When is it Time for a Landowner to Change Tenants?

The relationship between a landowner and a tenant—the farmer who farms the land—is similar to any relationship. There can be ups and downs, but hopefully, with good communication between the two parties, the business relationship flourishes and each partner feels that their goals are being met.

At a time with more volatility in both grain and land markets, these arrangements have been even more strained than normal, as landowners and tenants strive to come to agreements that are fair. While switching to flexible cash rent agreements have alleviated many of these issues, there are times when the business relationship no longer works. Often, issues have been slowly surfacing for years, especially in long term agreements, and these relationships can be especially difficult to maneuver.

What factors give rise to making this decision? First, the foundation of a good partnership is effective, frequent communication. If you continually feel out of the loop, despite making your wishes to remain informed known to your tenant, then it’s a good sign that a change is in order.

While it’s a two way street, Kansas State University ag economist Kevin Dhuyetter, who runs farm workshops on landowner/tenant ethics, finds that landowners are often less privy to information than the tenant, and are easy to take advantage of as a result. “Based on my experiences, the typical landowner in Kansas is a landowner by inheritance. If you are a landowner by inheritance, as opposed to buying the land as an investment, you can be relatively easy to take advantage of, depending on the situation,” he says.

While this isn’t always the case, many landowners are generations and geographically removed from their land, and their access to the information necessary to make informed decisions in lease agreements is compromised. Having a tenant who is willing to be above board and communicate the necessary information with the landowner is necessary for a healthy business relationship. If this is not occurring, then you may need to consider a change.

Another situation Dhuyvetter encounters is when the cash rental rate in a long-time landowner/tenant relationship hasn’t changed in years. The landowner desires to raise the rate, but is uncomfortable asking the tenant, and decides to sell the land, rather than face the confrontation. This situation should be avoided at all costs. Retaining the land if desired and working out a cash rental agreement based on current market value is best for everyone.

These situations can be uncomfortable for many landowners, and that is why so many turn to land managers to act on their behalf. A good land manager can serve as an impartial liaison between landowner and tenant, ensure healthy communication between the two parties, and assist with working out lease agreements that serve the interests of everyone. If the situation necessitates, they can also help landowners change tenants.

Are you a landowner wondering if your land rental agreement is healthy? Are you in need of expert advice in working out rental agreements or in negotiating with your tenant? Let the land managers at UFARM offer you a hand.

United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s.

 

Sources:

Arens, Curt. “Landlords and Tenants: Building Trust.” Dakota Farmer. FarmProgress.com. 17 Dec. 2013. Web. 21 Jul. 2014.

Fee, Rich. “Land Rental Ethics.” Agriculture.com. 20 Mar. 2012. Web. 21 Jul. 2014.