When drawing up a lease agreement, there are several important economic factors to consider. Some of the most important economic issues are: In a lease, the landlord is able to list basic information about the rental property – such as rent payments, deposit information and, if necessary, an explanation of late fees – so that tenants are aware of their obligations. In addition, in an agricultural lease, the landlord can provide information about what the landlord and tenant must do for business-specific situations and how they must act in accordance with the laws of the particular state in which the parties live. A good lease should contain as much information as possible to let the tenant know what to expect from the landlord, but also to protect the landlord in case of negligence on the part of the tenant. There are different types of agricultural or land agreements, but this agreement applies specifically to what is often referred to as a “cash rent” agricultural agreement. This means that the tenant pays for the use of the land, but the landowner does not share a percentage of the income from the crop or livestock. The advantage of this type of agreement is that the landowner receives predictable and scheduled payments. The disadvantage is that they do not receive any major payment possible if the tenant has an exceptional year. Cost sharing One issue that often arises is the owner`s responsibility to share the costs of herbicides for weed control, which can partially or completely replace cultivation or other tillage methods. Most landlords agree to provide half the cost of these materials under a crop-sharing lease.
Some believe that when no-till or minimum tillage practices are used, they should not pay the full 50% of the herbicide`s costs. See FM 1811 (AgDM C2-15), Survey of Iowa Farm Leasing Practices for more information. Flexible cash leasing A variant of the fixed cash lease is a flexible lease in which the actual rent payable depends on the actual returns obtained and/or the sale prices available during the term of the lease. This ensures that the rent paid corresponds to the profitability of the crops grown that year. Sometimes government payments and crop insurance benefits are also included in the calculation of gross income. The landowner shares some of the risk of low returns or falling prices, but also shares the additional profits when prices and/or production exceed expectations. Some flexible leases also take into account the cost of harvesting when determining the final rent or premium. More details are available in FM 1724 (AgDM C2-21), Flexible Farm Lease Agreements. You and your tenant can decide how you want to cover these costs. During the term of the contract, the owner still owns the irrigation system, but the tenant will use it. Here are some possible solutions: Even if you`re renting from a long-time friend or neighbor, or renting to a long-term neighbor, it`s best to turn any type of handshake agreement into a signed lease. While handshake agreements can be legally enforced with good evidence, a written agreement clearly describes the terms and greatly facilitates proof of an agreement if necessary.
A written contract can also help avoid disputes that can arise from hazy memories and misunderstandings. Lords are required to maintain the structures and have permission to enter the premises if necessary. Structures can be barns, equipment, fences and more. You can assign certain responsibilities to the customer, such as . B devices that it uses frequently and that may require ongoing maintenance. If significant damage occurs, for example due to .B fire or storm, the landlord has the option of terminating the lease. They also have the right to give tenants permission to add approved improvements at their own expense. For a harvest sharing lease, keep the expense accounts up to date. Most input suppliers charge each party individually. However, it is recommended to inform the owner in advance that he will receive an invoice and its object.
Tenants who rent from multiple landlords can purchase bulk deliveries and pass the bill on a pro rata basis to each of the owners. In this case, a copy of the original invoice must be attached. Explain each element of the invoice, as the names of the company`s own resources change frequently. The owner may not be familiar with the terms of commercial products for seeds, herbicides, and insecticides, but may need to categorize tax return expenses. This section deals with the beginning and end of the lease and the amount of lease payments. You can define how you want to receive payments, when they are due, and what happens if the tenant pays late (or doesn`t pay). They can also determine what will happen if they do not leave at the agreed time. It includes the ability to exclude customers from subletting.
The owner usually provides land and buildings and pays half the cost of inputs such as fertilizers, seeds and pesticides if the harvest is shared 50-50. Owners are also usually responsible for drying, storing and marketing their share of the harvest. The tenant usually provides all the work, fuel, equipment and the other half of the joint expenses. However, there are many variations in the distribution of expenses. Publications FM 1811 (AgDM C2-15), Survey of Iowa Farm Leasing Practices and AgDM C2-30, Crop Share Leasing Commission, provide further details on the allocation of expenses under a crop sharing lease. AgDM C2-30 decision tool, Crop Share Lease Analysis, calculates input contributions from landlord and tenant to determine how profits can be shared equitably. The potential drawbacks and problems of the fixed cash lease include: Iowa law establishes three methods for serving a notice period for agricultural leases to terminate the lease on the following March 1. The following is taken from Iowa Code Section 562.7: HarvestIng How are the costs associated with combining, drying, transporting and storing plants divided under a stock lease? If the corn drying equipment is part of the rental unit, the landlord often provides the dryer and storage facilities.
If the corn drying unit is portable, it may be jointly owned, or either party may own it and charge the other party a specified amount for its use. Fuel and electricity costs for drying are usually divided in the same proportion as harvesting. In some cases, the tenant is paid extra to deliver the owner`s share of the farm warehouse crop to a lift or processor. Whether you are a producer looking to expand your operations without purchasing additional facilities, or a farmer approaching retirement and considering renting your barns, the following key terms should be considered in any barn lease: If you are considering renting a barn, whether as a landlord or tenant, discuss all of these key terms, before reaching a final agreement. Also, be sure to write down the agreement. A lease is automatically continued from year to year, unless one of the parties terminates a separate written notice of the lease agreement. In Iowa, a notice period for the lease must be properly delivered in writing before September 1 before the end of the rental year. This applies to both rent-sharing and harvest-sharing leases, but not to tailor-made farming agreements. .