Equine-related leases have been increasingly popular. In the horse industry, lease arrangements include horse leases, pasture leases, breeding stock leases, barn or facility leases, and others. Disputes sometimes do occur, however, generating time-consuming and expensive lawsuits.
Here are some common problems associated with equine leases and a few suggestions for avoiding them.
Basic Lease Terminology
Leases involve terms that are unfamiliar to many people. For example, the “lessor” in a lease is the one who owns the horse or property at issue and has the ability to temporarily transfer possession, custody, and use of it to another. The “lessee” is the one who receives the use and possession of the property and usually pays rent or gives something of value to the lessor in exchange. (By comparison, this blog has addressed “free leases,” which appear to be unique to the equine industry.)
Common Equine Lease Problems
Well-written contracts can help avoid or minimize problems with equine leases. Some equine lease problems are discussed below.
Problem: No Written Lease Contract
Lawsuits have focused on the sole question of whether an undocumented transaction was really an equine sale, gift, or lease. Several years ago, for example, someone leased a horse to a friend, with nothing in writing, but was forced to file suit later to recover the horse because the lessee insisted the horse was a gift and refused to return it.
Well-written contracts can help avoid these disputes if they clearly specify (at a minimum) that the arrangement is a lease, who owns the horse, and when the lessee must return the horse.
Problem: Nobody Knows How Long the Lease Lasts
Problems can occur when the lease fails to specify its duration. Lessors sometimes want to call off the lease and take back the horse, while the lessee expects continued use, such as through the remainder of a show season. These types of legal disputes can be complicated and costly, but they can be prevented if the lease agreement specifies, among other things, how long the lease lasts, when it can be terminated, how it can be terminated, and whether (and how) either party can end it sooner or to extend it for a longer period.
Problem: The Lessor Disapproves of the Lessee’s Use of the Horse
Sometimes, lessors want to limit what a lessee can do with the leased horse. The lease agreement can specify restrictions. For example, some lessors restrict the allowable height for jumping activities, whether showing or schooling, and some lessors forbid jumping. The lease can control where the horse must be stabled, and it can specify trainers who are permitted to ride, drive, handle, or work with the horse.
Problem: Someone is Hurt While the Lease was in Effect
Every horse owner dreads the thought of his or her horse hurting someone by, for example, kicking, biting, or throwing a rider or handler. These risks and potential liabilities never disappear merely because the owner has leased out his horse. The lessor is always at risk of being sued in a personal injury lawsuit.
The parties to an equine lease can plan ahead for these possibilities. For example, the lease agreement can include a release of liability (where allowed by law) that is designed to protect the lessor (and those affiliated with the lessor) against claims from the lessee, where allowed by law. Keep in mind that states differ in their requirements for releases, and a small number of states do not enforce them. A knowledgeable lawyer can draft or review your release provisions. In addition, because people who sign releases can and sometimes do file lawsuits, lessors can purchase a policy of liability insurance such as personal horse owner’s liability insurance.
In a further attempt to protect themselves from liability, lessors can also consider requiring lessees to sign indemnification agreements. An indemnification clause can provide that if any claims or liabilities are brought against the lessor due to acts or omissions of the lessee (or of others affiliated with the lessee); the lessee will hold the lessor harmless and will pay the lessor’s legal fees and any liabilities or judgments. For lessors, indemnification clauses like this may seem desirable, but they can be especially complicated; consult with legal counsel before entering into these arrangements.
Problem: The Leased Horse is Injured or Dies While the Lease is in Effect
What if the leased horse becomes seriously ill or lame while the lease is in effect? What if the animal requires expensive surgery, such as colic surgery? Illnesses and injuries are a foreseeable part of horse ownership, and problems can occur if the lessee fails or refuses to arrange for proper veterinary care or pay for veterinary expenses. Careful advance planning and attention to contract language can help avoid these problems. For example:
- The contract can require procurement of equine mortality insurance and possibly other insurance on the leased horse (such as major medical or loss of use insurance), and the contract can address how, or if any proceeds will be shared between the lessor and the lessee.
- The contract can require the lessee to pay veterinary expenses related to the horse. It can also specify how long those payment obligations continue if an injury or illness occurs during the lease term.
- Some lease contracts limit the lessee’s obligations to pay veterinary and farrier fees only if he or she (or others affiliated with the lessee) were negligent in causing the injury or illness during the lease term.
Careful planning and written contracts can help avoid many kinds of disputes involving equine leases. The legal expense to draft or negotiate a lease could save significantly more expense from a lawsuit.