**Understanding Broodmare Leasing: Essential Insights and Benefits**

What is a Broodmare Lease Agreement?

A broodmare lease agreement is a contract between the owner of a mare (the "leasor",or lessor) under which that mare is leased to another party (the "leasee") for the purpose of breeding or producing a foal.
Broodmare lease contracts are a necessity when a stallion owner and a broodmare owner do not have an existing arrangement allowing access to a particular horse. Leasors can be any party that has ownership or possession of the mare, including the breeder that raised her, a third party breeder that purchased her for resale, a person that won the mare in a business deal, or in some cases, the lessee him/herself. Lessees can be anyone who wants to breed the mare. The most common type of lessee is a person that owns a stallion and desires to breed it to the mare without investing in her outright . Leasing mares is common in the equine industry because it gives mare owners an alternative to selling their horses while allowing stallion owners to breed without having to purchase a mare.
Broodmare leases usually require the lessor to maintain ownership of the mare and provide care and maintenance for the mare including regular veterinarian checks and medical attention, as well as board. Lessoors must also protect any breeding rights they have in producing a foal and any protection they own in the stallion. They do, however, delegate the right to breed the mare and Burden of providing the stallion fees and booking fees to lessee. So, the basic elements of a broodmare lease contract will include the following:
The broodmare lease is a helpful tool in the equine industry that enables mare owners to keep their horses so they can produce other horses for them while opening the door for individuals without access to a broodmare to breed theirs and further their own equine enterprises.

The Advantages of Leasing a Broodmare

These arrangements can provide a number of advantages to the larger farm, including cash flow benefits if the lease payments are made over a longer period of time. For example, often a broodmare is purchased and for the first year is kept on the farm, where the owners take advantage of the 200% depreciation allowance for horses in that facility. Owners of larger facilities may also appreciate substantially reduced risk, if the property value declines, since these large capital outlays are not expensed for tax purposes until the mare becomes a dead asset.
Leasing is also a financially prudent choice for those already pulling money from their operation to buy stallions. The lessor is probably paying for the broodmare with horses. The owners of the smaller breeding operation (the leasee) are short on capital, but do not wish to divest assets in order to attract clients looking for young stock based on best values. A significant expense on the balance sheet of any business is principal payments on a loan or the amortization of the purchase price of a broodmare and her offspring; the broodmare is buying you peanuts. By leasing the mare and retaining her as an asset on the balance sheet, the leasee can pay the interest on the lease at a low rate and simultaneously use the cash generated by the stallion service fee payers. The leasee with an owner that wants to preserve cash can now have the mare (and foal) on the farm for a fraction of what it would cost to purchase the same mare. The economic risks of ownership are hence avoided.
Genetics: Another benefit of leasing a broodmare is the ability to acquire superior genetics. In some cases a client is interested in adding a specific broodmare to the herd. The mare may belong to a top competitor, but they are willing to lease her. The client may not be able to afford a "whole" ownership of the mare, and may not know the correct strategy to establish the business relationship. Sometimes two smaller farms join together to acquire a single mare (or mares) and share the associated costs of her care and feeding. Perhaps one of the smaller farms is too small to renovate the facility; by joining together, the two farms enjoy cost savings on renovation and have a better chance of securing the appropriate credit for the work performed.
Reduced risk and short-term commitment: For both the lessor and leasee, a broodmare lease agreement can help reduce the risk of the ownership of the broodmare by providing flexibility and options to re-negotiate terms and conditions annually. The involved parties are agreeing to a lease renewal instead of a new broodmare purchase. Additionally, a lease agreement can (as in the case of most commercial leases), be executed for a longer period of time (up to three (3) years), which can reduce the transaction costs and increase the return on investment in the lease.

Crucial Provisions in Broodmare Lease Agreements

Breeding Rights
In most broodmare lease agreements, the lessee’s right to breed the mare is stipulated. As with many other topics in the horse industry, the parties are free to negotiate these terms. For example, the lessee might have the right to sell or lease the breeding rights to a stallion to third parties. These breeding rights continue either throughout the term of the lease or until the mare has foaled her last foal. Other possible issues include whether the lessee may breed the mare to only Grade A or "approved" stallions, or whether the parties intend that the breeding restrictions will survive the termination or expiration of the lease.
Insurance
The parties also will typically address insurance. If the broodmare dies, the lessee’s liability for board and other expenses will be alleviated, and the lessor will have the funds necessary to replace the mare (likely to the extent the insurance proceeds are not used for these purposes). Therefore, the lease agreement may require the lessee to obtain mortality insurance naming the lessor as an additional insured and to maintain such coverage throughout the term of the lease. Parties also might choose to address liability insurance, particularly if the horse will travel off the owner’s property.
Termination
The lease will often set forth the conditions under which the agreement terminates. For example, either party might be allowed to terminate in the event of breach, death, or force majeure. The parties also may provide for termination after the mare foals a set number of foals. If the lease does not have a termination date, it will terminate when the term of the written agreement has expired. The lessor should consider including a provision that requires termination to be in writing to avoid other disputes. In addition, the parties should consider a provision under which lease payments advanced prior to the termination of the lease are refundable (at least on a pro rata basis) in the event the mare sells in utero or dies.
Care and Maintenance
The parties will negotiate the responsibility for the care and maintenance of the broodmare. The parties might consider specifying the minimum care, feeding, and maintenance requirements, how board is calculated, what types of work will be performed (i.e., ultra-sound), and who will pay for any unrecoverable costs.

Legal Considerations and Implications

Due to the complex nature of broodmare leases, it is essential that all terms of the lease are well defined to avoid litigation or breach. For example, the parties should decide on a method for resolving disputes and the value of the foal. All broodmare leases should be in writing. Whether a contract is partly oral and partly written, evidence of an oral agreement is admissible for several purposes. The statute of frauds defense does not apply to the extent that a contract has been performed by either party. Tex. Bus. & Comm. Code §26.01(b)(3); Baker v. Baker, 239 SW 3d 223, 227 (Tex. App. – Fort Worth 2007, no pet.). Further, a written contract is enforceable on its terms even though it is not signed when it contains a grant of an interest enforceable as a conveyance of real property. Tex. Bus. & Comm. Code §26.02; Baker, 239 SW3d at 228 (written lease for real estate enforceable even though not signed by the tenant). If a broodmare is boarded at the owner’s facility, the boarding contract will govern the relationship between the lessee and the lessor. A boarding contract, unlike a lease, may contain provisions allowing the lessor a lien on the horse for care provided. The careful practitioner should avoid standard or "boilerplate" contracts that may not account for issues particular to the breeding industry. Additionally, the lessor must comply with the Texas Deceptive Trade Practices Act when advertising any livestock.

The Process of Drafting a Broodmare Lease Agreement

Once the parties have decided to enter into a broodmare lease agreement, it is time to put the agreement in writing. Broodmare lease agreements contain several specific provisions that should be included to ensure the agreement is legally enforceable and protects the rights and interests of the parties. The broodmare lease should spell out the period of the lease, the compensation to be paid by the lessee, any obligations to be met with respect to the foal should the broodmare be bred, and the parties’ duties with respect to the care and upkeep of the broodmare. As is often the case with business negotiations, an agreement that is satisfactory to both parties requires creative problem solving and a willingness by both parties to make compromises and yield on certain points in order to achieve overall satisfaction with the agreement. A well-drafted broodmare lease agreement should make explicit whether the broodmare can remain with her foal, and if so, the responsibilities of each party with respect to the care of the foal. The broodmare lease agreement should be reviewed by legal counsel to ensure that the provisions are appropriate under the law and that the terms of the agreement are properly expressed. Other issues within the concept of an equitable broodmare lease include termination of the lease, which can either be automatic at the end of the stated time period, or , in more unusual circumstances in which there has been a breach of a material term of the contract, made subject to termination with notice to the other party. Negotiating the termination clause is important in order to protect the rights of both parties. The broodmare lease agreement should also include a provision for advance deposited funds for the care of the broodmare, and lay out the method for resolution of any disputes that might arise in the further course of the relationship between the parties. The parties may also want to include a dispute resolution clause, and stipulate whether it will take place in court or through arbitration or mediation. Another factor to consider is the force majeure clause which establishes the circumstances under which the parties are excused from their obligations under the contract. These situations usually include natural disasters, strikes, failure of suppliers, embargoes, viruses or other diseases which affect the broodmare or foal, destruction of the broodmare or foal, or any other cause beyond the control of the parties. The broodmare lease agreement can be beneficial in allowing the lessee the use of the broodmare to breed and enhance its bloodline, while allowing the lessor to retain the foal until the broodmare returns to its premises. With the assistance of competent legal counsel, the parties can draft an enforceable and fair broodmare lease agreement which meets their needs.

Common Pitfalls to Avoid

Mistakes
Even more important than anticipating the ultimate date for the return of a broodmare at the conclusion of the lease is the obligation of the tenant to provide good care to the mare during the lease term and if the broodmare is pregnant to also provide good care to the foal. A small number of broodmare leases do not mention "good care" and provide that the landlord lessor may inspect the premises on short notice, i.e., 24 hours or less. Care should be taken to ensure that such short notice isn’t unreasonable under the circumstances and the effect of such a provision where a mare is housed at a facility different from the location of the landlord lessor. In addition, if the freshening of a foal takes the foreseeable date for the return of the mare outside the term of the lease, it is prudent to similarly require the landlord lessor to provide at least 30 days’ notice so that the tenant has adequate time to move the mare to a preferred location. Additionally, if the parties contemplate the foaling of the broodmare, provision should be made for the expenses associated with veterinary services for the mare during foaling and care of both the mare and foal during any post-delivery sick care. In the event the freshening of the mare occurs after the expiration of the lease term, absent a provision to the contrary, the tenant will still be responsible for support, veterinary care and the costs of moving the mare.

Case Study: Successfully Leasing a Broodmare

One successful broodmare lease arrangement occurred when the owner of a well-bred, but unproven broodmare preferred leasing the mare to not breeding the mare himself. The owner of the broodmare had one desired goal: raise a high-quality foal so that she could retain an interest in a prospective stallion. The manager of the stallion had an interest in getting an already successful and proven mare bred to make it more likely that the produce of the "guest" mare would have value as a potential stallion prospect. Of course, the mare would also provide a 4% fee on the mare’s reported live foal to the stallion’s syndicate as well as a reduced breeding fee to come in after the leasing arrangement.
The owner of the broodmare looked at and reviewed a number of different publicly-available stallion prospects to make a wise investment decision on which stallion to breed to. That decision was not made lightly and included the preferences of the stallion’s manager as well as the mare owner . Dealing with a reputable manager and syndicate who had experience with such deals from the stallion end of the transaction was critical. However, the mare owner was still concerned about the value of the mare’s foal. To that end, he obtained a sound appraisal of the mare before entering into a lease arrangement and he obtained quiet title to the horse. The appraisal was done so that any residual value would still remain with the owner of the mare in the event the foal would need to be sold to pay off debts or otherwise support the ongoing business of the stallion. Having title to the horse was important because of the distance between the horse’s location and the stallion’s location. Had a debt on the horse existed at the time of the mating, it is possible that the debt could attach to the horse/mare resulting in litigation and the POSSIBLE sale of the foal to pay the debt. Instead, having quiet title to the horse permitted the owner to take full advantage of the foal once it was born.