Renting land can be a challenge. Utilizing a professional farm manager and other professional expertise may help the landowner get the most out of his or her land. A variety of economic, outlook, production, and legal information about farm leases is available online. Those with Internet service may do a search for “farmland rent” or “farmland leases” and discover many useful articles and tools for making rent and lease decisions.

A landlord needs to know the details related to his or her land, e.g., legal description, tillable acreage, average crop yields under the “best management practices,” and government payments for your land — your local Farm Service Administration Office will have some of this information. Often tenants have land pooled for government payment purposes, but landowners can get this information for his or her land. A landlord may need help assembling and interpreting this information depending on his or her experience, familiarity with the land and farming practices.

It is also important to stay abreast of changes in farming technology. A retiring farmer may be in a better position to make a rent decision than a landlord who did not farm the land or have recent experience in farming. However, even though the farmer may have retired, this does not mean that you can stop learning about the changes to production technologies and business practices if you want to get the most out of you farmland investment.

When farmers decide to retire and rent the farmland they own it is important to recognize the legal and federal tax implications that the type of lease or rental arrangement selected can have. Both landlords and tenants should be aware of the statutory advance date for lease terminations. Legal and tax issues involved in renting Indiana farmland are discussed in EC-713, “Legal Aspects of Indiana Farmland Leases and Federal Tax Considerations” online. At this site, lease forms, other lease considerations, and management information are available by selecting “farm management” from the list of choices under Agricultural Economics.

Information from the Purdue Land Value and Cash Rent Survey is available at the “PAER Archive” if the current PAER issue does not include the “Land Value and Cash Rent” survey. This information is usually reported in the August issue of PAER. Rents in recent years have been trending higher. But the level of rent per acre varies with the quality (yield potential) and location of the land though the rent per bushel of corn yield varies little from area to area.

Bid Solicitations: Going public to find a Tenant.

Choosing a tenant to farm the land is probably the most important decision a landlord makes. In many cases, these decisions are made with little public notice, using the network that the landowner has developed. However, in some cases the landlord decides to “go public.” Information needed for soliciting farmland rent bids may be brief if the solicitation is to run in a local newspaper. In this situation, the landlord must prepare bid specifications that outlines the information that must be contained in any bid that is submitted.

Solicitations focus on the closing date for receiving bids, the payment terms, whether the successful bidder will be required to sign a written lease and the type and duration

of the lease, the number and type of references required, and any specific duties and restrictions that may be imposed upon the successful tenant. Bid solicitations should let a landowner reserve the right to reject any and all bids.

A landlord, or farm manager, with several neighboring farmers that have shown an interest in renting, may want to select these farmers to bid first, and forgo a public solicitation for bids.

While a bid solicitation may include few specifics we highly recommend that all leases be

in writing covering details that may avoid a future dispute on matters such as: general farm maintenance, measuring and maintaining fertility, various insurance coverages, specific farming practices, lease termination provisions, and compensation for work performed at the time of termination.

Bid solicitations may invite bidders to obtain additional information about the property, and review a copy of the desired lease, though some of the terms may ultimately be negotiable. An interested farmer may want to inspect the property. However, if an existing tenant is in possession of the land under consideration, going on to the property may not be advisable, unless the landlord has reserved that right in an existing lease.

A farm manager or farm land appraiser may have a role to play in some leasing situations by pulling together all the necessary information a farmer who is not familiar with the land up for lease, would need to know. In other words, an unbiased, professional opinion in writing may be something the landlord would be well advised to provide along with his or her

lease terms.

Accurate information about existing fertility levels, yield history, and government program payments for the farm can greatly increase the willingness of a prospective tenant to bid at the market or to meet the expectations of the landlord. Competitive and experienced farmers may gain an advantage by offering something not in the bid solicitation–other than a higher cash price—such as more favorable payment terms than requested or non-cash services such as general farmland and farm building improvements or maintenance.

Calling references and talking to knowledgeable individuals, may increase a landlord’s level of comfort with a prospective tenant. Landlords or their farm managers often do not select the highest bidder, when other factors such as farming record and reputation (e.g., crop yields, personal skills, care of farmed property, and community involvement) are considered.

Professional Help

Both landowners and tenants may find cash rent a comfortable alternative for a number of reasons. Cash rent relieves the landlord from marketing a share of the crop, a challenging task for which many landlords need professional assistance. Marketing assistance is readily available and various crop marketing tools are well developed. Cash rent also relieves that landlord from tracking the purchase of inputs. For tenants, it saves them the time of dividing expenses and crops at harvest.

A landlord may find he or she can increase farmland income with a crop share lease. A landlord may be in a better position than a tenant (especially a beginning farmer) to take the risk of crop and price variations that accompanies the share lease or custom farming arrangement. Taking on these risks can provide a better average return if the lease terms have been properly specified and tenants carefully selected.

A landlord attempting to maximize return may choose the custom farming alternative. This choice leaves the landlord as the owner of the entire crop and entitled to the government program payments as the actual “producer.” A professional farm manager may be needed to assist a landlord with a custom farming operation.

Leasing and farm management choices may be up to an individual landlord, but a landlord often has a responsibility to other family members that can be neglected by the choices made with the annual farm lease arrangements. These considerations not only suggest the landlord may benefit from professional management and marketing assistance but may need tax planning advice and legal counsel.