As landowners and land renters look ahead to the next cropping season I’ve had several questions regarding farmland rental rates and lease agreements. While the land rental rate drives land rental agreements, I encourage the landowner and the land renter to consider negotiating a comprehensive written farmland lease agreement that protects both parties and serves to clarify expectations and avoid potential misunderstandings that can lead to legal disputes and damaged relationships.
The most common question I receive is “What is the land rental rate for Wayne County?” Unfortunately, the land rental market is not a commodity market where a price is posted and easily accessible like our corn and soybean or livestock markets. Most commonly, land rental rate values are based upon word of mouth conversations or surveys. Reliability of surveys depends upon the number surveyed, the bias of those surveyed and the geographic distribution of those surveyed. The bottom line is that there is not just one land rental rate. More accurately, there is a range of land rental rates. Factors that influence land rental rate include:
- Demand and competition for the parcel of land
- Fertility of the parcel
- Drainage characteristics
- Soil type and crop yield potential
- Size (acres) of the parcel
- Shape of the parcel, does it lend itself to easy soil preparation, planting, and harvesting with commonly used equipment and machinery?
- Potential for wildlife damage
- Services provided by the renter
- Crop prices and crop enterprise budgets
- Land taxes
- Personalities/relationships; can both parties get along with each other.
The National Agriculture Statistics Service (NASS) surveys landowners and growers and provides an Ohio cash rent report that is available on line at https://www.nass.usda.gov/Statistics_by_State/Ohio/index.php. The reported cash rent value is an average of responses received. Do not use this value as the absolute correct rental rate, but rather use it as a starting point in negotiations and adjust it up or down depending upon those factors listed above.
After agreeing upon a rental rate, both parties should have a discussion about the terms and provisions of the lease, put those agreements into writing and file a memorandum of lease with the county recorder in the county where the land exists. Peggy Hall, OSU Extension Field Specialist in the Agricultural and Resource Law Program, has written several good fact sheets on farmland rental agreements, all available on-line at https://farmoffice.osu.edu/our-library/farm-leasing-law. I’ll draw from some of Peggy’s publications in making the following comments.
Consider discussing the following provisions, getting them spelled out and included in a written agreement:
- Rental amount and payment: when is the payment due, to whom is it due, what happens if the payment is late?
- Duration, renewal and termination of the lease: For what length of time does the lease agreement last? What is the process to renew the lease? What are the options for either party to terminate the lease and what kind of notification period is required?
- Is participation in government farm programs allowed? If so, which party receives any program payments?
- Is liability insurance required on the property? Whose responsibility is insurance? What coverage amount is required?
- Soil health and water quality: What safeguards are in place to maintain or improve soil health and protect water quality? Are there specific measurements or tests required at the beginning and end of the lease period to assess soil health? Are there provisions for soil testing and maintaining minimum levels of soil pH and soil fertility? Are maximum levels of soil phosphorus set? Who is responsible to pay for fertility inputs? Are there required or prohibited practices regarding tillage, use of cover crops, etc.?
- Livestock manure: Are there requirements regarding application methods, timing and amount?
- General maintenance: What are expectations for the property appearance? Who is responsible for mowing lane access, around buildings if included in the lease, and along fence lines? Who is responsible for overhanging branches? For maintaining grass waterways?
- Is hunting or other non-farm uses allowed by the renter?
Ohio law requires that a farmland lease agreement be in writing to be legally enforceable. The lease must identify the land by providing a legal description, address and acreage amount of the land parcel. Both parties, the landowner and the land renter, are required to sign the lease. The lease needs to include the proper legal names or business names of the parties involved in the lease. Lease agreements of more than three years require all signatures acknowledged and certified by a notary public or local official. An enforceable lease requires filing with the county recorder in the county where the land exists. It is not necessary to divulge all the details of the lease. File a shortened memorandum of lease that only includes the names and addresses of each party, a legal description of the land, the lease period and rights of renewal.
For more information about farmland rental and lease agreements or about any of the publications mentioned in this article, contact the Wayne County Extension office at 330-264-8722.