Farmland lease relationships: Landowner and lessee

Farmland value and productivity go hand in hand. But when farmland is leased on a year-to-year basis, it can be difficult to make the improvements necessary to maintain both.

“True improvements to the farm including things like installing drainage tile or irrigation, establishing waterways and building soil health can take years to implement and pay off,” said Nationwide Risk Management Consultant and agronomy specialist Derek Hommer. “If a landowner is leasing the farm year-to-year, there is limited incentive for the lessee to invest in those types of improvements.”

Multi-year farmland lease agreements can be a win-win for both parties. Not only do they help build trust and cement relationships, long-term commitments between landowner and lessee are good for the land – both in terms of farmland value and productivity.

Start with good alignment

Developing a good relationship starts with alignment. A farmland owner’s goal often depends on how involved he or she is in the operation of a farm. Some see farmland as a basic financial investment, while others want to be more involved in what happens on the land. As a lessee, it’s important to align with your landowner’s preferences in forging a strong relationship.

“Some absentee landowners will leave all of the operational decisions to the lessee; others want to stay informed about things like what’s planted and how crops are managed. Today I see many landlords who require operational practices such as no-till, cover cropping and grid soil sampling,” Hommer said. “Aligning how the lessee manages leased acres with the landowner’s preferences and wishes helps build trust and a good long-term relationship.”

Understand each other’s needs

Once aligned, it’s important to level set on needs. If land is leased on a crop-share basis, for example, the landowner may have specific requests on how crops are managed and marketed. Decisions on things like production systems and how grain is marketed are typically made after consulting the landowner if he or she is actively engaged in the operation.

“If you’re leasing farmland, have the conversation with your landowner, make sure you understand the farm's history and the landowner's goals. Doing so enables you to make informed decisions and engage him or her in exactly the right way,” Hommer said. “That will demonstrate that you not only care about the health and productivity of the land but want to do what the landowner wants and needs. That’s a great way to cement a strong relationship.”

Tips to demonstrate good land stewardship

Land improvements aren’t always major year-over-year efforts. Lessees can do simple things to show they are fully invested in caring for the land. A comprehensive approach to being a good steward of rented farmland includes:

• Matching cropping plans to the landowner’s wishes
• Creating a conservation plan that ensures the long-term productivity of the land
• Keeping farmland clean and in good order
• Keeping up the land’s appearance by things like mowing ditches and fencerows
• Implementing sustainable practices that reduce the landowner’s risk by things like minimizing erosion and improving water quality
• Communicating positive farmland outcomes to the landowner, like strong crop yields

“Don’t overlook some of the ‘little things’ you can do as a lessee to demonstrate your care of the leased land. Sometimes, that means things like mowing road ditches,” Hommer said. “Things like that can go a long way in instilling confidence in a landowner that you have genuine care for the land.”

Keep up the hard work year after year

Sustaining a strong relationship over time requires assessing how you’re meeting the other’s needs, both personally and financially. That attention normally creates the trust that’s essential to long-term lease agreements.

“Landowners and lessees should consider one another business partners,” Hommer said. “Just like your accountant, agronomist and legal advisor, your landowner or lessee should be considered part of your farm team.”