Word of Mouth: Verbal Farm Tenancies in North Carolina

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Introduction

When one inherits or purchases an interest in open farmland – particularly between March and November – chances are good someone is growing crops or pasturing livestock on it.  This person or operation may be someone who holds title in co-tenancy with other non-farmer owners (e.g. a sibling as farmer), or it may be a non-title holder or someone outside the immediate family, related by blood or otherwise (e.g. a surviving spouse who has inherited an undivided interest in the land).  Either way, the person farming the land as a tenant in common will be considered a tenant as regards the undivided co-ownership interests of the non-farmer owners.

The term “tenancy” (from Latin tenir, “to hold”) is a general description of a person’s “estate” (applied in law 13c. from Anglo-French astat, “condition, rank, standing,” itself from Latin status) in land. In other words, tenancy describes the person’s position in ownership, whether owner alone, owner with other owners, or non-owner occupying with permission of the owners. The term “tenancy” now colloquially is used in two main contexts: 1) as reference to someone on the land with permission of the owner; 2) descriptive of a form of estate describing co-ownership, or co-tenancy, where by an owner is a co-tenant. (See Understanding Title in Land). This paper uses the term to describe the former legal relationship of a person to the land – one who does not own the land, but has a legally-enforceable right of possession and not trespassing.

In farm tenancies, several fundamental questions may arise in varying situations about the status of the growing crop and the operating farmer’s right to it, the items the operator has placed upon the land supporting his or her operation (“trade fixtures”), and the farmer’s right to continue farming the land over the dormant season or next spring and beyond.  North Carolina has codified by statute basic law on these matters (NC General Statute Ch. 42, Article 2) with some case law to provide some guidance in settling landlord and farm tenant disputes. The discussion below addresses these questions and a few others.

The Leasehold Estate

Ownership (title) to real property is known at Anglo-American common law as a “freehold” or “fee” estate.  A person using property – by permission of the title holder(s) – to which they do not hold title has a “leasehold” estate (from 13c. Anglo-French laissier, “to let, allow, permit”).1  Such leasehold estate – the permission to hold – can be verbal or written.  Though all verbal and written rental agreements are known as “leasehold estates,” for simplification in this paper a written use and occupation arrangement will be called a lease, and a verbal arrangement will be called a tenancy; this paper focuses on the latter.

At common law, leasehold estates evolved to be classified as one of four estates: tenancy at will, periodic tenancy, tenancy at sufferance, and estate for years. The traditional verbal farm tenancy is for practical purposes a periodic tenancy.

A tenancy at will can be terminated at any time with no notice, and the occupier’s leasehold estate ceases immediately upon notice of termination by the landowner, as does all right of access and occupancy. In other words, the landlord may turn out the tenant immediately.  Such a tenancy would be unheard of in farming, and would otherwise be subject to notice upon some showing of the duration the farmer had been on the land in preparation.

A periodic tenancy is measured by a traditional time increment, be it a week, a month, or a year, with no agreed termination date. A periodic tenancy cannot encompass more than one year. Such tenancies are terminated with notice under N.C.G.S. 42-14, requiring 2 day notice for a week tenancy, a 7 day notice for a month tenancy, and 30 day notice for a year periodic tenancy.

Verbal agricultural tenancies are considered periodic tenancies. Without evidence to the contrary, the period is traditionally one year due to the long growing season. Periodic tenancies shorter than a growing season – to include land preparation (e.g. discing), crop maintenance (e.g. spraying) and harvest – are impracticable, but not legally impossible. One can certainly have a periodic tenancy on a farm for agricultural purposes outside of prepping, sowing, growing and harvesting crops, such as use of a pasture for livestock, or sheds for machinery and bins for storage. (A periodic tenancy in farming shorter than a full year presumably would be considered a month to month periodic tenancy with a 7 day notice period.) The schedule for rent payment is a strong indicator of the period agreed by tenant and landowner.2  Because farm tenancies are often paid with one annual payment (often measured in price per acre), a farm tenancy with an annual rent check will likely be considered a periodic tenancy measured by one year without sufficient countervailing evidence. It is important to understand that period tenancies are continually ‘renewed’ (whether weekly, monthly or annual) for the like period until properly terminated. Importantly in agriculture, failure to notify termination of an annual periodic tenancy results in continuation of the tenancy for another like period – one year. An annual periodic tenancy does not convert to a weekly or monthly periodic tenancy following termination of the first period.

An estate for years expires at the time agreed by the parties, and terminates immediately upon the agreed time for termination without a requirement of notice as in the periodic tenancy.  The word “years” is somewhat misleading because the tenancy can be measured for a term less than one year.  In other words, an estate for years has a start date and an end date, with the time between not measured by reference to a day, month or year. Evidence of a hard termination date may readily be found in a written rental agreement (lease). However, with no written agreement, the termination date – in the event of disagreement – must be determined by sufficient evidence before a court, which likely would require verbal testimony upon oath of parties. A proven estate for years allows for no tenancy at sufferance as of right, though an owner by allowing a tenant to remain, and the prevailing rule in most jurisdictions – followed by NC – is that landowners acceptance of rent creates a periodic tenancy.3

A tenancy at sufferance refers to the holdover period after a periodic tenancy, whereby the tenant is allowed to remain on the land but with no particular right to remain in possession. Black’s Law Dictionary defines a tenant at sufferance “[o]ne that comes into the possession of land by lawful title, but holds over by wrong, after the determination of his interest.”  By definition, a tenancy at sufferance occurs only after termination of an estate for years or a tenancy at will.

Nature of the Farm Tenancy

A verbal farm tenancy has no written agreement outlining the roles and responsibilities of the parties, and as such relies on statutory affirmation of rights to access and harvest the crop.  While most all enforceable present transfers of interests in land, whether title or usufructuary (use), require a writing under North Carolina’s Statute of Frauds, agricultural farm tenancies serve as an exception, at least for a period less than three (3) years.  A farm tenancy for an agreed term exceeding 3 years is not enforceable without a writing sufficient to hold either of the parties accountable, and such periodic or estate for years tenancy (for any time exceeding 3 years) is void.4   However, as noted below, even a void verbal term tenancy survives as a year to year tenancy until properly terminated with sufficient notice.  A party claiming a tenancy term of no more than three years must nonetheless prove its existence for that term.5

Anecdotally, it is more likely than not that the farmer tending the land does not have a written lease agreement.6   Though the trend toward written leases is progressing upward, many tenancy arrangements have long been a matter of spoken trust between landowner and tenant, with neither side wishing to upset the status quo (because it has generally worked out for both parties: the farmer has land, the owner has cash to pay property taxes and liability insurance and the land generates farm income required to keep the land enrolled in Present Use Value property tax program).  Answers about the status of a leasehold are more straightforward if addressed in a written lease, such as when the lease ends, whether it can be renewed, etc.  However, if there is no written lease, the answers regarding termination of tenancy, rights to crops and installed features such as fencing and irrigation, and renewal for next season are less straightforward.

The “Year to Year” Statutory Farm Tenancy

North Carolina’s agricultural tenancies statute, Chapter 42 Article 2, addresses the term of farm tenancies and the relative rights and obligations of landowner and tenant, particularly to rents and crops. Though a modification of early common law – as well as a validation of the concept of “custom” in producer-landowner relationships, much of Chapter 42, Article 2 and its arcane terminology comes from a time of what seem ancient customs in southern farming. The sections refer to “croppers” (one granted a portion of the crop as compensation for raising it, but having no ownership of the crop or legal tenancy on the land, in the nature of a sharecropper)7  and “emblements” (the common law term for profits from a crop apportioned between tenant and landowner), and “tobacco marketing cards” (the device by which tenant and landowner’s rights and authorities were made known to tobacco buyers, as controlled by the Depression-era tobacco quota system, retired in 2004). The statute also refers to “shares” in tenant relationships whereby the rent paid to the landowner is a portion of the crop itself (or its emblements). This last practice appears rare in modern agricultural practice in North Carolina, but is not unheard of. (Application of Ch.42, Art.2 by analogy to modern practice is subject to further research)

The most important “custom” validated by the statute is the year-to-year (periodic) tenancy. While a statutory term for a farm tenancy in North Carolina is not mandated, as a practical matter farm tenancies require a year’s time and are generally agreed as annual agreements measured by the calendar year.  NC General Statute §42-23 notes that the measurement of a farm tenancy is a matter of custom, running from “January first to January first.” As such, it follows that a farm tenancy is a year to year agreement in the absence of sufficient evidence proving otherwise – particularly when rent is one annual payment – with an attendant guarantee of a farm tenant’s right to harvest her crops grown in that year.

The statute does however set termination dates in such annual periodic tenancies. Specifically, N.C.G.S. §42-23 states that a farm tenant’s tenure on the land is protected by statute for at least until December 1 or January 1 depending on the county.8   In the following counties, a verbal statutory tenancy is presumed to run from December 1 to December 1: Alamance, Anson, Ashe, Bladen, Brunswick, Columbus, Craven, Cumberland, Duplin, Edgecombe, Gaston, Greene, Hoke, Jones, Lenoir, Lincoln, Montgomery, Onslow, Pender, Person, Pitt, Robeson, Sampson, Wayne and Yadkin.9  All other North Carolina counties have a presumed farm tenancy of January 1 to January 1.

Custom and practice in farming in the era where tenancy laws were passed likely saw an annual rent payment after harvest when the crop was paid off. Again, while the statute does not say that “all farm tenancies are periodic tenancies measured by one year,” the above statute gives strong indication that a court would recognize such as law.

Termination of a Verbal Farm Tenancy

Without sufficient evidence to establish otherwise, the tenancy “prevailing” custom runs for one year, and is thus terminated according to statutory law on termination of the tenancy. NC General Statute §42-23 states that “[i]n all cases of such tenancies a notice to quit of one month as provided in G.S. 42-14 shall be applicable.” Thus, in one of the counties (noted above) with a statutory term of December 1 to December 1, the landowner must give notice to the farmer by no later than October 31, allowing for the full month of November prior to December 1. In all other 75 counties, notice must be given to the farmer no later than November 30, allowing for the full month of December prior to January 1. NC General Statute 42-14 does not specify how notice is given, but one should assume it to be in writing given that such notice is a termination of an interest in real property (the periodic tenancy).

As a matter of evidence in the event of a dispute, a landowner is advised to send the letter to ensure delivery by October 31 or November 30 depending on the county. A return receipt will ensure that the farm tenant has received the notice as required by statute.

In the absence of notice, the farm tenancy renews for a like period of one year. Therefore, if the landowner’s notice to quit falls inside the 30-day notice period (after October 31 or November 30 depending on county), the farm tenancy is renewed for another full year to December 1 or January 1 (again, depending on county). Consider these illustrations:

Joey farms land owned by Dee Dee in Pender County. Sometime in August 2021, Dee Dee is approached by Johnny – another farmer – with a verbal offer of $10 more an acre. However, Dee Dee does not inform Joey until November 3, 2021. Because Pender County recognizes an agricultural year ending December 1, Dee Dee has failed to give Joey 30 days notice to quit. Joey therefore has another one year periodic tenancy, which ends December 1, 2022.

Note that Dee Dee has given Joey notice more than 30 days prior to December 1 of the following year, and need not take further action for Joey’s tenancy to terminate on that date. If the county above is changed to Pasquotank, Dee Dee has timely notified Joey of the tenancy termination, as that county retains January 1 as the customary end of the annual tenancy.

Ownership Crops and Fixtures at Termination

At common law, growing crops are considered real property belonging to the landowner, but once harvested – even if remaining in storage on the land – became personal property of the farmer.10  NC General Statutes Chapter 42 modified this rule, and crops raised on the land are “vested in possession” of the landowner until rents are paid.11  This applies to harvested crops, and illustrates the lien in favor of the landowner on the farmer’s crop for the amount of agreed rental payment, which is superior to all other liens against the crop even after harvest “against any other person who may get possession of said crop.”12  Such is true for verbal farm tenancies or written leaseholds, and lien is automatic and no writing, filing or recording is required to establish the lien.13  Once rent is paid, the crop legally belongs to the farmer. As noted, the lien is enforceable against purchasers of the crop, unless such purchasers can present evidence that the landowner waived the lien.14

North Carolina law appears clear that a lessee (a tenant under a written estate for years with a hard termination date; i.e. a written lease agreement) has no right to grow crops unharvested at the termination of the lease term.15  As for crops still growing at the termination of a periodic tenancy where proper notice is given, the farmer’s right to harvest the crop still in the field – the “way going crop” in 19th century legal parlance16  – is less clear. Consider the following illustration:

Joey is farming in Pasquotank County on Dee Dee’s land under an annual periodic (and verbal) tenancy. Joey harvests his fall crop of corn, and then sows wheat for harvest the following May. Dee Dee sells the land in August, and the new owner, Johnny, notifies Joey on November 15 (after Joey has sown the wheat) that his tenancy will terminate this year (on January 1 customary in Pasquotank). Johnny has plans for his own crop to start in the ground prior to May.

Did Dee Dee risk his costs and potential profit by planting a crop on land where his tenancy renewal was uncertain? Unfortunately there is no clear answer to this not-improbable situation as to whether Joey has any right to harvest the crop, or get paid back his costs if the crop is plowed under by the next operator. And if the new owner (and operator) Johnny at his own cost harvests and sells the wheat, is Joey due a share, and if so how much? If a court applies the rule of Lewis v. Lewis Nursery, Inc. (see endnote 15), Joey has no right to enter the land to harvest his crop, nor does he have a right to its emblements (or profits from sale); this harsh result would rest on the logic that his periodic tenancy had a hard termination date as of the proper termination notice.

At the very least, a farmer should consider costs forfeit for applications to the ground whose benefit extends beyond the termination of a lease for years or a periodic tenancy properly noticed and terminated. For example, an operator making a lime application on a verbal tenancy that is properly terminated loses the future benefit of the application. Likewise would apply to a cover crop planted as soil enhancement.

The rule is different when it relates to the farmer’s equipment and implements, and trade fixtures. Long ago, the North Carolina Supreme Court summarized the ruleas follows: “Whatever things the tenant has a right to remove ought to be removed within the term; for, if the tenant leaves the premises without removing them, they then become the property of the reversioner. But where the tenant holds over, even so as to become a trespasser, he will not be considered as having abandoned the things he had a right to remove.”17

Disputes (Ejectment)

With the prevalence of verbal tenancies, combined with circumstances of land succession and sale to third parties, disputes are likely where the new purchaser wishes to occupy and use their new property immediately, and not wait out the statutory tenancy. Alternatively, circumstances may arise where a farmer continues to plant on land based on a long-ago agreement with a now-deceased owner. (In such circumstances, such occupation may appear as simple trespassing to a new “heir” owner unaware of past arrangements.) Though few of such disputes may get to trial, it is helpful for farmers and landowners to know the process and their relative starting positions.

For a verbal tenancy, in the event of a dispute where a farmer wishes to remain and a landowner wants them to leave, either party may avail themselves of the “trial division of the General Court of Justice.”18  The situation is likely not such that a landowner will successfully avail themselves of local law enforcement to oust a farmer they believe to be trespassing. Standing at the farm gate, there are too many factual issues the law officer is without authority to determine in the face of conflicting versions of the situation. In absence of a resolution, any dispute must before a court by one of the parties (either farmer or landlord) wishing to change the status quo, and the party bringing the action bears the burden of proof to establish their legal right – either the tenancy agreement in the case of the farmer, or the uninterrupted right to sole possession (i.e. trespass) by the landowner. Because the agreement or understanding is verbal, the parties bear the oath of truth as to what was said about the current arrangement.

(Note that a “trespass” may either be civil or criminal. A civil claim of trespass by a lawful owner against an unlawful occupier or encroacher requires a showing of damages to the landowner, and will likewise require proof by the landowner that the farmer is on the land without permission to secure an order to vacate. Criminal trespass to open land is a second degree trespass and Class 3 misdemeanor.19  Again, the person must be on the land “without authorization,” which in the case of a farming trespass, the farmer would likely present as a defense an earlier permissive tenancy that was not properly terminated.)

Landowners should proceed with caution and not resort to “self-help,” given that – depending on the amount of damage – it is a misdemeanor or felony to destroy the crops of another who is lawfully on the land. NC General Statute §14-141 (Burning or otherwise destroying crops in the field) clearly states:

Any person who shall willfully burn or destroy any other person’s lawfully grown crop, pasture, or provender [“fodder”] shall be punished as follows:

(1) If the damage is two thousand dollars ($2,000) or less, the person is guilty of a Class 1 misdemeanor.

(2) If the damage is more than two thousand dollars ($2,000), the person is guilty of a Class I felony.

In the event a landowner (new purchaser) assumes takeover of a planted field, a farmer may presumably place a call to the sheriff’s office to intervene at the point of destruction, given that such is a criminal act. However, it is unknown what the sheriff may do at the moment of intervention given that the farmer’s ‘lawful’ presence on the land is a matter of legal interpretation requiring an absence of fact (i.e. the notice of termination), the sheriff keeps the peace and is there to enforce the status quo. Unless a landowner is legally certain that the farmer received notice of termination of the tenancy in a timely manner the year prior, he runs the peril of prosecution. The farmer’s recovery of the costs – measured by inputs such as fuel, seed, fertilizer, labor – are presumably recoverable in a civil action against the landowner.

As a practical matter – when confronted by a landowner seeking ejectment of a tenant  – the farmer may either agree to leave at a certain time, or simply sit tight and respond when the landowner moves for summary ejection. At that hearing, the landowner as noted above bears the burden of proof to show that 1) he has given property notice to terminate a periodic tenancy, or 2) that the tenant is a holdover tenant following hard termination of a written lease for years (or verbal lease for years whose term the landowner can otherwise “prove” with testimony, or 3) that the farmer is simply on the land without permission in the manner of civil trespass. The farm tenant likely would not take the burden of proving the tenancy by seeking a court to validate the tenancy by filing a declaratory judgement.

Relevant Statutes

§ 42-23.  Terms of agricultural tenancies in certain counties.

All agricultural leases and contracts hereafter made between landlord and tenant for a period of one year or from year to year, whether such tenant pay a specified rental or share in the crops grown, such year shall be from December first to December first, and such period of time shall constitute a year for agricultural tenancies in lieu of the law and custom heretofore prevailing, namely from January first to January first. In all cases of such tenancies a notice to quit of one month as provided in G.S. 42-14 shall be applicable. If on account of illness or any other good cause, the tenant is unable to harvest all the crops grown on lands leased by him for any year prior to the termination of his lease contract on December first, he shall have a right to return to the premises vacated by him at any time prior to December thirty-first of said year, for the purpose only of harvesting and dividing the remaining crops so ungathered. But he shall have no right to use the houses or outbuildings or that part of the lands from which the crops have been harvested prior to the termination of the tenant year, as defined in this section.

This section shall only apply to the counties of Alamance, Anson, Ashe, Bladen, Brunswick, Columbus, Craven, Cumberland, Duplin, Edgecombe, Gaston, Greene, Hoke, Jones, Lenoir, Lincoln, Montgomery, Onslow, Pender, Person, Pitt, Robeson, Sampson, Wayne and Yadkin.

§ 42-14.  Notice to quit in certain tenancies.

A tenancy from year to year may be terminated by a notice to quit given one month or more before the end of the current year of the tenancy; a tenancy from month to month by a like notice of seven days; a tenancy from week to week, of two days. Provided, however, where the tenancy involves only the rental of a space for a manufactured home as defined in G.S. 143-143.9(6), a notice to quit must be given at least 60 days before the end of the current rental period, regardless of the term of the tenancy.

§ 42-17. Action to settle dispute between parties. When any controversy arises between the parties, and neither party avails himself of the provisions of this Chapter, it is competent for either party to proceed at once to have the matter determined in the appropriate trial division of the General Court of Justice.

§ 42-27. Local: Refusal to perform contract ground for dispossession. When any tenant or cropper who enters into a contract for the rental of land for the current or ensuing year willfully neglects or refuses to perform the terms of his contract without just cause, he shall forfeit his right of possession to the premises. This section applies only to the following counties: Alamance, Alexander, Alleghany, Anson, Ashe, Beaufort, Bertie, Bladen, Brunswick, Burke, Cabarrus, Camden, Carteret, Caswell, Chatham, Chowan, Cleveland, Columbus, Craven, Cumberland, Currituck, Davidson, Duplin, Edgecombe, Forsyth, Franklin, Gaston, Gates, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Jackson, Johnston, Jones, Lee, Lenoir, Martin, Mecklenburg, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Pasquotank, Pender, Perquimans, Pitt, Polk, Randolph, Robeson, Rockingham, Rowan, Rutherford, Sampson, Stokes, Surry, Swain, Tyrrell, Union, Wake, Warren, Washington, Wayne, Wilson, Yadkin.

§ 14-159.13. Second degree trespass.

(a) Offense. – A person commits the offense of second degree trespass if, without authorization, he enters or remains on premises of another: (1) After he has been notified not to enter or remain there by the owner, by a person in charge of the premises, by a lawful occupant, or by another authorized person; or (2) That are posted, in a manner reasonably likely to come to the attention of intruders, with notice not to enter the premises. (b) Classification. – Second degree trespass is a Class 3 misdemeanor.

Endnotes

1 Online Etymology Dictionary, https://www.etymonline.com/search?q=lease

2 See Kent v. Humphries, 303 N.C. 675, 275 S.E.2d 176 (1981)

3 Id.

4 N.C.G.S. §22-2

5 The author as practicing lawyer for a landowner once tried to terminate a farm tenancy, whereupon the lawyer for the tenant produced an NRCS cover crop funding contract where the landowner, had by his signature, affirmed a two year tenancy – a minimum term requirement of the cover crop funding contract.

6 This statement is made upon author’s professional experience working with landowners and farmrs.Though the National Agricultural Statistics Service (NASS) surveys cash rents and amount of acres rented, the author could find no data on percentage of rented land under written lease.

7 See Harrison v. Ricks, 71 N.C. 7 (N.C. 1874)

8 See N.C.G.S. §42-23.  Though agriculture is arguably exempt, North Carolina follows a rather harsh rule when a tenancy at will is created by a voided lease (see Mauney v. Norville, 103 S.E. 372 (N.C. 1920) whereas other states follow a rule where payment of rent for a defined period (e.g. a week or a month) creates an estate for years measured by that period. (see Kent v. Humphries, 275 S.E.2d 176 (N.C.App. 1981)

9 Id.

10 Brothers v. Hurdle, 32 N.C. 490 (1849)

11 N.C.G.S. §42-15

12 Id.

13 Id.

14 See Rivenbark v. Moore, 57 N.C. App. 339 (1982).

15 Lewis v. Lewis Nursery, Inc., 342 S.E.2d 45 (NCApp. 1986)

16 E.g. see Brothers, 32 N.C. 490 (1849)

17 Smithwick v. Ellison, 24 N.C. 326, 330 [1842])

18 N.C.G.S. § 42-17. There are two NC trial courts in each county, the General District Court which may hear disputes involving $25,000 or less, and the Superior Court, $25,000 or greater.

19 N.C.G.S. § 14-159.13.