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5 Big Misconceptions About Farmland Leasing
Whether you're renting out your farmland or you're leasing the land to farm yourself, today's lower grain markets put a premium on reaching a fair agreement in which both sides of the deal will be able to make it work. Regardless of the agreement -- cash rent, flexible rent, crop share, etc. -- there are a few misconceptions that can sometimes damage what would otherwise be an amicable, fair deal.
The most important thing, one specialist says, is getting everything in writing. That may seem to be a foregone conclusion, but a lot of land deals are confirmed with a handshake, says University of Nebraska Extension ag law specialist David Aiken. So, get the deal down on paper and, in doing so, "spell out the rights and responsibilities before issues arise," he says in a university report.
Here are five misconceptions Aiken says are common in land lease agreements. Look out for these whether you're the landowner or lessor:
Landlords can tell their tenants how to farm the land. "During the period of the lease, the tenant is in charge of how things are done on the farm, not the landlord. From a legal perspective, the tenant calls the shots unless the parties both agree otherwise," Aiken says. "If the landlord wants to specify how it should be farmed, the best route to avoiding misunderstandings midseason may be to discuss farming practices and note them in a written lease."
Trespassing is still trespassing even if you own it. That's right; even if you own the land but are leasing it out, you can be prosecuted for trespassing if you venture out on that ground without the lessor's permission. This is one area where a written lease can be a huge asset. "Without a written lease, the landlord legally has the right to come onto rented land only to collect the rent and make repairs," according to Aiken in a university report. "Otherwise, the landlord can come onto the property only with the tenant's permission. Of course, the tenant would be pretty short-sighted to push this too hard."
Selling land and terminating leases. It's commonly thought that if a parcel of land is sold to a new owner, any previously held leases are ended. Again, getting a lease down on paper is critical when this scenario unfolds, Aiken says. "If the landlord sells rented land, the new buyer is subject to any existing lease. And if the lease has not been legally terminated, the new buyer may be stuck with the tenant for one to two more years," he says. "If the landlord sells the land, the tenant is not likely to give up the lease without being paid."
Raising rent. The new crop year for Aiken's state of Nebraska, for example, is March 1. And, the state's lease establishment deadline is September 1. After that date, the landlord cannot change rent "without the tenant's agreement," he says.
Hunting on leased land. If you own it, don't assume you can automatically go onto your land to hunt, which is common in many Plains and Corn Belt states. "Landlords can't hunt on rented land unless the tenant agrees to it," Aiken says.
It's critical to make sure any considerations like these -- especially those that can raise question and potentially cause disagreement between landowner and tenant -- are well-thought out before any agreement is signed, especially when farm budgets are tight.
"Discussing these rights ahead of time and noting them in the lease can help avoid misunderstandings and keep landlord-tenant relations positive," Aiken says. "While the savvy tenant often will accommodate the landlord's interests in order to keep the lease, working from a written lease will benefit both parties."