Following is some advice from the farmers, landowners, and farm advocates from around the country whom we interviewed while developing this toolkit. Although farm operations vary widely by type and by location, the wisdom we gleaned from talking with these individuals is broadly applicable.
“My first experience was a handshake deal for a one-year lease that had renewed a few times. After 4 years we created a written lease, but then the arrangement stopped working for me! The landlord wanted to be part of my farm operation, but I didn’t really want that, and he was not complying with certain terms of the lease. When I tried to enforce the lease, he told me he didn’t want me on the land anymore. I found another property with a landlord who did not want to be part of the operation, and hired a lawyer to help me put into writing what I wanted. I didn’t get everything I wanted, but it was so helpful to have a lawyer. Farmers often think we have to take what we can get, and that’s just not true. The landlord can just say no to something we ask for, but it can be easier if the lawyer asks for it. I advise farmers just starting not to just sign something because they think it’s what they can get. For me, the most important things to discuss are: the permitted and prohibited uses of the land; getting a long-term lease (a 5-year lease gave me a great sense of security); making clear that the farmer has access to utilities, including water, and being clear about who is paying; and finally, what access the landlord will have to the land.”
– Small scale Iowa vegetable grower
“I came to work at the farm as the farm manager, and in my first season, my boss decided to sell the business and move on. So a few colleagues and I purchased the business and renegotiated the lease with the landowners. We had good rapport, and were in sync with the landowners about the need for supporting sustainable farming practices, but we also hired a lawyer experienced in leasing issues.
One example of how we were able to discuss what was needed and determine a fair method of payment was with respect to improvements and repairs. There was a huge barn on the land, but a new roof and water and electricity access were needed for it to be useful to the farm operation. It is so important to carefully inspect the land and buildings you are planning to lease. We agreed that the landowners would pay the cost of renovating, and we would pay the depreciated cost of the improvement through each year of the term of the lease. With respect to necessary repairs through the lease term, we agreed that if the cost was under $750, the farmers would pay for the repair, and any repairs costing more than $750, or having a useful life of more than four years, were to be covered by the landowners.
Being in the northeast, we didn’t think there would be any issues with access to water, but that was shortsighted. We share a pond with another tenant. The summer and fall of 2016 were extremely dry, and the farm did not have enough water from the pond, which fell to its lowest level in many years. We are now negotiating new terms for 2017 and beyond. I advise all farmers to think about water access, even if your area has not been subject to drought in the past. These types of climate change impacts are difficult to foresee.”
– Vegetable/flower farmer in upstate New York
“We have 180 acres of plantable land base for vegetable crops. We own 70 acres on two separate plots, and the other 110 acres are leased from various landowners. I’ve found that owning sometimes costs significantly more in mortgage payments for the same acre than renting, and while I may build equity and better land security it is not necessarily worth it, especially if I can build that on the land I own. I grow perennials, have storage, make improvements, all to the land I own.
Be sure to check out what programs your state offers to farmers. In Massachusetts there is something called the “APR” program, where the state department of agriculture buys the development rights to a piece of land, and the farmer can purchase the land for its agricultural value. This program made a huge difference to me in purchasing one of my plots of land; for the other, I’m in negotiations for a land trust to purchase the property and lease it back to me, because the taxes are so expensive.
If you want to be certified organic, and you are leasing land that has not been certified organic, you need 36 months to transition that land. So I highly recommend you obtain a long term lease (at least 7-8 years) in order to make that financially viable, as it takes at least 5 years after the transition to obtain the added value from organics.”
– Organic producer in Massachusetts
“I lease 95% of about 1200 acres, all within 20 miles of the land I own. If I own land I have to pay taxes and that takes away from the money I can invest in a tractor, for example. So I own what I need to have my farmstead, including my equipment and processing facilities, and lease the rest. I strongly recommend getting leases for as long as possible; land subject to an annual lease, or even a five year lease, is difficult to improve, as you don’t want to invest if it is not going to be yours to gain from. A good lease should protect your investments – cover cropping, building organic matter, creating drainage – for some period of time.”
– Upstate New York grain farmer
“The length of your lease is going to need to be longer or shorter depending on your operation: dairy, livestock, apple orchard, for example, if your operation includes these things you will need a longer lease because it takes longer to build the operation and make a profit. Also – farmers and landowners can shy away from “getting all legal,” but the farmer is putting in enormous investment so it’s quite important to agree to your lease terms in writing. This is especially true if you are friendly, so there is no miscommunication. And you have to build in your worst case scenario – because it can happen.”
– New England farmer with diversified operation and land trust experience
“I lease barn space and land from a successful farm, and have access to their CSA customers and farmstore space. My rent is a base price plus my landlord gets a percentage of my sales. It’s helpful to me, to build my business, but we have to negotiate customer information if I leave or sell the business.”
– Vermont dairy farmer
“I had a reasonable lease with my landlord, but he did not understand what sheep farming was going to mean. For example, he wanted the barn to be “clean,” but “clean” meant different things to him and to me. We ended up terminating the lease, and it made me realize how important discussing all these issues is to have a successful ongoing lease arrangement.”
– Western PA sheep farmer
“I had an annual lease, and it was extremely difficult to farm, both because there was no security, and because I could not make any improvements or add any structures. I have now learned that an irrigation system, electricity in the barn, walk-in coolers, greenhouses, wash stations are all critical to my vegetable operation. Beware, the first 3 years of a farm business is getting used to local consumers, local pests, local climate, and building goodwill. Finally, I advise developing a business plan before entering into a lease, and being sure that the lease allows you to do what you need to accomplish the plan.”
– Vermont vegetable farmer
While having a lease in writing is critical to being able to enforce your rights, almost every farmer and advocate we spoke with said the key thing is communication. The lease negotiation process gives you the ability to discuss many of the issues that can come up between landowner and farmer. If you have good communication, when there’s a problem or dispute, you have the relationship to deal with figuring out the best resolution (whether it is in the lease or not).
Another way of putting this is that the relationship between landlord and tenant is the most important element to having a successful lease. Getting clear on the vision and intention of the arrangement is the first step, and documenting it in the lease is the second. Hopefully, you can walk or tour the land together and discuss details of the tenant’s planned operation. For example, if you are a tenant farmer, make sure the landlord knows about your plans for a CSA with on-farm pickup, for on-farm events, for a temporary greenhouse, for farm tours, or for anything else that the landlord might not expect.
There is no one way to value land. You can check with your local extension agent and see if they have a sense of what land is renting for in your area, and you can try to find data for the rental rate for your county, but your rent is going to depend on the value placed on the land by the landowner, the landowner’s reason for leasing the land, and the tenant’s financial ability to pay. Both sides need to be happy with the rent price; if one side is unhappy the relationship is unlikely to succeed. Also, if you are a tenant farmer just starting out, you might want to negotiate a staggered rent with your landlord, so that your first few years as you are building your business you are paying less rent than once you are established.
Equity building is critical to the long term financial sustainability of individuals and families. Equity building can be done outside the provisions of a farm lease, i.e. in a residence, by contributing to a 401(k), or even in farm equipment or moveable structures. However, a farmer’s ownership of a temporary greenhouse, coolers, and/or farm equipment can be a means for building equity. Farm lease provisions can also help with equity building in certain situations.
If the lease includes conservation provisions that require a tenant to act in certain ways, be sure the tenant farmer has enough time and resources to accomplish conservation goals. Also, if a tenant farmer wants to be able to pursue conservation funding, be sure to make the lease long enough for the farmer to be able to accomplish the goals necessary to obtain the conservation funding. Finally, be clear about who is responsible for conservation measures and who will get the benefit of required conservation activities.
Overall, based on hard-won farmer experience, it seems the most valuable thing about a farm lease is the process of negotiating it. The farmer and the landowner should discuss what the farmer is going to be doing, what is permitted, what is prohibited, who is going to pay for what, and what is going to happen if there is a dispute. Initial and ongoing communication between farmer and landowner is critical, as is continuing to build the relationship during the lease term.
The Questions to Consider page in this toolkit can help get you thinking about how to start fruitful landlord-tenant farm leasing discussions.
The Center for Agriculture and Food Systems is an initiative of Vermont Law School, and this toolkit provides general legal information for educational purposes only. It is not meant to substitute, and should not be relied upon, for legal advice. Each farmer’s circumstances are unique, state laws vary, and the information contained herein is specific to the time of publication. Accordingly, for legal advice, please consult an attorney licensed in your state.