How to Build a Farmland Lease

There are several critical components to include in a comprehensive farmland lease.

- Cassidy Walter Business Management Editor [e-mail]

The relationship between a landowner and a renter, like any relationship, needs clear communication. A well-crafted lease can help with that.

There are several critical components to a comprehensive farmland lease. Whether this is all new or you’re an old pro, whether you are seeking professional help or taking the DIY approach, make sure your lease includes these basic elements.

1. Write It Down

First, and this perhaps goes without saying, but: Write it down. While less common today, handshake or oral lease agreements are still at play in American agriculture, but experts advise against them.

“I hear about people using them because those are the individuals who call me with problems,” said Heather Gessner, livestock business management field specialist with South Dakota State University Extension.

Patrick Hatting, farm management specialist with Iowa State University Extension, said some people work together “like peas and carrots,” but it’s still a good idea to have the details worked out in writing.

“Why do you have a written lease?” he said. “It’s because you value your relationship. You want to create an environment where there are no misunderstandings.”

2. Use Legal Names

Now that you’ve agreed to write a lease, where do you start?

Begin with the proper legal names of the lessor (owner) and the lessee (farmer/tenant). Frequently, one or more of those are a limited liability company (LLC) or a corporation. So, list the actual legal entities, rather than the individuals who own the entities.

You might think, “Does it matter if there are a few technical errors in the lease?” But when there is a legal problem, those little technical errors are what lawyers go after.