An Overview of Lease Agreements
The fundamental question for any resident of the commonwealth is whether the lease between a landowner and a horse stable operator is one that conforms to the legal requirements for a written lease or whether the arrangement constitutes something other than a lease. Even though they are momentarily separated in the prior analysis, the answer to this question makes all the difference in the world for those who choose to locate their stables at a specific property. A common definition of a lease is "a contract transferring the use and occupancy of facilities to another person for a specified period of time in exchange for rent." In the horse business, we must be much more formal, however, because horseowners are subject to substantial legal liability if there are injuries to their horses or people at a facility, or if the horses there cause damage elsewhere. As a result, stable operators are asked to sign lease agreements all the time . This document protects the stable operator by providing language in explicit detail about the rights and duties of the property owner and the resulting leasee. The design of a lease agreement guarantees that the landlord/owner understands his/her concomitant obligations and agrees to those restrictions. Because many farms are "running on a handshake" for many reasons – such as long relationships, trust and goodwill – this will require some persuasion and possibly an association of stable owners to try to level the playing field. Lease agreements generally are short-term documents (1-year, 3-year, etc.), are for a "rental fee," and do not obligate the tenant to remain at the facility. These associations are likely to be amenable to negotiating such an arrangement, but some might not. In any case, this negotiation – along with the protections, restrictions and other elements that should be contained in a properly-drafted lease agreement – will determine whether you will be satisfied with your choices.
Crucial Provisions to Incorporate
The duration of the lease should be clearly stated, as well as the amount of rent due, whether it is due monthly, quarterly, or annually. The provisions for annual increases in the amount of rent should also be included in the lease agreement. Lease expiration terms are also important to outline and whether there will be an option to renew or renegotiate the terms. Maintenance is another primary concern for both landlords and tenants. Maintenance clauses should cover which party is responsible for maintenance and repairs for the barn, equipment, and appliances. If the tenants are expected to make repairs and maintain the premises, it is important to specify any restrictions on the amount those repairs can cost without prior landlord approval. Extensive repairs can be costly and result in disputes between landlords and tenants if the lease does not delineate the duties of each. Depending on the size of the barn and lease term, a detailed inspection schedule, as well as a move-in and move-out walk-through, may be beneficial as well. Lastly, pets, animals, or equine services must be addressed, as some landlords may not allow tenants to house other animals on the property.
Rights and Responsibilities of Lessor
Because horse barns typically are used for a specific purpose, the basic rights and responsibilities of the parties with respect to the upkeep of the barn and its premises may be spelled out in detail in a lease agreement. Although the law implies that the lessor (the party leasing the barn) must avoid causing damage to the premises, a lessee may or may not be entitled to seek damages for such conduct. For this reason, more than one agreement is examined when considering the rights and responsibilities of the lessor. In addition to providing an implied covenant that the premises will be maintained in a safe and suitable condition, the law protects the right of a lessee to retain other benefits obtained from possession.
Different jurisdictions may imply lessor’s obligations different ways. A lessor may be responsible for the reasonable repair of defects arising from the destruction of habitable structures which existed at the commencement of the agreement. However, the law will not protect a lessee from damages accruing as a result of a lessor’s refusal to fulfill its repair obligations if the lease agreement specifically states that the lessee should assume responsibility for such repairs. Similarly, a lease agreement may require the lessor to repair the barn, but obligate the lessee to provide notice of defects and to abstain from altering the real estate without the lessor’s consent.
In a lease agreement where the lessor agrees to give the lessee free access and egress to specified common areas and limits the lessee’s ability to include others within the same premises, it is possible for a lessee to limit the ability of the lessor to meet its responsibilities. Therefore, a lessee that introduces additional persons within the barn may be breaching an express term of the lease agreement that permits the lessee and those the lessee designates access to the barn and its adjoining areas. Coupled with the imposition of traditional lessor duties, a lessee that relies solely on the right of access may be liable to the lessor should anyone other than the lessee enter the barn. For this reason, the right of access granted to a lessor, as well as the means to restrict access to the barn by others, is a form of tenant reversion.
Similar time lines for property maintenance intervals exist for the oral agreement and deed respectively. A lessee that seeks to hold the lessor responsible for the completion of repairs to a barn, such as the repair and maintenance of water supplies, electrical supply fixtures, drainage systems, and waste disposal, is limited by the statute of frauds. Even if a written contract provides an ambiguous promise to deliver the barn in good order or to make repairs by a certain date, courts will not imply what the parties must have intended to create a valid and enforceable agreement.
Responsibilities of the Lessee
"Obligations of Lessee" in a Horse Barn Lease Agreement
The "lessee" or tenant is the main player in any lease agreement – as it is their job to pay rent, care for the premises, and (hopefully) follow the rules. Horse barns are unique places, which usually find their way into the lease agreement, at least in the lessee’s obligations section. Here are just a few items to consider when drafting or reviewing that lease.
Rent
The lessee will have the basic obligations of renting any other premises – to pay rent on time (often with a strict "grace period" or late fee schedule), to occupy the premises, and if there are any amenities (such as swimming pools or club houses), to follow the rules of use. However, in the horse context, these amenities may become complicated. For example, does the pool water need to be changed bi-weekly? Is the club house closed either during mating or birthing seasons? How often should the pastures be rotated?
Animal Welfare (equine and human)
Whether we like it or not, the lessee is the person who has day-to-day control over the animal (or animals). They bear the primary responsibility for day-to-day care and monitoring, but that does not mean that the owner is completely off the hook. Instead, they should establish an equine and even human care plan, with regular check-ins to ensure all of the creatures (and humans) are okay, and to be able to enforce the strictest obligations of the lessee, those being proper care and humane treatment. Sadly, this is where most disputes arise. These sections should also address how the animals and barn area should be cleaned up.
Alterations or Improvements
Some lessees believe they can do anything they want to the space, while other lessees believe they cannot touch it, even in an emergency. The best solution is to clearly define what may be done without permission, and what requires permission by the owner before being completed. The owner should also reserve the right to make improvements or alterations at any time, although this could be as simple as giving the lessee notice of the improvement.
Common Mistakes in Lease Agreements
When it comes to the potential for issues that horse barn lease agreements can cause, there are two that stand out among the rest. The first is contracting parties not clearly defining the actual leasing space in the agreement itself. The second is the leasing parties being unclear about how costs are to be distributed among themselves.
As for the first aspect, horse barn lease agreements can specify a broad range of barn sizes, from as little as one stall to an entire stable filled with a specific number of stalls and corral space. Only specifying "your horse" in the lease agreement may make for a potentially difficult and costly dispute if the landlord decides to focus on the letter of the contract literally. If the landlord is responsible for cleaning the stalls and corral , then having only one stall available could result in him not being required to tend to that area as long as your horse stays in the stall. If you are a horse owner who likes to spend time with your animal several hours a day, you may find it inconvenient for you to be limited to spending time with the animal in a cage that’s similar in dimension to a dog kennel.
As for the second aspect of horse barn lease agreements, this aspect can be troublesome for the same reasons that leases for homes and businesses generally are. If a tenant shares some costs with the landlord, who is expected to pay for things like utilities, landscaping, trimmings, snow removal and other maintenance? Although horse owners generally bear the responsibility for their animals’ care, there are ways to figure these potential costs so the horse barn lease agreement is fair and clearly states who pays for what.
Statutory Considerations
The horse barn, just because it is a smaller building and a family-run operation, is not some magical creature that does not come under the scrutiny of the law and various legal regulations. It will. It is important to consider a number of "what if" scenarios, as well as anticipate any problems that may arise before signing a lease agreement.
What happens when a horse in stall #6 bucks and injures a boarder? A poorly written lease agreement may leave both the owner of the horse and the barn owner susceptible to lawsuits. Going back to the original Kiss My Tarheels blog, each horse hotel should require a release of liability be signed by the owner of the horse which states he/she is solely responsible for the actions of their horse and any injuries to the horse, boarders or barn staff. There are many specialty liability insurance policies on the market that will help protect the owners of a horse barn.
How does a conflict between a stall renter and the barn owner get resolved? Horsemen could joke they can litigate a problem better than they can improve a horse’s gait! However, litigation takes time and money. Consider whether or not arbitration or mediation may be in order so you can resolve the issue quickly and avoid a lawsuit.
The most common dispute between horse boarding barns and stall renters is the "who can and can’t use what." Probably 100% of lease agreements contain a list of barn rules. As the owner/operator of the barn do you have the right to change those rules? What happens if you move a horse to a different barn to continue with its training program? Can the horse owner say you are "stealing" her horse? Does the stall renter have the right to bring in "her" trainer? Because a horse barn is in a lot of ways a commercial enterprise – albeit run in the rolling pastures of farms, barns need to be treated as a commercial establishment until proven differently to avoid the pitfalls of "our word against yours."
God forbid a horse should get out or a child cross the fence into the horse paddock. Who is liable for an injury? The horse barn owner? The horse owner? The parent of the child? Again, let’s go back to the leaser’s responsibility to provide liability insurance to protect themselves and the barn owner. Both barn and horse owner may want to mutually agree that lawsuits between the two parties will be "outright banned."
What about care and feeding? The horse owner says put out more hay and grain. The barn owner says the horse had colic (see last week’s blog) from too much food. Who is responsible when the horse colics? Tentative language needs to be included regarding the responsibilities of the horse owner and the barn owner. An owner who wants special treatment for his/her horse may be willing to pay a little extra for that service. Fine, bake that into the lease agreement so when the owner’s bill is paid, everyone is smiling.
Will the horse barn owner allow third party visitors? It is getting more common for horse owners to open up their premises for tours. How is the barn owner going to react when a prospective boarder arrives to meet with the current boarders. Will the barn owner be accommodating? Does the barn owner involve the current boarders in tours? All controversial topics that should be discussed in great detail prior to signing the lease agreement.
Although a mom-and-pop facility will never be able to compete price-wise with the big mega-stables, some of the smaller horse hotels may find themselves facing legal issues. Take the time necessary to consider your legal responsibilities and responsibilities of others. Draft the lease agreement from the bottom up and have a lawyer review the document before it is presented to the stall renter.
Insights for Drafting a Specialized Lease
While the form lease agreements addressed above cover the common provisions, it is important to remember that each leased property is unique, and therefore a customized lease agreement may be necessary. For example, based on the size of the property, type of horses to be kept on the property and intended use of the land, certain considerations not covered in a standard lease should be considered. One such consideration could be a purchase option , including the right of first refusal to purchase the property should the owner decide to sell. Also, depending on the geographic location of the property, zoning maybe a significant issue. Numerous states permit agricultural operations, including horse use, in certain residential zones. However, many county and township ordinances do not permit this use in any zone. It is extremely important to consult with an attorney and conduct the proper due diligence prior to executing a lease to ensure the proposed use is permitted.