How to Negotiate a Fair Land Rental Agreement

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It’s a rare character who enjoys negotiating a cash rent farm lease, but there’s no reason to feel intimidated by this conversation.

Whether you’re a local landowner, remote farmland owner, or a farmer, you can arrive at a fair land rental agreement by leveraging a little data, defined goals, and clear communication. Here are a few concrete strategies anyone can adopt when it’s time to negotiate the cash lease of farmland, along with a couple of pieces of information to have on hand to arrive at a fair rental agreement for the 2020 growing season.

Get started on the right foot: plan your conversation

No matter how long you’ve known your counterpart, you should take a professional approach to this conversation. What does this mean? Set up a call or send a letter or email laying out your questions, expectations, and a timeline for negotiations.

This conversation is typically started by the landlord, but it’s not a bad idea for a farmer reach out about renewal if a farm lease termination date is less than 30 days away. If you’re not sure when the termination date is, be sure to check your state’s termination date.

Put yields front and center

When it’s time for negotiation, the main subject should be how the land performs and how it can be reasonably expected to perform in the next growing season. Whichever side of the table you’re sitting on, the condition of the ground and the proof its past production provides are critical pieces of information.

In your discussion, you should plan to dig into yield histories, but it can be very helpful to look at the average rental cost as a factor of overall revenue.

Everyone should come to the table with data in hand

Both parties should come to the table with data in hand. Farmers in these negotiations typically have more access to data, but in a healthy lease agreement, most of this will already have been shared with the landlord on an established timeline.

Landowners should prepare for cash rent farm lease negotiations by educating themselves on current rents in the market. If it’s not your first year working together, you can also prepare by reviewing past yield records and any other historical data you have on hand.

Bring your concrete goals for the year ahead (in writing)

In your initial request for a call or face-to-face meeting, you should both agree to bring concrete goals to your conversation in writing. Putting pen to paper, in this case, is helpful not only because it’s easy to forget what you were hoping to achieve at the moment but because it’s important to think deeply about your values and financial needs before you enter the negotiation process.

Fifty percent of farmland owners don’t farm their land, and their concerns can be quite different than those of the person farming that land. Writing out goals can be helpful for both parties: if both parties’ goals don’t align, it may be time for you to look elsewhere for land or a tenant.

When it comes to sustainability, many landlords will want to discuss …

  • Making it a stipulation that farmers plant an annual crop rotation.
  • Fertilizer and pesticide applications maps.
  • The frequency of tillage in the past year.
  • Whether or not tillage practices are allowed going forward.

Farmers may be concerned with …

  • Managing costs.
  • Maximizing yield.
  • The length of the lease term.

Whatever your priorities, if you don’t articulate them upfront, you may find yourselves in conflict later. It’s best to discover this early and have a frank discussion.

Find what’s “fair” in your relationship

When it comes to arriving at a fair land rental agreement, the word “fair” is very important. It can mean different things for different people.

For example, price fairness is important. But fairness in other objectives is equally important. Both parties have to work to find a balance between their business needs and equilibrium in their personal relationship.

To extend this example, if you’re a farmer who’s had a tough year due to extreme weather, you may be hoping for some help from your landlord. But next year is a new year with new potential, and your landowner may view their property as strictly a business asset. In this case, you’ll both need to think about your priorities, and how much you can compromise and still meet your goals.

Farming for the future

For landlords, it’s not just about how much cash rent you can get this year but also about working with a farmer who is a good steward of the land. For farmers, the process may be about finding someone who takes good care of their land and is on top of soil management.

Whatever your goals, at the end of a negotiation, landowners and farmers both want to see a positive financial outcome and sustainable practices in place. With yield data in hand and a clear set of goals, this can be achieved for the next growing season and the one after that.

Related Resources

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