Questions to ask on renting land
The two most common questions Alerus Financial farm managers say they hear from landowners about rents are:
How much rent should I receive?
Should I get more than we negotiated last time?
When the choice is receiving the highest rent or having a renter who takes good care of the land and pays the going rent rate, Alerus Financial farm managers recommend the latter.
The most important questions they say a landowner ought to consider when establishing rents for the new year are:
Does the operator pay the rent on time?
Does the operator take care of the land properly?
Has the operator completed land improvements?
Some guidelines for landowners to follow when structuring a farm lease are:
If you plan to sell the land within the next few years, plan the lease accordingly.
Review completed and uncompleted land improvements and determine responsibility.
• Landowners often don’t ask the right questions about rent.
• Their top question should be “does the operator pay on time.”
• Land care and improvements should be the other top issues for owners.
Take this into consideration when negotiating the rent rate for the new lease.
Determine the acres to be fall tilled in the final year of the lease.
Determine the rent ranges — the going rate is somewhere in the middle of the range.
Have all the rent due in the spring.
Consider the terms. Alerus Financial recommends three-year leases, with an option allowing the landowner to sell the land. No lease should be longer than five years.
A one-year lease is not recommended because it does not give the farm operator incentive to do the extra land improvements.
Source: Botsford and Qualey Land Co.’s Fall 2010 newsletter
This article published in the November, 2010 edition of DAKOTA FARMER.