I gave a lengthy presentation this week to a national group of attorneys regarding farm leases. I'm sharing some of my presentation here on the blog in case it can help our clients and friends when negotiating their own leases.
Like other legal agreements, agricultural contracts should record the parties’ agreement and expectations so there are no surprises regarding the parties’ relationship. A farm’s costs to operate have risen exponentially since a generation ago, and market prices for commodities haven’t always kept up. Precise and efficient contracts can save a farmer (and landlord) time and money. Some agricultural contracts are similar to traditional adhesion contracts (like insurance policies), where there is not much room to negotiate. Others are drafted from scratch, giving both parties the opportunity to create a quality agreement.
Farm leases are important because rented farmland is now a common situation. It is especially common in major cash grain producing regions like the I-states and the Mississippi Delta. According to the USDA 2014 Tenure, Ownership, and Transition of Agricultural Land (TOTAL) Survey, 45% of farmland is rented in Indiana, Illinois, and Iowa. The majority of farmland is still leased out using a fixed cash rent arrangement. According to the survey, 47% of land has been rented to the same tenant for more than 10 years. Roughly 15% of land has been rented to the same tenant for three years or less. The vast majority of land (70%) is rented out using a lease that must be renewed annually. These numbers mean that the farmland lease is one of the most important tools in a farmer’s or landowner’s toolbox.
I'll keep posting parts of my presentation, but if you have any specific questions about farm leases, do not hesitate to contact me directly at Schroeder@aglaw.us.