We recently sat down with Brett Salyers of Halderman Real Estate and Farm Management to discuss some of the basic points of farm leases. Leasing farmland requires an in-depth understanding of farm management, and Halderman considers this specialized expertise to be its comparative advantage in the market.
What are some of the basics of farm leases?
Over time we have seen that a majority of leases are either cash leases or cash-flex leases. There are still some share crop leases, but these are becoming pretty rare.
Our main objective for negotiating a farm lease is to arrive at an equitable rent payment. The payment should provide the landowner with a fair return yet allow the tenant to productively work the farm.
As far as the basic terms go, we will note the intended crop use; in our region it is primarily corn, soy and wheat, with hay and oats occurring a bit less frequently. We provide a lease provision for crop rotation to ensure soil health. As many people are aware, too many consecutive seasons of the same crop can damage the soil.
Another consideration is the use of accessory buildings on the property. In some cases, particularly if the structures are either obsolete or minimally functional, we will just go ahead and include the use of those structures in the lease. But if there are modern, highly functioning buildings on the property, we might break out a separate rental structure for those.
Other, non-farming uses like hunting can also be included in a lease. For the most part, working farms do not have an abundance of wooded areas suitable for hunting, but we do come across it now and then. If it's just a small area, it would probably just be included as a permitted use.
Can you tell us about conservation and farm leases?
Conservation is very important for the long-term health of the farm. One thing we work through is how CRP payments are distributed. Drainage is another negotiated item. We determine who maintains drainage systems and who provides the labor for implementing new projects. If the landowner pays for the entire project, then there might be an agreement for the tenant to provide all or part of the labor.
Another conservation element is the use of cover crops. Cover crops are non-cash crops that are planted to sustain soil health and provide additional nutrients. Another component of soil health is how to regulate the use of fertilizer. Rather than stipulating a quantity of fertilizer that must be used, we study growing patterns and recommend nutrient levels and use based on the actual condition of the soil.
What do you think sets Halderman apart from the competition?
One thing that we always emphasize is communication. Among the three interested parties, the landowner, the farm manager and the tenant, there is no such thing as too much communication. We often find ourselves getting to know all the parties and their families. In my view, it is this personal touch that sets Halderman apart. At Halderman Real Estate and Farm Management, we look forward to answering any questions you may have about farm leases and farm investments.