A well-drafted farm lease is more than just a document outlining acres and rental rates—it establishes the foundation for a strong, long-term relationship between the landowner and the farm operator. Early fall is the ideal time for landowners and tenant operators to begin discussing lease options for the coming year. Starting these conversations early allows ample time for goal-setting and financial planning to ensure everyone is fully prepared when spring rolls around.

A lease acts as a roadmap for the farm, clearly defining objectives and setting terms to ensure both parties are aligned year after year. Here are a few considerations to keep in mind when drafting your next lease:

Aligning Goals and Risk Tolerance: Establishing clear goals and determining your risk tolerance are crucial first steps in selecting the right lease. Some leases transfer all the risk to the tenant, while others involve sharing the risk between the landowner and the tenant. Understanding these factors helps you choose a lease that aligns with your personal and financial objectives as well as your risk preferences.

Conservation: It is essential for the landowner and operator to agree on the conservation practices they wish to implement and then determine how expenses will be allocated. These details—including specific practices, management strategies, and associated costs—should be clearly outlined in the lease through detailed provisions and addendums. This approach minimizes confusion and establishes a clear plan for the implementation of conservation practices.

Planning for Long-Term Success and Improvement: The future of a farm is shaped by its yearly operations. For landowners focused on long-term sustainability, finding a dedicated and skilled operator who can incorporate sustainable practices into the lease is essential. Multiyear leases at a reduced rate can be particularly beneficial when the operator engages in substantial projects that increase the property's value, ultimately providing added benefits to the landowner.

Important Lease Additions and Opportunities: When drafting leases, several additional factors should be considered. These include filing UCC-1 liens on farm operators to ensure payment of any outstanding rent, if applicable. Leases should also mandate that the operator maintains farm liability insurance to address potential risks. Landowners might also investigate whether their state offers incentives for working with beginning or underrepresented farmers. If the farm has recreational potential, incorporating a hunting lease could offer an additional income stream.

Every rental arrangement is unique, and strategies that work well on one property might not be effective on another. One landowner might prioritize maximizing rent, while another might focus on conservation, and yet another might prefer leasing to a family member or long-time operator. Achieving these diverse goals requires a meticulously drafted and robust lease to safeguard against unforeseen changes. It’s crucial for landowners to thoroughly understand the risks and rewards of each arrangement and ensure that the farm operator agrees to all lease terms.

Peoples Company’s team of land managers excels in all aspects of lease management, from selection and negotiation to drafting, execution, and enforcement. Our comprehensive, six-step proven process ensures that landowners' needs are met and each farm reaches its full potential. For more information on maximizing farm opportunities through a written farm lease, please visit http://www.PeoplesCompany.com or call 515-222-1347 to consult with a land manager today.