A purchase agreement for a farmstead in Custer County, Nebraska is signed on October 15. The property is subject to an existing agricultural cash rent lease that runs from March 1 of the current year through February 28 of the following year. Closing is scheduled for December 1. Which of the following best describes the impact of the existing lease on this transaction?
Correct Answer
B) The buyer takes title subject to the existing lease, which will not expire until February 28, and the tenant retains possession until that date
In Nebraska, the customary agricultural lease year runs from March 1 to February 28/29. An existing agricultural lease does not automatically terminate upon sale of the property. The buyer takes title subject to the existing lease, and the tenant retains the right to possession through the end of the lease term (February 28). This is a critical Nebraska-specific consideration in agricultural real estate transactions, and buyers must account for the fact that they will not have immediate possession of the property if an active farm lease exists.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
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