Creating Successful Leasing Arrangements Wesley Tucker Agriculture Business Specialist

Wesley TuckerAgriculture Business Specialist

Creating Successful Leasing Arrangements

Wesley Tucker

Agriculture Business SpecialistUniversity of Missouri

Extension


Tucker FarmsTunas, MO


Rental Arrangements

Rental agreements create a relationship where both

parties have the opportunity to gain from the strengths and assets

of the other party.


Experts tell us that positive relationships have:

• Trust and support• Honesty and accountability• Respect• Responsible parties• Non-threatening behavior• Shared interests• Communication


What makes an agreement work?

• The most successful relationships occur: – when the parties have

complimentary goals. – when parties are willing to

compromise as necessary.– when parties communicate

effectively.


Laws and Customs• Statutes and Common Law

– Binding contract, violations– Termination notice– Tenant liable for rent– Possession/right of entry– Property damage– Subleasing/soil fertility

• Customs– Don’t have to follow


“What makes a good lease?”

• It’s not easy!• Takes lots of hard work• Careful thought by both

parties

• Generally a good lease is:– Landowner & tenant both agree it’s

fair – Both clearly understand each

other’s expectations


“What makes a good lease?”

• Verbal or Written – Discuss the details


Benefits of a Written Lease

• “What? Don’t you trust me?”

• Documents Agreement– Prevents misunderstandings

(communication)

• Forces Consideration of All Details– Much easier before one party gets

upset– Minor details = explosive problems


Oral/Verbal Lease• Term

• More than 1-yr invalid• Year-to-year tenancy

• Binding on heirs or new owner• What was agreed? • Can’t testify


How Do I get Out of This

• Year to year terminates at anniversary with 60 day WRITTEN notice, otherwise it is continuous.

• Month to month terminates with 30 day notice.

• If an agreed date is set for termination then no written notice is necessary, tenant must vacate without notice.


When Does This Start• Tenancy begins on day the

agreement is made, not on the day possession is given.


Written LeaseMinimum Requirements

• Name, Address—all parties• Property Legal Description• Duration (term) of Lease

– Extremely important consideration– Promote investment/Land value– Termination clause or amortization of

investments• Rental Rate • Rent Payment Arrangements• Signatures


Special Agreements:• Entry rights• Subleasing• Insurance• Use of buildings & grain bins• Fences• Repairs, maintenance, mowing • Hunting Rights• Fertility• Other special agreements


Fertility is a Difficult Issue


What’s It Worth?

• 25 lb of N• 7.5 lb P2O5

• 22.5 lb K2O

1000 lb bale of grass hay

• N - $5.32• P2O5 - $4.12• K2O - $12.37• Total = $21.81

30%

N=$0.71, P=$0.55, K=$0.55


Things Don’t go as Planned

• Situations change– Death– Illness– Memory loss– Accident– Finances fall apart


If There Is A Problem• Why is there a Problem?• Separate People from Problem

– Perceptions – Emotions - Communication

• Focus on Shared Interests not Individual Positions– He wins vs. I win

• Work toward Mutual Gain– Original Objective – “gain from

strengths & assets of one another”


Rental arrangements– It’s the legal stuff.

• Have things in writing.• Keep it simple if possible.• Think about your family.

– It’s the money.– It’s the relationship.

• Keep it honest.• Keep it open.• Keep it positive.


Developing a Lease Agreement

• North Central Farm Management Extension Committee - Pasture Lease

• http://www.aglease101.org/DocLib/docs/NCFMEC-03A.pdf


Livestock Lease Agreements

• Situation: Farming is capital intensive

• Land, Machinery, & Breeding Stock• Leasing land is common, why not

cattle?• Young Producer vs. Ready to Retire


Crop Share Agreements Determine a Fair Split

Landowner

Tenant

Land XXXLabor XMachinery XXSeed, Fert., etc. X XTotal Contribution

XXXX XXXX

Share 50% 50%


Livestock Share Agreements

What’s a Fair Split?Landowner

Tenant

Land XXMachinery X Breeding Stock XXXLabor XSeed, Fert., etc. _______

X

Total Contribution

XXXXXX XX

Share 75% 25%


Livestock Lease Agreements

• Important to consider all details in advance

• Who’s responsible for:– Damaged Machinery– Fence Repair– Replacement Females– Bull Expense


04/22/2023 25

Lease Hunting


Questions

Wesley TuckerUniversity of Missouri Extension451 S. AlbanyBolivar, MO 65613

417-326-4916

[email protected]