## Facts

- Richard and Nancy Prescott owned a dairy farm in Vermont and negotiated with Dirk and Kay Smits, experienced dairy farmers, for a farm lease.
- The parties orally agreed to a three-year lease beginning May 1, 1982, with rent set at \$14,400 per year, payable in equal monthly installments.
- The Prescotts prepared a written lease reflecting the three-year term and annual rent, but the Smits objected to additional provisions and refused to sign; no signed writing was executed.
- With the Prescotts’ permission, the Smits moved onto the farm in March 1982 and began operating the dairy.
- During the summer of 1982, the Smits paid \$2,600 in rent.
- After taking possession, the Smits encountered problems they attributed to the farm’s condition, including herd health issues and water-supply concerns; when the Smits complained about water, the Prescotts installed a new pump at their own expense.
- In October 1982, the Smits vacated the farm and stopped paying rent; they later returned to harvest and remove corn they had planted.
- The Prescotts sued for nonpayment of rent. The Smits counterclaimed, alleging the Prescotts failed to provide a farm reasonably fit for dairy operations.
- The trial court treated the invalid oral lease as creating a tenancy at will that had become a year-to-year tenancy and held the Smits liable for one year’s rent, with credit for amounts paid (and accounting for subsequent reletting proceeds), and denied the counterclaim.
- The Smits appealed, arguing primarily that a year-to-year tenancy could not exist because they did not remain in possession for multiple years.

## Issues

1. Whether entry under an oral three-year farm lease that is unenforceable under the Statute of Frauds can, based on an agreed annual rent and rent payments, result in a year-to-year tenancy (rather than only a tenancy at will).
2. Whether a year-to-year tenancy requires continuous possession over a period of years, such that tenants who vacate within the first year cannot be held for the full year’s rent.
3. Whether the landlords breached a duty to provide premises reasonably fit for dairy operations so as to support the tenants’ counterclaim or excuse further rent liability.

## Decision

- The Vermont Supreme Court affirmed the judgment for the Prescotts.
- Because the oral lease was for more than one year and was not signed, it was unenforceable as a three-year term under Vermont’s Statute of Frauds, and the initial occupancy was treated as a tenancy at will.
- The court upheld the trial court’s finding that the tenancy at will became a year-to-year tenancy because the parties fixed rent on an annual basis and the Smits paid rent consistent with that annual arrangement.
- The court rejected the Smits’ argument that a year-to-year tenancy can exist only after continuous possession over multiple years; the rent period and the parties’ conduct could establish a year-to-year tenancy within the first year.
- As year-to-year tenants who left without legal justification, the Smits were liable for one year’s rent, subject to appropriate credits (including rent paid and amounts obtained through reletting, as found by the trial court).
- The court affirmed the denial of the Smits’ counterclaim, concluding the record supported the trial court’s finding that the Prescotts did not fail to provide premises in a condition that justified abandonment or damages.

## Legal Principles

- A lease for more than one year must be in a signed writing to be enforceable at law under Vermont’s Statute of Frauds. 12 V.S.A. § 181(5).
- Entry and possession under an unenforceable multi-year oral lease create a tenancy at will, not an enforceable term of years.
- A tenancy at will may become a year-to-year tenancy when rent is agreed upon on an annual basis and the tenant pays rent consistent with that annual basis.
- Continuous possession over multiple years is not required before a year-to-year tenancy may be found; the rent period and conduct can support that characterization during the first year.
- When a year-to-year tenancy is found and the tenant abandons without legal justification, the tenant may be held for the rent due for the year, with credits and mitigation offsets as supported by the record.
- A tenant’s claim that premises were not reasonably fit for an intended use is a fact-intensive question; appellate review defers to supported trial-court findings rejecting such a counterclaim.

## Conclusion

In *Prescott v. Smits*, the Vermont Supreme Court held that although the parties’ oral three-year farm lease was unenforceable under the Statute of Frauds, the tenants’ entry and their agreement to pay (and partial payment of) rent calculated on an annual basis supported a finding that the tenancy at will became a year-to-year tenancy, making the tenants liable for one year’s rent (with appropriate credits), and the court also affirmed the rejection of the tenants’ counterclaim that the farm was not reasonably fit for dairy operations.


Prescott v. Smits, 505 A.2d 1211 (1985)