Sample Greenhouse Facility Lease (E3141)

Sample Greenhouse Facility Lease (E3141)

Greenhouse owners who are considering leasing space can find helpful information and sample forms in this publication.

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In response to discussions with the Michigan greenhouse industry, MSU Extension has compiled a sample greenhouse lease form and information on owner and operator considerations in leasing greenhouse space.

The sample lease format is designed to be flexible and to address issues related to leasing a facility for an entire year, for a single crop such as poinsettias, or for a season such as the spring crop cycle.

An additional document that can be used alongside the lease, if applicable, is the Subordination, Non-Disturbance and Attornment Agreement. This agreement, between the operator and the owner’s mortgagee, ensures that the operator will remain in possession of the leased premises throughout the term of the lease and in ownership of all of the operator’s products present on the leased premises despite any foreclosure action against the greenhouse owner, as long as the operator is not in default of the lease.

Some Owner and Operator Considerations in Leasing Greenhouse Space

There are a number of factors to consider when considering a lease of greenhouse:

• What are the purpose and duration of the lease? Will it be for one calendar year and allow the production of more than one crop?

• What facilities and equipment is the owner providing? These should be clearly stated, as well as their condition.

• Will the operator receive any advance notice of lease expiration, or will he waive any termination notification?

• Will there be a “failure to pay” clause? For example, will the operator pay late fees and, if so, at what rate? Will the operator reimburse the owner for any legal and collection fees the owner incurs to collect late rent?

• Will the rent be paid in advance or in installments? Will security be required from the operator to secure the unpaid installments? If so, what type?

• Will the owner or the operator maintain the facilities? If the operator is required to maintain them, what types of repairs or maintenance is the operator expected to perform?

• To maintain the facilities, can the operator purchase materials, and, if so, should there be a defined dollar limit before obtaining owner approval to purchase more?

• Who is providing the insurance on the facilities? Will insurance that either party obtains name the other as an additional insured?

• Will the operator be required to obtain crop insurance?

• Is auxiliary electricity generation equipment necessary, and, if so, which party will provide it?

• Is the owner required to replace any or all portions of the facility if it is damaged by fire?

• If the operator is to provide his labor for facility maintenance, at what point can an outside professional be hired if the operator feels the repair is beyond his/her qualifications? Does the operator seek owner approval, or is approval already granted if the repair is less than a predetermined maximum cost?

• Will water be furnished by the owner? If well water is used, who will pay the costs to repair or replace pumps, electric motors, electric panels, etc.?

• How will conflicts between owner and operator be settled? Will conflict resolution be limited to mediation, arbitration or some other method?

• Will the operator be allowed to construct or add improvements? Section D, Capital Improvements, provides a method to reimburse the operator for improvements made to the facilities. It establishes in advance the timetable for reimbursement. For example, if operator and owner agree that the operator will install a new water well in year 1 at a cost of $10,000 and the well is physically depreciated in 10 years, in year 5, the operator would be paid $5,000.

 

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