What you should know about finding a farmland tenant
This is often not an easy decision and it's one that should never be reached lightly. However, the process of finding a tenant can result in an ideal partnership that can lead to better returns on your valuable investment.
So, if you find yourself contemplating a search for a new tenant for your farmland, then continue reading to learn what you should know about finding a farmland tenant.
Who owns farmland in the U.S.?
Farmland ownership is of interest to many because of how much land owners influence production on farmland, conservation of that land and farm succession planning.
More than 60% of farmland in the U.S. was owned by the farms' operators in 2012, according to the 2012 Census of Agriculture. That percentage has been relatively stable for about 50 years, other than a decline during the 1980s farm crisis.
The census also found that 39% of farmland in the country was rented. Of cropland, more than half was rented. A little more than 25% of pasture land was rented. The census found that there is generally more rented farmland in grain production areas. Regions where cash grains are grown - such as corn, soybeans, wheat, rice and cotton - typically see more than 50% of farmland being rented to tenant farmers.
In general, the census found that smaller family farms were more likely to be operated by landowners. Also of note is that of rented farmland, 80% (or 30% of all farmland) is owned by people who do not farm.
Know your goals for the land
The first step to finding a suitable tenant to operate on farmland is for the landowner to examine his or her goals for how they would like the land to be used and how it should perform.
Is this land a long-term investment that you hope provides solid returns in the long-run? What about short-term performance. It's important to know what matters for both the long- and short-term.
Landowners should also take a close look at how the land has been used in the past and how that has translated to performance and sustainability. Are there other uses for the land that could increase income or establish a more sustainable future?
These are the types of questions landowners should ask - and find answers to - before looking for a tenant. In many cases, an experienced farm manager can help guide landowners through this process.
Who would you want your tenant to be?
This may sound like an odd question, but trust us, it's not. If you could pick any type of person to rent and operate your land, then who would that tenant be?
Bird Dog recommends that you create what they call an "ideal tenant profile." That profile would include characteristics you would hope to see in a potential tenant that would help make working with them easier and more enjoyable. This would include personality, character qualities and shared values.
If you know what you are looking for in an ideal tenant, then the entire search process becomes that much easier. With this profile, you can eliminate potential tenants that may not fit who you think can work best to help you achieve the goals you have for your farmland.
Be prepared to screen potential tenants
Finding a farmland tenant is by no means a first-come, first-serve situation. It's a process that should involve careful screening followed by interviews that include conversations about goals, desires for the land and shared values.
But before you can get to the interview process, you have to set up a good screening system. This can include being clear in any advertisements about minimum requirements (including lease rate). It should also involve verifying identity, requesting farm resumes and asking for references.
Landowners can also lean on area farm managers, lenders or even neighboring farmers to see who may fit the profile of an excellent tenant.
Get on the same page with your tenant
Who makes decisions on how land is operated? If it's not mentioned in a written lease, then the tenant farmer can make those decisions, not the landowner. That's why landowners must always communicate with their tenants - both current and prospective - as to what their expectations are. In addition, any wishes the landowner has for farming operations should always be included in the written lease agreement.
There are some other common misconceptions that landowners should know about or clear up with their tenants, according to Successful Farming. That includes the fact that landowners can't hunt on the land they own without the tenant's permission; in fact, they could even be prosecuted for trespassing.
There could also be restrictions on when leases can be terminated and when rent can be raised. Be sure to check your state's laws regarding these issues.
Written leases are better than verbal
Handshake agreements can sometimes become a little shaky when the parties that once agreed now find themselves in disagreement or dispute. Some deals on the farm can be agreed upon with a handshake, but it's best not to set up lease agreements this way.
It's true that you can enforce a verbal lease, but only for one year. As Iowa State University Extension and Outreach explains, though, verbal leases are only provable for one-year at a time. This is due to the fact that the statute of frauds prohibits the admission of evidence that would be required to prove that an oral farm lease agreement existed beyond a year's term.
That's why written leases are much more preferable. Written leases, unlike verbal leases, allow for every detail of an agreement to be on the record, preventing most disputes. Also, when something unexpected happens, a written lease provides a document to fall back on that could provide some direction that shouldn't surprise either the landowner or the tenant.
Midwest Land Management can help find tenants and more
Midwest Land Management offers a wide range of services to farmland owners, including tenant selection, contract and lease negotiations and more. We are fully licensed in Iowa, Minnesota and South Dakota.
Contact our team to talk about your farming and land goals.