Creating Successful Leasing Arrangements Wesley Tucker Agriculture Business Specialist
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Transcript of Creating Successful Leasing Arrangements Wesley Tucker Agriculture Business Specialist
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Wesley TuckerAgriculture Business Specialist
Creating Successful Leasing Arrangements
Wesley Tucker
Agriculture Business SpecialistUniversity of Missouri
Extension
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Wesley TuckerAgriculture Business Specialist
Tucker FarmsTunas, MO
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Wesley TuckerAgriculture Business Specialist
Rental Arrangements
Rental agreements create a relationship where both
parties have the opportunity to gain from the strengths and assets
of the other party.
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Wesley TuckerAgriculture Business Specialist
Experts tell us that positive relationships have:
• Trust and support• Honesty and accountability• Respect• Responsible parties• Non-threatening behavior• Shared interests• Communication
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Wesley TuckerAgriculture Business Specialist
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.
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Wesley TuckerAgriculture Business Specialist
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
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Wesley TuckerAgriculture Business Specialist
“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
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Wesley TuckerAgriculture Business Specialist
“What makes a good lease?”
• Verbal or Written – Discuss the details
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Wesley TuckerAgriculture Business Specialist
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
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Wesley TuckerAgriculture Business Specialist
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
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Wesley TuckerAgriculture Business Specialist
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.
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Wesley TuckerAgriculture Business Specialist
When Does This Start• Tenancy begins on day the
agreement is made, not on the day possession is given.
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Wesley TuckerAgriculture Business Specialist
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
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Wesley TuckerAgriculture Business Specialist
Special Agreements:• Entry rights• Subleasing• Insurance• Use of buildings & grain bins• Fences• Repairs, maintenance, mowing • Hunting Rights• Fertility• Other special agreements
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Wesley TuckerAgriculture Business Specialist
Fertility is a Difficult Issue
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Wesley TuckerAgriculture Business Specialist
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
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Wesley TuckerAgriculture Business Specialist
Things Don’t go as Planned
• Situations change– Death– Illness– Memory loss– Accident– Finances fall apart
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Wesley TuckerAgriculture Business Specialist
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”
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Wesley TuckerAgriculture Business Specialist
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.
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Wesley TuckerAgriculture Business Specialist
Developing a Lease Agreement
• North Central Farm Management Extension Committee - Pasture Lease
• http://www.aglease101.org/DocLib/docs/NCFMEC-03A.pdf
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Wesley TuckerAgriculture Business Specialist
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
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Wesley TuckerAgriculture Business Specialist
Crop Share Agreements Determine a Fair Split
Landowner
Tenant
Land XXXLabor XMachinery XXSeed, Fert., etc. X XTotal Contribution
XXXX XXXX
Share 50% 50%
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Wesley TuckerAgriculture Business Specialist
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%
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Wesley TuckerAgriculture Business Specialist
Livestock Lease Agreements
• Important to consider all details in advance
• Who’s responsible for:– Damaged Machinery– Fence Repair– Replacement Females– Bull Expense
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Wesley TuckerAgriculture Business Specialist
04/22/2023 25
Lease Hunting
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Wesley TuckerAgriculture Business Specialist
Questions
Wesley TuckerUniversity of Missouri Extension451 S. AlbanyBolivar, MO 65613
417-326-4916