Models of free land leases from the agribusiness departments of universities tend to look at things from the farmer`s point of view. It is not necessarily a bad thing, but it is something that owners need to be aware of. It may be advantageous for both parties to add to the lease that also meet the needs and prospects of the landowner. Most flexible leases have a basic rental component that insures the owner of this income and allows tenants to cover the costs even after a bad year with good crop insurance. Basic rents vary by region, but for Southern Minnesota, the range for basic rents could be between $100 and $200. Then, a flexible component is added, either based on price, revenue, gross sales, or a combination of these components. Over the years, producers have leased farmland, also known as swapping ground, for a variety of reasons that use a wide range of types of agreements. The nature of the agreement generally has a lot to do with how a landowner wants to participate in plant production on his territory. Some landowners do not want a production or market risk or participate in production decisions. Some want to own part of the crop. Some might want to be able to market their share of the crop. There is great flexibility in agreements based on what corresponds to the needs of the landowner and the needs of the tenant.
Here is a basic summary of land leases. One way to share risk and rewards between the operator (tenant) and the landlord is to enter into a flexible basic lease. Iowa State Extension reported that nearly 12 percent of all leases in 2008 were flexible. Rural rent prices have risen dramatically in recent years, with commodity prices at record levels and remaining high relative to historical averages. When grain prices fall, rent prices often lag and do not fall as quickly. This will lock up farmers with high rents, resulting in a loss for the year. If you own the land, you should protect your interests and the value of your property by signing a written lease. The cost of hiring a lawyer to create or verify your lease is well below the amount you will spend if things go wrong.
Most models of agricultural agreements focus on short durations, defined as one to three years, although this is not always the case. Short-term leases are a good way to have a “trial phase” where you can determine whether the relationship is good or not. Even if you rent or rent from a long-time friend or neighbour, it is best to turn any type of handshake contract into a signed lease. While handshake agreements can be legally enforced with good evidence, a written agreement clearly defines the terms and facilitates proof of agreement if you need it. A written contract can also help avoid disputes that can arise from hazy memories and misunderstandings. This is a rental agreement in which the rent is based on the prices of the harvest. Often, it is an average price of the last 12 months or a quarter of a price that sometimes multiplies the agreed bushel. Rents can be paid at quarterly pricing periods or half and half or after harvest. There are different types of farm or land contracts, but this agreement is specifically designed for what is often referred to as the Farm Agreement “cash rent.”