Make Your Leases Legit

March 19, 2016 02:47 AM

Follow these tips to secure your land base

Think about the significance of the farmland you rent. You scale your business, purchase inputs and market grain or livestock based on that land being part of your farm. 

What would happen if one of your landowners backs out of your agreement? Or a new heir decides to sell the land midseason? While handshake lease agreements are still common, they can leave your farm exposed if situations change. 

“Leases are worth thousands of dollars, and the land at issue is crucial to an operation, so it might be worth spending a few hundred dollars to make sure your contract is good,” says Liza Moore, attorney with Foster Swift Collins & Smith in Lansing, Mich. “A farm lease needs to be specific to your situation. A form contract might not do the job. Many people don’t think about lease terms until a problem arises.” 

Start by sparing no details. Clearly identify the land in the lease, including boundaries, farm buildings and driveways. Spell out the lease termination and renewal process. Even for long-term rental arrangements, this should be included so there’s an automatic trigger to renegotiate the lease price. 

Set the value of long-term improvements, such as fertilizer applications, cover crops or drainage system maintenance—anything you do to the land that improves it beyond one season. 

Hunting is another issue to consider. In the lease, include whether or not the tenant has hunting rights and if there’s a fee. “You want to clearly state who is allowed to be on the land and for what purpose,” Moore says.

Some states have specific laws for farmland leases. Check with your attorney to make sure your leases comply with the law and meet your needs. “A farm lease needs to cover many issues—get advice from your attorney before you sign a contract,” she adds. “Then review all your leases during your annual business meeting.” 

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