Designing Hunting and Recreational Leases for Your Property - Ernest L. Huntington

Adirondack Woodlands Manager, Finch Pruyn & Co., Inc. Glens Falls, NY


Overview

The backbone of a recreational lease is the lease contract. Lease contracts are complex documents that require the help of a lawyer to prepare. Much like a living will, a lease contract is a document which is tailored to the needs of the individuals involved. Also--as with a living will--a lease contract may change over time. The primary functions of a lease contract are to protect the lessor from potential liabilities arising from a lessee's use of his or her property, to document exactly what parts of the property are being leased, to reserve all other rights not explicitly mentioned in the lease, and to provide to the lessee a document which details his or her rights and obligations.

ADVANTAGES OF LEASING LAND FOR RECREATIONAL PURPOSES OVER RECREATION ON PUBLIC LANDS, OR OVER OWNING LAND

There are many advantages which lease property has over public property for people who are interested in regular outdoor recreation. Lease property allows users to build camps and to access their camps over private roads. Access provided by private roads on leased lands allows lessees to use campers and ATV's, and this access provides the lessee with an added degree of safety. Leased property gives users the right of "exclusivity" meaning that the lessee need not make reservations for the use of a lease. Lessees may use the lease any time they please (unless otherwise specified in the lease contract), and they will always know who else is using the property.

Compared to purchasing land for the purpose of recreation, leased lands require less up-front cash, provide the lessee with short term flexibility, and allow the lessee to lease recreational rights to properties that may not otherwise be available for sale.

THE LEGAL DOCUMENT

Because the lease is a binding, legal document, it is imperative that a lawyer be involved in its development. Realize from the start that no two people are alike and for that reason, no two leases will be alike. In fact, because no two leases are alike, a copy lease is not being provided to use as a "boiler plate" contract. Instead, some important aspects of a good lease contract will be discussed:

1. Term

The term or duration of a lease can have a substantial impact on the way a lessee interacts with the lessor. Terms that are for less than one year provide maximum flexibility for the lessor, but minimum security to the lessee. Consequently, lessees are not likely to invest monies into improvements to the property.

Leases with terms of from two to five years, give the lessee more security to invest monies into such improvements as cabins, and road upkeep. Once the investment has been made, the lessee is more likely to continue renewing the lease and to practice good land stewardship.

Long term leases can cause unexpected problems to the landowner. They provide minimum flexibility to the landowner and maximum security to the lessee. Generally speaking, a lease term of from 49 to 99 years will make the lease appear as though the landowner has outright sold some of his or her rights to the land. Such long term leases may be construed as subdivision of the land.

2. Rate

The rate charged for a lease should be market driven. One should resist the temptation to calculate a rate using arbitrary figures such as land taxes. One should also resist the temptation to duplicate a lease rate based upon what someone else might be charging (always be aware of potential anti-trust violations). No two properties are alike, and consequently, different leases will command different prices.

A simple but effective method of developing a lease price is "trial and error". Pick a price which you believe the recreational rights to your property to be worth and advertise. You will soon find out if you are asking too much or not enough. Make sure to start high--it is always easier to drop a lease rate than it is to raise it. Don't be afraid to ask for what you think the lease is worth; we all know that owning land is not a "get rich quick" situation. If our intentions in owning land were to get rich, we would have been better off investing our money into stocks rather than forest property. Remember this: the highest price that we receive for the recreational leases on our property won't make us rich; it will simply help us continue to own our lands, and enjoy the other values that the land gives us.

3. Insurance and Indemnification

A law known as the "General Obligations" law is designed to protect landowners against liability claims made against them by people who use their property . Landowners are somewhat protected by the General Obligations law whether or not they lease their land; however, protection provided by this law alone is not good enough. One advantage which a landowner who leases his or her land has over one who doesn't lease is that the terms of the lease can stipulate additional insurance coverage further protecting the landowner from possible law suits.

Additional coverage can be provided by writing in the lease contract that the lessee must provide proof of liability and property damage insurance to the limits of $1,000,000 personal injury; and $100,000 property damage. Furthermore, the landowner should require the lessee to carry Workman's Compensation insurance in the event that the lessee should hire work done to his or her lease. The landowner should also be listed in the insurance policy as "additional insured", and he or she should be listed as a certificate holder so that notice is sent to the landowner if the policy is canceled. In the event that a lessee's insurance has expired or has been canceled, the lease should be canceled.

A "Hold Harmless" clause in the lease contract can further protect the landowner. The Hold Harmless clause simply states that the lessee will "at all times protect and save harmless the Lessor against and from any and all claims, actions…"

The reality is that anyone can be sued no matter what steps they have taken to protect themselves. One must ask "Do I want to risk relying on the General Obligations law alone for protection or do I want to take steps at no expense to myself, to secure further liability protection?"

4. Petroleum Fuels

The landowner should protect him or herself from liabilities resulting from the storage of petroleum fuels by the lessee on the property. Depending on the amount and type of fuel stored, it may be necessary for the landowner to apply for a fuel storage permit. In the case of a fuel spill, the landowner may be responsible for remediation of the spill, unless the contract explicitly makes the cost of remediation the lessee's responsibility.

5. Camps

If camps are allowed on the lease, make certain the local and regional regs/codes are followed. It may be necessary to apply to the local planning board for a building permit.

Camps constructed on your property will be taxed. Make certain that the lease contract provides for reimbursement to the landowner by the lessee for any taxable improvements.

Additional fees for those who build camps on your property is another consideration. The landowner will undergo additional expenses and management time for lessee's camps and should be compensated for such. In the event that a lessee breaks the contract and leaves a camp on the property, it may cost the landowner to have it removed.

6. Guests

It's a good idea to define what constitutes a "guest" on the lease. Is it immediate family? Is it extended family? Can it be a friend; and if so, how many is too many -- one, two, ten? Dealing with this issue early on may save headaches further down the road.

7. Garbage

Simple. If you bring it in, take it out!

8. Cancellation

A cancellation clause in the contract is a good idea. People can't always predict if something is going to go terribly wrong (lessor or lessee). If such should happen, a cancellation clause will allow the contract to be broken by either party, thus avoiding a potentially expensive court battle.

9. Reserved Rights

A clause should be included in the lease contract which states that the landowner reserves the right to enter or exit his or her property, to maintain the property and any other rights not explicitly given to the lessee.

10. Renewal

The contract should hold some provisions which allows the lessee the first right to renew the lease at the end of the contract period.

Summary

Recreational lease contracts are as diverse as the lands and people involved in the individual leases. Aside form some basic points that all leases should have, lease contracts should be tailored to meet the specific needs of the landowner. Because a lease is a legal document, and many local and regional laws/rules/regs may be impacted by a lese, a lawyer should be consulted in its drafting. Try to get as much revenue from your lease as you can, and don't be afraid to start high; owning land is not a "get rich" proposition. Lastly, and certainly no less important, be certain to lease your property to the right person or people. In the end, despite all the preparation, the people that you sign a lease contract with can make the difference between an enjoyable relationship or a miserable lease term (remember your cancellation clause).

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