Land rent and leases are two of the more popular questions I’ve been answering lately. Landowners and farmers alike are asking about what to include in a written lease and land rental rates.
There are a number of resources available to help answer many of these questions. Let’s take a look at a few.
Available resources
An excellent resource I use, and often refer others to use, is Ag Lease 101 (http://www.aglease101.org). Ag Lease 101 was developed by a really fun bunch of people…attorneys and agricultural economists!
It’s easy to joke about these two groups, but this team has developed a very useful resource. Ag Lease 101 is a product of the North Central Farm Management Education Committee (NCFMEC). The NCFMEC is comprised of Extension educators and specialists from multiple states in the North Central Region of the United States, including Barry Ward, OSU Extension specialist in farm management.
Resources available to assist with rental questions include the following:
- Fixed and Flexible Cash Rental Arrangements for Your Farm,
- Crop Share Rental Arrangements,
- Pasture Rental Agreements for Your Farm, and
- A Pasture Worksheet.
These publications provide an overview of what items to include in a written farm lease, as well as sample lease forms you can use for your own situation. You can download a copy of the sample leases and supporting information at http://aglease101.org.
If you are not able to access the Internet, contact your local OSU Extension office to request a copy.
Legal issues
Peggy Hall, director of agricultural law and OSU Extension specialist in agriculture and resource law, has also developed a detailed fact sheet about the legal issues surrounding farm leases.
A copy of this publication is available at: http://aede.osu.edu/programs-and-research/agricultural-and-resource-law-program/law-library/farm-leases. This publication details a number of important considerations that farmers and land owners should consider when drafting a lease agreement.
Topics related to the legal issues of farm land leases include:
- Types of Leasing Arrangements
- Verbal vs. Written Leases
- Legal Requirements of Enforceability
- Terms of the Lease Agreement
- Termination of the Lease
- Using Model Leases and Attorneys
- Common Legal Questions on Farmland Leases
- Determining a Fair Rental Rate
What’s fair?
Farmers and farm land owners often want to know what’s a fair rental price. This is a difficult question to answer because of the number of factors involved: location, soil type, soil productivity, cropping history, supply and demand, and the length of the lease, among others.
Another important factor I ask landowners to consider is the interested farmer. It’s not possible to place a dollar value on this, but it is an important consideration.
Just because one farmer offers to pay more per acre doesn’t necessarily mean they will care for the land like someone who offers less per acre.
Examples of “extras” that someone may provide, yet pay less per acre, include applying lime and fertilizer, mowing weeds, plowing snow, etc. Base your decision on whom to rent your land on the reputation the farmer has in the community and a face-to-face interview with all interested parties.
Little data
Land rental data for eastern Ohio is very slim and it isn’t necessarily fair to expect to pay or receive the same per acre rate that is being paid in western Ohio or other Corn Belt states. However, from the perspective of the owner of the land, ownership costs can be summarized as the DIRTI five (Depreciation, Interest, Repairs, Taxes, and Insurance).
Many land owners want, at a minimum, to cover the property tax. This may serve as a starting point for negotiating a per acre rental rate.
From the perspective of the farmer, the rate cannot be at a point where costs exceed revenue. As a potential renter, If you are not able or willing to pay as much per acre in cash, you may want to consider the value of some of the “extra” things you can offer, such as mowing, snow removal, mending fences, etc.
Bottom line
Determining a fair rental rate is sometimes a difficult topic to address. However, there are a number of resources available to assist all parties develop a written lease that is fair to everyone.
Use the resources available to you and talk with your local Extension educator to help you draft a lease that is fair and addresses the concerns of both the owner and the farmer.
Very, very helpful article you have here.
I do estate planning for farmers around Central Ohio, and I’ve been confronted with an Illinois Farm Business Farm Management (FBFM) report showing that in Illinois, between 2000 and 2012, “returns for high-productivity (>190 ba) farmland averaging $343 per acre in 2011 and $371 per acre in 2012.” Some leases I’ve worked on in Western Licking County run in the range of $100-$150 per producing acre. So, I suppose we’re roughly splitting the profit generated by the farmer’s work.
Do you know of any published materials looking at the issue of what farmers & lessors consider fair for high productivity land, for taking hay off of grassy waterways, etc.?
Any thoughts you might have will be appreciated.
Thanks!
I understand that the rate per acre is a complicated mess. I am a new landowner and was curious how the lease system works. Say I own 100 acres, and the general lease in my area is $120 per acre. What is the monthly amount I recieve from the leasee (farmer)?
The rate per acre is actually the simplest rental formula. Using your example of 100 acres and $120/acre, your total income would be $12,000 (100 acres x $120/acre). Generally, lease payments are due after harvest. Some leases will require a portion due early in the year with the balance paid after harvest. I’m not aware of any leases that are paid month to month. However, if you can find someone willing to do so, that is fine.
Let me know if you have other questions.
CZ
We have 25 acres of frame land we would let some one frame it for a very low price . we hade a framer frame it for about 5 years .but he is retiring from framing. if you know any one who would be interested let me know? It is in Akron Ohio .
If it is still available then I would like to rent the farmland.
We just want about $1.500 per year to cover the taxes we got to pay per year. Thank you.