The Dos and Don’ts of Cash Rent Leasing

Cash Lease Farmland

We’ve covered the topic of leasing a number of ways—the main types of leases and their applications, how to arrive at a mutually satisfying landowner/tenant agreement, and the best way to go about deciding which type of leasing agreement is right for your situation. We’ve also talked a lot about the importance of writing down leasing agreements on paper, and this is worth re-visiting periodically. Far too often, we see years-long relationships go suddenly awry due to confusion caused by handshake agreements and faulty memories.
Given the various factors that come into play with lease agreements, it’s important to keep a few main Dos and Don’ts in mind. First, DO write it down. Doing so prevents confusion and clearly delineates the terms, that may be reviewed should issues come up.
DO consider enlisting the help of a third party in the process, not only to avoid any awkward conversations, but also to take advantage of the neutrality that the third party provides. UFARM land managers are well-versed in this task, and provide peace of mind to those entering into the agreement that all bases are being covered. Should an issue arise at some point down the line, it is much more desirable to call your land manager and let him take care of the issue than to threaten the relationship otherwise.
DO be specific in the lease terms. Leave no base uncovered. At the most basic, include the following: The names of the parties involved, an accurate description of the property being rented, the beginning and ending dates of the agreement, the amount of rent to be paid, a statement of how and when the rent is to be paid, and the signatures of the parties involved.
DO go further than this. Add in provisions regarding improvement provisions, and clearly set down the duration of the lease agreement including termination and renewal guidelines.
DON’T rush into any sort of contract. Weigh the options carefully, considering all the variables, such as cattle grazing, erosion issues, crop residue considerations, and types of crop that will be grown.
DON’T forget to lay out a clear, mutually-beneficial payment plan. Take into consideration that payment plans may need to coincide with sales of livestock or crops, and be further separated to help the operator from a cash-flow standpoint.
DON’T forget to include the following main terms in your agreement. Your land manager will be sure to help you with this:
– Parties to lease and description
– General terms
– Termination
– Operation and maintenance
– Landowner rights and government payment
– Arbitration of differences
Creating a leasing agreement doesn’t have to be a difficult endeavor. In fact, we hope this post provides you with a solid foundation from which to start building yours. We encourage you to contact us with your questions or concerns. Consider enlisting the help of one of UFARM’s experience land managers to help you create an exceptional leasing agreement that provides both you and the other party peace of mind for the duration of the leasing relationship and for years to come.
Source consulted: “Fixed and Flexible Cash Rental Arrangements For Your Farm.” North Central Farm Management Extension Committee. 2011. Web. 06 Dec. 2016.