Many people or entities own farmland they would like to see farmed by someone else, but they may not know how to find the right farmer or how to create an effective lease agreement. Providing advice on these topics can be challenging because there are many possible combinations of landowners, land and property status, and needs of the leasing farmer.
Landowners may be retiring farmers, farm heirs, nonprofit organizations, for-profit businesses, land trusts, or public/government entities. They may or may not need income in the short or long term, have funds to invest in the property, or want to be engaged with the farm operation.
Farmers looking for land may be starting a new farm business, moving a farm business, expanding their farm or taking over a farm business. They may or may not have lots of experience, a business plan, working capital, equipment and markets.
The land may be currently farmed, recently farmed, farmed long ago or never farmed. It may be some combination of farmland, woodland and other lands. The soil may or may not be high quality. Land use restrictions may be absent, or the land may be under conservation easement, zoned agricultural by the local community, and/or in a state’s agricultural use tax abatement program.
Infrastructure desired by potential farmers may or may not be present, including access roads, barns, greenhouses, housing, electricity, fencing, ponds or wells for water supply, etc. Farmers might propose to install additional infrastructure during the lease term. Before moving ahead with a lease farmers and landowners should discuss appropriate siting, construction details, how to cover the cost, and what will happen to the infrastructure after the lease term. A checklist for farmers seeking land or for landowners to assess their property can be found at the University of Vermont’s Farm Rental Assessment Checklist.
At a minimum, all written agreements should specify the name, address and contact information of each party; the date the lease was executed; the duration of the lease; a clear description of the property or facilities being leased and the purposes for which they may be used; the kind and the amount of payment; time and place of payment; rights to extend or renew the lease; and how the lease may be terminated.
Additional issues to address include liability and other types of insurance, allowable/required/prohibited farm practices (e.g., organic production, fertilization based on soil test results), responsibility for maintenance of land and structures, and process and status of any future capital investments. For more information on the legal framework of a lease, see Chapter III in the “Legal Guide to the Business of Farming in Vermont. ”
Types of leases include a year-to-year lease, multiyear lease, “rolling” or renewable lease, lease with option to buy or a right of first refusal, and/or transfer by sale of some or all of the farmland over the short or long term. Shorter-term agreements may be more appealing to beginning farmers, but if they succeed they may depart for a site with longer-term land security. Thus, landowners not willing to offer long-term agreements may have to deal with a series of beginning farmers rather than a successful business that stays put. The long-term agreement does not have to be the first step, but it should be on the table if the owner wants the relationship to work so a farmer can invest for the long haul without risk of losing access to the land. Sample leases can be found here.
The first step is for the family or organization that owns the land to come to agreement on their goals. How much annual income is hoped for? What type of farm activities are desired, and which are not? How long a relationship is hoped for with a farmer? How much investment, if any, will be made by the owner, and for what purposes?
Farm enterprises vary, so landowners need to consider the needs and impact of different types of farming activities. Low-impact/low-cost farm activities (like haying, grazing animals) generate little revenue per unit of land and have the lowest “disturbance” factor for on-site owners or neighbors.
As one goes up the farming intensity chain (growing Christmas trees or blueberries, for example) there is more revenue, investment required and need for land security for the farmer, and more potential for impact on neighbors. Activities that generate the highest revenue (many fruits and vegetables, greenhouse crops, intensive animal production) require a lot of capital investment (i.e. buildings, equipment, irrigation, fencing, storage), need long-term land tenure and infrastructure agreements if they are to succeed over time, and will lead to frequent human activity, equipment use, noise, odors and/or traffic that may disturb nearby nonfarmers.
Intensive farming operations also tend to benefit from on-site housing, since ongoing attention is needed to on-site activities. Housing in a town nearby is the next best option but may not be ideal.
To recruit the right farmer, it’s important for the landowner to clearly describe what he has to offer, what he expects in return, and which terms are fixed and which are negotiable. You can see examples of how landowners describe their farms to potential farmers on sites like Pennsylvania FarmLink and Vermont Land Link.
Farmers seeking to supplement their current land to grow crops or graze animals will usually be recruited from relatively close by through word-of-mouth and/or local advertising. Recruitment of farmers to start or relocate a business usually involves far-flung recruitment.
The recruitment process can be informal, or it may be more like a job interview. Talking by phone or in person is a common approach when local farmers are recruited to lease land for low-intensity activities such as haying. A more formal process is advisable if farmers are sought for relatively intensive enterprises and/or longer-term lease agreements.
Asking farmers to “apply” in writing by answering a list of questions can help screen out farmers that are not a good fit with the landowner’s goals. This approach may also identify issues that require some thought before a face-to-face meeting. The application can be simple or detailed, but at a minimum it should describe the farmer’s agricultural experience, the farm activities they want to establish, the infrastructure they will need, the markets they intend to serve, whether or not they have a business plan, and a list of references. A short description of the property with a link to the application questions can be used to advertise the available land in agricultural publications and listservs; cooperative extension personnel can usually help identify these. The property listing may also be suitable for Land Link programs. The National Farm Transition Network maintains a list of Land Link programs across the country at: www.farmtransition.org.
What the farmland is worth in rent will vary depending on the enterprise of the farmer and the benefit to the landowner. It may be reasonable to charge the farmer little or nothing to hay fields, especially if they lime and fertilize, otherwise one would pay for these services. For more intensive operations in the start-up phase, it makes sense to charge a low rent initially and build towards a maximum that does not exceed a percentage of their net income. A guide to help determine the value of rented farmland is available here.