What is in this article?:
- Flood Damaged Crops, Crop Insurance Payments and Lease Contracts
- Rental Contracts
What do these questions imply for rental contracts? A great deal of uncertainty, for one thing. Lease agreements in Iowa continue in effect for another year under the same terms if they are not terminated on or before Sept. 1. Either an owner or a tenant can terminate a lease. Operators who rented flood covered land this year may want to think seriously about whether they want to rent those acres next year, especially at the same level of cash rent. Leases can be terminated by delivering a notice in person to the other party, sending it by certified mail or (rarely) publishing it.
Landowners will have to bear the burden of mitigating flood damages – that goes with owning property. But, a better solution may be for renters and owners to work together to repair the damage and bring the land back into production. Farm operators may have access to machinery that can help accomplish the job that owners do not. In return, tenants should be compensated for their efforts, either directly, through a significant discount on the 2012 rent or with a long-term lease.
In some cases there may be doubt as to whether land flooded this year can even be planted next year. Fortunately, such acres are still eligible for multiple peril crop insurance coverage in 2012, including prevented-planting payments. Operators have the opportunity to increase the prevented-planting coverage from 60% of their initial guarantee to 65% or 70% when they purchase their policies. They should also consider insuring flood-damaged land as a separate unit to the extent possible. Finally, operators can request that their 2011 yield histories reflect a value equal to 60% of the county “T-yield” rather than a zero or very low yield.
Close communication and cooperation between owners, crop insurance agents and renters can be a “win-win” strategy in the long run, but recovery will likely take several years. Additional information about managing flood-damaged cropland will be available on the ISU Extension and Outreach flooding website as the waters recede and the situation is assessed.