Farmland leases can lead to a lot of stress and frustration when you are looking for a new tenant or searching for more farmland to lease.
If you are currently facing either of those situations or are in the process of renewing a lease, the next few articles should be of some help.
One of the most important things a farmer or landlord needs to do is get their farmland lease in writing.
By taking the time to write down the lease, you are able to get your thoughts down on paper so you can make a clearer decision.
Additionally, it gives you a record to go back to if a disagreement arises.
It also serves as legal proof of your agreement and provides a way for your asset to be handled in the event that a tragedy would strike and your heirs are left with crops growing in a field.
It is best that when the lease is being written, the landlord, tenant and a notary or witness is present.
There are many types of leases out there.
Cash rent leases typically involve one payment that is due at planting time or after harvest.
The advantage of cash rent is that the landlord gets a stable income and the tenant has total management control.
The downfall for the landlord is they do not get the benefits of a good year while the tenant is faced with having to provide all the capital.
The 2012 Purdue Farmland Value Survey did indicate cash rent was going up throughout the state.
Cash rents throughout the state ranged between $159 per acre for poor quality land and $265 per acre for top quality land.
Cash rents for the Southwest region (consisting of Vigo, Clay, Owen, Sullivan, Greene, Knox, Daviess, Martin, Gibson, Pike, Dubois, Posey, Vanderburgh, Warrick and Spencer counties) varied from $142 per acre for poor quality land to $254 per acre for top quality land (average quality land was $195 per acre).
Crop share leases can be based on many factors, but are often based on the amount of equipment, time and financial capital spent to make the ground productive when determining the percentage split.
The advantages of crop share is that the tenant has less operating capital tied up, the risk is shared between both parties and the landlord will receive some of the benefits of a good year.
However, to make a crop share lease work, both parties need to realize there is an increased need for good accounting to determine how to split all the various expenses that are incurred.
Flexible leases are newer.
They take into consideration fluctuating markets and uncertain yields by not determining rent until after harvest.
Sometimes, they also include splitting government payments as part of a flexible lease.
The formula to determine the amount of income the landlord receives is determined at the time when the lease is being developed, so there is some price risk for the landlord since they will not know until the end of the year what they will receive as income.
One advantage is that the benefits of a really good year are often shared between landlord and tenant.
As always, if you have any questions or would like information on any agriculture, horticulture or natural resource topic, then please contact your local Purdue Extension Office at 448-9041 in Clay County or 812-829-5020 in Owen County, or reach me directly at email@example.com.
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Upcoming opportunities available to you through Purdue Extension include:
* Dec. 24-25 -- County holiday, Extension Office closed,
* Dec. 31 -- Clay County Extension Office closed,
* Jan. 1 -- County holiday, Extension Office closed, and
* Jan. 5 -- State 4-H Poultry Workshop, 10 a.m.-1:30 p.m., Boone County 4-H Fairgrounds.