Creating Successful
Leasing Arrangements
Wesley Tucker
Agriculture Business Specialist
University of Missouri Extension
Wesley Tucker
Agriculture Business Specialist
Tucker Farms
Tunas, MO
Wesley Tucker
Agriculture 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.
Wesley Tucker
Agriculture Business Specialist
Experts tell us that positive
relationships have:
•
•
•
•
•
•
•
Trust and support
Honesty and accountability
Respect
Responsible parties
Non-threatening behavior
Shared interests
Communication
Wesley Tucker
Agriculture 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.
Wesley Tucker
Agriculture 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
Wesley Tucker
Agriculture 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
Wesley Tucker
Agriculture Business Specialist
“What makes a good lease?”
• Verbal or Written – Discuss the
details
Wesley Tucker
Agriculture 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
Wesley Tucker
Agriculture 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
Wesley Tucker
Agriculture 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.
Wesley Tucker
Agriculture Business Specialist
When Does This Start
• Tenancy begins on day the
agreement is made, not on the day
possession is given.
Wesley Tucker
Agriculture Business Specialist
Written Lease
Minimum 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
Wesley Tucker
Agriculture Business Specialist
Special Agreements:
•
•
•
•
•
•
•
•
•
Entry rights
Subleasing
Insurance
Use of buildings & grain bins
Fences
Repairs, maintenance, mowing
Hunting Rights
Fertility
Other special agreements
Wesley Tucker
Agriculture Business Specialist
Fertility is a
Difficult Issue
Wesley Tucker
Agriculture Business Specialist
What’s It Worth?
1000 lb bale of grass hay
• 25 lb of N
30%
• 7.5 lb P2O5
• 22.5 lb K2O
• N - $5.32
• P2O5 - $4.12
• K2O - $12.37
• Total = $21.81
Wesley Tucker
Agriculture Business
SpecialistP=$0.55,
N=$0.71,
K=$0.55
Things Don’t go as Planned
• Situations change
–
–
–
–
–
Death
Illness
Memory loss
Accident
Finances fall apart
Wesley Tucker
Agriculture 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”
Wesley Tucker
Agriculture 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.
Wesley Tucker
Agriculture Business Specialist
Developing a Lease Agreement
• North Central Farm Management
Extension Committee - Pasture Lease
• http://www.aglease101.org/DocLib/docs/N
CFMEC-03A.pdf
Wesley Tucker
Agriculture 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
Wesley Tucker
Agriculture Business Specialist
Crop Share Agreements
Determine a Fair Split
Landowner
Land
Tenant
XXX
Labor
X
Machinery
XX
Seed, Fert., etc.
X
X
Total Contribution
XXXX
XXXX
50%
50%
Share
Wesley Tucker
Agriculture Business Specialist
Livestock Share Agreements
What’s a Fair Split?
Landowner
Land
Machinery
Breeding Stock
Tenant
XX
X
XXX
Labor
X
Seed, Fert., etc.
_______
X
Total Contribution
XXXXXX
XX
75%
25%
Share
Wesley
Tucker
Agriculture Business Specialist
Livestock Lease Agreements
• Important to consider all details in
advance
• Who’s responsible for:
–
–
–
–
Damaged Machinery
Fence Repair
Replacement Females
Bull Expense
Wesley Tucker
Agriculture Business Specialist
Lease Hunting
Wesley Tucker
7/17/2016
Agriculture Business Specialist
25
Questions
Wesley Tucker
University of Missouri Extension
451 S. Albany
Bolivar, MO 65613
417-326-4916
tuckerw@missouri.edu
Wesley Tucker
Agriculture Business Specialist