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SF Blog: Adjusting Cash Rent to Keep the Tenant
My grandfather has been a farmland owner and landlord for years. With a pretty extensive stretch of farmland in southern Iowa and four 200-acre farms in northern Iowa, he’s been working with farmers for years.
He has a soft spot for growers as he spent his childhood working on the family farm, as did many other Iowa kids.
This year, he adjusted rental rates for the father-and-son farming team who have been loyal tenants for years. They farm the 800 total acres of relatively flat farmland in northern Iowa. My grandpa describes them as incredibly environmentally conscious and really good people. He would know since they’ve been renting that land from him for at least 15 years.
Grandpa visits the farms twice a year, generally, but he’s spent more time at the northern Iowa farms than usual this year while he negotiated a new lease.
It wasn’t a surprise when his tenants asked to renegotiate their lease.
The long-time tenant who’d been farming my grandpa’s largest farm in southern Iowa struggled last year but was able to keep farming the ground when Grandpa worked with him and adjusted his cash rental rate. This year, the farmer wasn’t able to swing it.
“He’d been farming that land a long time – I’d say 15 years – and this year he decided that he’d give it up when he lost his input loan,” Grandpa says.
The farm was quickly snagged by a big-time farmer who has 24,000 acres of farmland all across the U.S. The new tenant is paying $190 per acre, and the most my grandpa has ever gotten on that farm was $200. The former tenant will be doing much more custom farming going forward, and Grandpa hopes he’ll be able to work on his ground.
As for the father-son tenants, my grandpa wasn’t comfortable with the flex lease they originally proposed that involved an adjustable cash rent value based on market prices. In the end, the two parties happily settled on knocking down the rental rate per acre by $50. The growers will now pay $250 per acre.
“It’s just a one-year lease,” Grandpa says. “But if corn goes up to $4, I get $275 an acre.”
Compromise is key.