If you’re sitting on a large amount of land, you might be considering the financial benefits of renting out a portion of your property. Often this can bring concern to farmers who want to ensure that their land is managed according to certain sustainability standards, but by devising a clear and concise contract you can minimize the worry and create a landowner-tenant relationship that puts both parties at ease.
Before renting out your land, it’s best to identify your sustainability priorities so you can build open and clear communication with the renter. Clear communication is the key to building strong relationships with neighboring farmers in the context of land-rental agreements.
Ed Cox, staff attorney with Drake University’s Agricultural Law Center and the Sustainable Agricultural Land Tenure Initiative, a project to support sustainable-agriculture land tenure in the U.S., offers his insights on sustainability and conservation legal documents: “I’m often asked where the sample sustainable or conservation lease is, and my response is, ‘There isn’t one model document.’”
“There really is no one sustainable way to farm and, likewise, no one sustainable farm lease,” he explains. “Developing a lease document that meets the needs of the landowner, the farmer and the land will take work. You can’t just download something from the Internet and fill in the blanks; however, there are some general principles to follow when developing your own lease agreement.”
Cox offers two primary lease guidelines:
1. Know your priorities.
As landowner, you have a huge say in how your land is treated, but you can’t negotiate a lease if you don’t know your own needs and what you want for the land.
“Because it is a contract, a lease has a great deal of flexibility, and you can basically put [in] any requirements or restrictions you want to include, which the tenant has to follow once they sign,” Cox says. “This can include limiting what, if any, chemicals or pesticides are used and when.”
2. Understand the tenant’s needs.
“While you can put any requirements or restrictions you like in your lease, your tenant has to be able to practically and financially implement them, and there are a number of ways you can help incentivize your tenant to follow your wishes outside of specific mandates in the actual lease,” Cox says. Some suggestions include:
- Sharing Cost: This might mean you, as landowner, share the costs of conservation practices, such as seed for beneficial cover crops. You could also accomplish this by lowering the annual rent if your tenant engages in practices that benefit the long-term productivity of the land.
- Sharing Risk: If your tenant voices concerns that not using chemicals will lower his yield, offer to share the risk. “You can do this through a traditional crop-share arrangement, where you commit to purchasing and selling a portion of the crop,” Cox says. “If you don’t want to mess with marketing your own grain or other crop, you can create a ‘flexible’ or ‘adjustable’ lease, where the rent price is based on the farmer’s crop yield and price.”
- Providing Security: Entering into a long-term lease might give your tenant a greater stake in the long-term productivity of the farm and better ensure a committed, trusted relationship for everyone. At a minimum, reimburse a tenant’s expenditures for improving the farm and soil at the end of the lease.
3. Write a clear agreement.
“While you can agree to any provisions you want, remember to make sure to have everything written specifically in the lease,” Cox says. “Written leases are becoming more common, but in relation to conservation practices, there seems to still be a prevailing verbal attitude of how tenants will care for the land, but you really need to take care of these things in writing.” Written leases should also be filed in the county recorder’s office—particularly leases lasting more than one year.
The Sustainable Agricultural Land Tenure Initiative offers a wealth of free resources to get you started, but speaking with a licensed attorney in your state is recommended, as he or she would know how to translate the plain language of the agreement you and your tenant desire into a legal document that is enforceable in court.
This article originally appeared in the July/August 2013 issue of Hobby Farms.