In a perfect world you'd own all the land you needed to support your farming operations. But there's no perfect world, so thank goodness for those who have land to rent to satisfy that need.
Renting land can be a simple, painless process if you have a strong lease. Here are some tips to help you determine what you should definitely be including in that agreement.
LEASES SHOULD have the names and addresses of all parties involved. “You want to prevent lease assignment or subleasing,” says Jim Farrell, CEO, Farmers National Company. “There is also a liability issue. Not knowing who is leasing the farm can cause problems for the landowner and the operator.”
BE SURE TO include start and end dates of the lease. “We recommend a one-year lease,” Farrell says. “A yearly lease brings a natural time to visit about the rental terms for the next year.”
Bryan Sicheneder, who farms 1,100 acres in rural New Germany, MN, with his dad and brother, uses some one-year leases, but also three-year terms. “When the owner wants to know which crops will be planted, I like to use a three-year lease,” he says. “That way, if I plant alfalfa, I know I'll get my money back out of it.”
OUTLINE THE PAYMENT terms and provide remedies if rent is delinquent, such as charging interest if the payment is late, notes Farrell.
“We pay our rent twice a year; once in early spring, once at harvest,” says Sicheneder, whose rents are generally based on the quality of land, the size of the farm and the location.
IDENTIFY WHO IS responsible for what costs. “Spell this out very specifically, especially for pastures, buildings or irrigation,” Farrell says.
Sicheneder adds that he's had leases where the owners won't allow the operators to tile.
WHEN LEASING BUILDING or bin space, be sure the insurance requirements are included in the lease, says Farrell.
INCLUDE DATES IF renting ranges or pasture. “In and out dates are important on pasture land,” says Farrell. “We also include terms for grazing limitations, control of noxious weeds and property maintenance in those leases.”
USE A WRITTEN lease. “These days, a handshake won't cut it,” says Farrell. However, Sicheneder has many acres that are agreed upon with just that.
“Of our 30 landlords, most of them are handshake agreements, and it's worked out fine for most of them so far,” he says. “We've been burned a couple of times, and if you don't have it in writing, things just don't work out sometimes. We know now who we can trust, and have strong relationships with most of our landlords.”
Not all leases will be the same. For Sicheneder, the simpler the lease the better. “What's important to me is to have a solid contract that includes basics — names, dates and payment and terms,” he says. Choosing to agree on it in writing or by a handshake is up to you.