners and not others like show jumping trainers. A higher-end, fully equipped facility, well maintained and looked after, you will likely get more rent.

    3. Size of the Barn & Property

      As you might imagine, the size of the barn and the property will also play a factor in the rent being charged. This will be in relation to the number of stalls and paddocks on offer as well. For example, all other things being equal, a 10 stall barn with 10 paddocks is going to be desirable that a 10 stall barn with 4 paddocks.

    4. (Landlord) Cover Your Costs

      As a landlord, you will want to factor in the costs you have into the rental price. Ideally, you’ll want to cover mortgage costs, taxes and any other expenses.

  1.  

What is the difference between renting out just a horse facility versus a horse facility and residence?

Renting out the horse facility – when you’re renting out just an equestrian facility there will only need to be one lease to cover the facility. The lines are a bit blurry on this but technically renting out a horse facility would fall under an agricultural lease and as such is typically held under the commercial tenancies act.

Renting out a horse facility and home – when renting out your horse farm and a residence on that farm to the same person, you want to have terms, conditions and clauses in one lease that covers both the facility and the residence.

What if I am just renting out my small, private barn?

As a landlord, you can really create your own lease for this type of rental and include clauses that protect you and your property. I would still want the lease to either be drawn up or looked over by a competent and knowledgeable lawyer on both sides.

You’ll seriously want to consider the size of your barn, the number of grazing paddocks you have and the number of horses you allow in.  If you have a 10 stall barn with only 10 acres of land you will seriously need to consider how that is going to impact the paddocks. Will the lease make sure to properly rotate horses and keep them off the grass during muddy seasons?

There is a lot to consider when it comes to renting out your private barn. Especially if it is in close proximity to your home and if you have one or two horses there yourself.

Proceed with caution on this one.

How do you choose a tenant?

For a large facility, ideally, you want a good trainer, with a good reputation to lease your property. Someone with a track record of clientele who has experience running a horse farm.

As with any property you are leasing out, do your due diligence.

For example:

  • Ask for references from past facility owners from whom the trainer has rented the property. If they are just starting out on their own, you might want to hear from the person they have been training under. It is ideal to have the two most recent landlords’ phone numbers so that you can call both yourself.
  • Run a credit check
  • Do some digging online. See what others say about them. If they have an existing operation, check to see if it has reviews.
  • Make sure they are in good standing with OEF & EC

How do you choose an owner?

As mentioned in the Renters: Before Your Lease A Horse Barn article, here are some things you can do as your own due diligence:

  • Ask around about the barn you are hoping to rent
  • Get in touch with the previous tenant if you know who it was
  • Simply ask the owner questions upfront. For example, how much horse knowledge they have, how hands-on they are, why the previous tenant left, will they be keeping horses there, etc.

 

This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.

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Renters: Before You Lease A Horse Barn

Renters: Before You Lease A Horse Barn

This entry is part 2 of 3 in the series Horse Farm Leasing
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Part 2 in our “Horse Farm Leasing” series. An article for Renters.

Have a Lawyer Review Your Lease Before You Sign It

It is a great idea to have a lawyer review your lease to make sure you, your horses and if applicable, your clients, are all protected.

Commercial and agricultural leases do not offer the same protections that residential tenants do. Even if you are renting the house on the property, it does not necessarily protect you from an eviction type situation.

Although it is the landlord’s right to put what he/she wants in a commercial or agricultural lease, you want to make sure the lease is fair and does not put you in any unfavourable situations if a disagreement should arise between you and the landlord. So always start with a lawyer you trust!

What Happens When The Owner Wants To Sell

There aren’t any hard rules on equestrian properties and leases in general. Least of all what happens if any owner decides to sell.

Under normal circumstances, if you are in a lease you should be protected from a sale during that lease. For example, if you are four years into a five-year lease and the owner sells, the new owners taking possession should have to keep you on as a tenant until the end of the lease when they move in.

According to Kurtis Andrews 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 during a year-to-year lease agreement.

As a way to protect yourself, it would be worth asking the owner to include a clause in the lease stating how much notice they will give you (e.g. 6 months, 3 months, etc.) if they decide to sell their farm.

Have Your Own Insurance and Confirm The Owner Has Their Own Insurance

You should absolutely have your own insurance. If you are running a boarding or training operation, you will need a commercial insurance policy. Make sure you are covered with continents insurance, liability insurance, loss in finances as a result of lawsuits or injury, and if applicable, workers compensation insurance as well.

The owner should have their own insurance that covers fire and water damage.

But remember, their insurance WILL NOT cover or protect you in any way!

Definitely speak with an insurance agent to understand your liabilities and risks. Ask for their recommendations on what insurance works best for your situation. HEP is the most popular insurance agency, you can contact them here.

Understand Your Maintenance Responsibilities

In the lease, the owner of the property will likely (or should) have a detailed list outlining who is responsible for what. The more detailed the list the more clear who is responsible for what. If you are unclear about where you stand, make sure to ask many questions upfront, before you sign.

It is reasonable for the owner to expect you to look after the barn in a good manner, with wear and tear to be expected as should be said in the lease agreement. They can also put as much responsibility on you to maintain the barn as they like. It is up to you to agree or not PRIOR to signing any agreement.

You will likely be expected to maintain fencing, footing, landscaping and the barn interior. For bigger priced items like roofing, plumbing, septic systems, wiring and putting in new footing, the owner is typically responsible for this.

If the owner promises you something upfront but doesn’t include it in the lease, don’t expect it to be done. For example, if the owner says he plans to put in brand new footing but doesn’t write it in, it may not get done. That is not to say that an owner isn’t going to do something they promise if it’s not in the lease, but just something to note.

Do A Pre-Inspection

It is a good idea to do a walk around the barn and property before you take over the place.

You could also do a couple of viewings of a barn before you decide to lease it. The first time you view there is often a lot of excitement happening and things get missed easily. The second time is when you go in with a clearer head and are able to take note of more things.

Once you sign the lease, you are agreeing to take the property as is, where is. So if you see something in your pre-inspection, like a fallen down fence that wasn’t there when you first viewed the property, that is something you’ll want the owner to repair prior to taking possession.

If The Residence Comes With The Barn

I mentioned this briefly earlier. Most of the time, when you rent the barn and home on the property you are doing so as a package. What I mean is, if for whatever reason you decide to cease operations at the barn, unless otherwise agreed to with the owner, you are not automatically allowed to stay in the home.

A lease agreement that covers both the barn lease and the home lease will be exempt from falling under the Residential Tenancies Act. Here is an excerpt from the Residential Tenancies Act:

(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;

Choosing The Right Owner

In Ontario, we do not have the fortune of having tons of barns to choose from when looking to lease. Even still, you want to make sure you are going to be renting from someone you will get along with.

Ideally, someone who knows about horses is a good place to start. However, you also want to make sure they aren’t going to be coming down to the barn telling you what to do every day either.

If you are in a situation where you are both renting from and training the owner of the barn and boarding their horses, you should ask that this transaction be conducted at two-arms length. That is, you pay them your rent, and they pay you to keep and train their horse. Why? Because it keeps things professional and clear both legally and financially.

The Ontario horse community is fairly small. People talk. You may be able to find out information about an owner by just asking around.

If a property has been sitting for lease for some time, and nothing appears to be wrong with the barn, property or the price, you might want to be wary of the owner.

You can also ask about why the barn is for lease, why the previous tenant left and judge for yourself from there.

 

This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.

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Leasing Out Your Horse Farm – Key Components To Your Lease

Leasing Out Your Horse Farm – Key Components To Your Lease

This entry is part 3 of 3 in the series Horse Farm Leasing
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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 to repair, 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.

6. Utilities

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.

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