Leasing farmland can be a good option for many people. If you have farmland that you are not using, you can supplement your income by leasing it. While you can gain many benefits from having a tenant, there are some pitfalls that you must avoid. The best way to prevent problems is with a detailed farm lease. Here are some of the essential things you should include in a farm lease.
Description of the Property
You should provide a description of the property which clearly identifies it. The legal description can contain photos and a map of the exact acreage. It is critical to include the exact number of acres that are part of the lease. If the farm is part of a federal program, such as USDA, you should attach the Farm Service Agency (FSA) maps to the lease document. FSA maps are aerial maps that show the boundaries of the property as well as a calculation of acres. Remember to be as detailed as possible in the description so it eliminates questions later.
Terms of the Lease
The document should include the timeframe that the lease covers as well as some other factors. The landlord should specify the use of the land. Some of the considerations to include in the lease are whether you allow hunting rights, horseback riding, snowmobiling or ATV use, and skiing, among other uses. You will also need to specify the use for livestock that graze on the property as well as cleanup of the property. If you have buildings, you need to provide specific details about the use of them, such as grain bins or barns.
You must also include the landlord’s right to enter the property. Wisconsin statutes say that the tenant has exclusive possession of the property, so if you want to enter the property you must provide for it in the lease. Therefore, be sure to include your right to enter the property to inspect it, make repairs, or show it to possible buyers or tenants. You should also stipulate that the tenant must have liability insurance.
Property Use and Care
It is important to include how the tenant may and may not use the property. You will also want to consider land conservation and care that is the responsibility of the tenant. For example, make sure to include crop management and rotation that conforms to your expectations in order to properly keep the soil. Other things to add are fertilizer application, use of pesticides, and restrictions. Provide procedures that the tenant must use if they want to make changes to the property or structures.
Rental Payment
The lease must provide details for the payment of rent. Include the address where the tenant makes payment, the amount due, and the date the payments are due. If you require a deposit, use this section to add that information. The rental rates for farmland are typically determined by the several factors including the type of use, the number of acres, and the location. The rates often fluctuate, so you can use the latest information.
Determine whether the tenant must provide a portion of the crop income to the landlord as part of the lease. If you prefer, you can choose a straight cash farm lease. In this arrangement, the tenant pays a specific rental fee per the agreement. If the farm is enrolled in a federal program there are payments associated with the acres. Keep in mind that the payments are made to the party that assumes risk, which is generally the tenant with a straight cash lease.
Termination or Extension of the Lease
Wisconsin law provides for the automatic extension of a farm lease unless the landlord takes action within a specified period of time ahead of the end of the lease. Provide a method for how to make modifications to the lease and how to renew the lease. Include the date that a new lease must be provided for upcoming years. If you fail to include these procedures, you might not be able to properly increase rent for subsequent years. If the tenant fails to make payments or to abide by the terms of the lease, the landlord has options for how to resolve the issues.
Farmland leases can be complex, so it is best to seek legal guidance before you enter into a contract. You want to make sure you protect yourself and your land while obtaining income. To learn more about farmland leases and get the legal help you need, contact our experienced team at Moen Sheehan Meyer, Ltd. online or at (608) 784-8310.