An elderly widow lives alone on the family farm. The horse barn has been empty since the children moved out. Recently, an equine professional asked to rent the horse facility to run a boarding, training, and lesson business. Should this arrangement proceed?
RISKS OF HORSE PROPERTY RENTAL ARRANGEMENTS
For property owners, these kinds of arrangements pose risks. Let’s look at some of them.
For both parties, liability is the biggest risk. But even though the widow property owner here would have no involvement in the equine professional’s business, she’ll probably be named in a personal injury lawsuit, anyway. This means, for example, that if the professional forgets to close a gate, and a horse runs loose into the road and collides with a motorist, the injured motorist’s top-rated personal injury lawyer could very well target the professional and the landowner. When this happens, who will pay the land owner’s legal fees? Who will pay a judgment or settlement?
In this example, the property owner probably only has homeowner’s or farm owner’s insurance. Her insurance coverage probably excludes liabilities arising from a “business pursuit,” but if she accepts rent payments from the equine professional, her insurer would probably consider this a “business pursuit.” She risks having no coverage. To protect herself in the arrangement, she’ll need business insurance coverage, such as commercial general liability insurance. Some types of business insurance may require the property owner to install a business security system such as CCTV in order to receive coverage at reasonable premiums. It may be useful for the property owner to keep factors such as these in mind when searching for insurance.
Years ago, the horse farm was a family-run horse operation. But now, the equine professional wants to run a business out of it. Local zoning ordinances might not allow this. Or, the laws might require the property to be modified with special lights, roads, signs, handicapped ramps, or others.
PROTECTING YOURSELF WITH CONTRACTS
Due diligence would no doubt involve credit history check as well as tenant background check. More importantly, equine property rental arrangements call for detailed contracts. Here are just a few of the many elements to consider:
Permitted Uses. What can the equine professional do, or not do? The contract can set limits for the professional’s activities on the property.
Zoning. A contract can require the professional’s compliance with zoning and land use ordinances, fire codes, and other local laws.
Lease Term/Termination. The contract can specify its duration and when it can be terminated. It can also address what actions can be taken (also called “remedies”) if either party fails to honor certain important obligations.
Insurance. The contract can address who must buy the commercial liability insurance and who must be listed as “additional named insureds” on the policies. For their protection, however, both parties might want to determine whether they are properly insured.
Liability releases. Aside from any liability release that the landowner might require the professional to sign on his or her own behalf, the land owner can also demand that the professional require everyone who enters the property sign a release of liability (where allowed by law). Who writes the release, who presents it, and who it names are among the factors for the parties to consider addressing in their contract.
Assignment and Sub-Leasing. The contract can address whether or not the professional can assign or sub-lease it to someone else.
With careful advance planning and thorough contracts, a facility use arrangement can work well for everybody.
This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.
Julie Fershtman is considered to be one of the nation’s leading attorneys in the field of equine law. A frequent author and speaker on legal issues, she has written over 200 published articles, three books, and has lectured at seminars, conventions, and conferences in 28 states on issues involving law, liability, risk management, and insurance. For more information, please also visit www.fershtmanlaw.com and www.equinelaw.net, and www.equinelaw.info. December 19, 2013
This article was printed in Performance Horse Digest, Volume 9, Issue 11