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lease farmland

How to Lease Your Farmland

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Owning farmland doesn’t mean that you have to grow crops or raise animals to earn money. When you lease farmland, you give someone else the right to use the property while you retain ownership. Before you lease your farmland, though, you should learn about several factors that may affect your agreement.

Do Some Research to Set a Fair Price

You must set a fair price when leasing your farmland because it will attract reliable tenants and help you earn a strong return on your investment. You will need to consider several variables to set a fair price, though.

Learn About Your Farmland

The more you know about your farmland, the better you can market it to interested lessees. For example, you might get a higher price if you have excellent soil that will nourish crop. Then again, you might need to charge less if you discover that an industrial operation used to sit on your property.

You should also walk the land carefully and note existing water features, roads, hills, and buildings. All of these things will matter when you try to lease farmland. Plenty of ponds and access to a barn could drive up the price. Too many hills, though, you could mean that you need to lower the price or focus on lessees who don’t mind hilly land.

Know How Much the Taxes Will Cost

You may have to pay property and income taxes when you lease your farmland. Talk to your county’s tax office or property value assessor to determine your annual taxes. You may also want to talk to a CPA about how the income from leasing your land will affect your federal and state tax burden.

Make sure you consider these amounts when you set a fair price for your farmland lease.

lease farmland

Get Insurance That Protects You

As the owner of farmland, you have more responsibilities than the lessee. Get the right insurance policies that will protect you from liability, property damage, and vandalism. Without insurance, you could get stuck with expensive medical bills after someone gets injured on your land and needs to recover in a hospital. You could also lose money when an irresponsible person lets your infrastructure or buildings degrade. You won’t need crop insurance like the lessee, but you do need other forms of coverage that protect you from liability.

Always Check References

Get at least three references from your applicants. Ideally, the lessee will have farming experience, so you can talk to another landowner or farmer about the person’s reliability.

Meet Applicants in Person

It is always optimal to meet applicants in person so you can get to know them. However, often this can be a difficult one to make happen since many landowners are absentee. If you can arrange to meet them though and something feels off about an applicant, then it’s best to pass on their offer. If meeting in person is not in the cards, you can tell a lot from a phone conversation or video-conferencing call as well to get a better feel for the applicant. You don’t want to lease to someone who will misuse your land or not uphold their side of the agreement.

Talk About the Business of Farming

Finding a long-term tenant will save you the hassle of looking for more lessees in the future. Whether in-person or on the phone, talk to applicants about their business plans. If they understand the business of farming, then they’re more likely to earn a good living from the land. That makes them more likely to keep leasing from you.

cornfield

Use a Land Professionals to Lease Farmland

Don’t rely on handshake deals when you lease farmland. Avoid getting lost in a corn maze, have a lawyer or farm manager write a legal contract that defines every aspect of your agreement. It should include, at a minimum, the following:

  • Beginning and ending dates.
  • Options to renew the farmland lease.
  • Any restrictions on what lessees can do with the land.
  • The monthly price of leasing the land.
  • Any fees that you will charge for late payments, returned checks, and similar situations.

“While you can use an attorney, a farm manager if possible is usually a better fit.  They are likely cheaper and will maintain contact with the tenant and land to ensure things are running smoothly,” says Accredited Land Consultant Luke Worrell, ALC, AFM, with Worrell Land Services, LLC. in Jacksonville, IL. He also suggests landowners seek to work with and ALC that is “a Farm Manager or an Accredited Farm Manager (AFM),” as it “would be extremely valuable and eliminate a lot of the extra work a landowner would need to otherwise take on themselves.”

If you need help evaluating your farmland or finding someone to lease it, Find Land Consultant in your market with specialized expertise, like an Accredited Land Consultant (ALC) for assistance. If possible, find an ALC in your area who is also an AFM to assist with this type of transaction. Accredited Land Consultants have years of experience and continuing education, so they can make the transaction easier for everyone involved.

private ranch property

Landownership Basics: Private Property Rights

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“The best investment on earth is earth.” -Louis Glickman

Fee simple landownership comes with some fundamental private property rights no matter what kind of land you own and where you own it. Understanding your private property rights from the start, even before owning a property, will ensure you get the most enjoyment from your property without violating the rights of others.

Fee simple “refers to real estate or land ownership. The owner of the property has full and irrevocable ownership of the land and any buildings on that land. He is free to do whatever he wishes on the land subject to local zoning ordinances. Fee simple and fee simple absolute are the same thing. Fee simple is the highest form of property ownership.”

“Private property rights are one of the pillars of capitalist economies, as well as many legal systems, and moral philosophies,” according to an article defining property rights.

Right to Possession

Once you fully own your own piece of land and hold the title, you retain possession and control its rights. If you have a mortgage, then the lender probably holds your land title until the loan and its interest is paid in full. Until then, you will have limited possession rights and potentially limited private property rights for use. Depending on where you live and the terms of your loan agreement, the lender could take the property quickly once you stop making payments.

land real estate private property

Right to Control

Assuming that you do not live in a neighborhood or city with zoning regulations or other laws that forbid certain activities, you can participate in any legal action on the land you own.

Keep in mind though that neighborhood associations and similar organizations often have covenants that restrict certain activities, so you’ll want to ensure none apply to your property. Covenants may include relatively harmless demands like requiring you to maintain grass that’s visible from the road. Other covenants may restrict activities like raising animals, operating a business, or using chemical fertilizers.

Always read local covenants and laws closely before purchasing land. Using a land expert in your area is the best way to learn about your property rights.

Right to Use and Enjoyment

The right to use and enjoyment means that you can engage in any legal activity on your property. The word “legal” carries a lot of weight in that sentence. For example, owning land does not mean that you can open a casino there without a state license. You must comply with local, state, and federal laws at all times. In fact, the Department of Justice can seize property that they think has been used to commit crime. Federal forfeiture law lets the government take ownership even without proof that it was connected to a crime.

You’ll also need to gather information on any zoning regulations that are tied to your property. According to legal experts, “Zoning regulations and restrictions are used by municipalities to control and direct the development of property within their borders,” and therefore restrict, limit, or otherwise define the uses of a property.

agritourism apple picking

Right to Allow Others a Right to Use

As a landowner, you can give other people access to your property. In fact, it is for many one of the most lucrative aspects of owning land real estate. You can choose to let others access the land for free, or you can charge for access. For example, investors may purchase farmland so they can earn money by leasing it to farmers. Recreational landowners may charge for access to hunt their properties. Agricultural landowners may charge visitors to access for agritourism like fruit picking, pumpkin patches, or corn mazes.

private property signRight to Privacy and to Exclude Others

No one has the right to access your property without permission. You have the right to tell other people that they cannot come onto your private property.

There are only two caveats to the right to privacy and exclusion. Law enforcement can come onto your property while pursuing a suspect. They do not need to stop their pursuit to seek your permission. Law enforcement can also access your property without consent by getting a judge to issue a warrant. If a judge has reason to believe that illegal activities take place on your property, then it only takes one document for officers to investigate.

Additionally, people who have been granted legal rights to use the property for access or another use by previous owners should be considered.

Right to Transfer Ownership

When you own land, you have the right to transfer ownership as you see fit. You could give the property to a relative or friend as a gift. You could include the land in a will or trust. You can also transfer ownership by selling the estate to someone.

Right to Use Property as Collateral

Your land has value that you can use as collateral when using a mortgage to purchase other properties. Collateral may help you qualify for a mortgage or other loan, and you may get a lower interest rate because your land offsets some of the lender’s risk. Keep in mind that failing to repay the mortgage could mean losing rights to your property.

Air Rights

For the most part, you own the right to use the air space that’s above your land. There are limitations to your air rights, though. You could potentially build a skyscraper on your property as long as doing so doesn’t prevent other owners from enjoying their land or violate any zoning laws as mentioned above.

You also don’t have the right to build horizontally across someone’s land. You can only construct vertical buildings that follow your property lines. If the building hangs over the property line, then the neighboring owner could demand that you remove the structure. Air rights especially come into play when it comes to developing on commercial land or residential land in urbanized areas.

What Landownership Rights Do Not Include

Owning land gives you considerable rights over its use, which is one of the biggest draws for land buyers in all markets. Surface rights, however, do not ensure that you control access to the ground below your feet or the air above your head. Before purchasing land, it makes sense to perform an extensive title search or Mineral Rights Search. You may discover that someone else already owns the minerals, oil, and other valuables under the surface of your property.

Understanding Your Private Property Rights

Landownership gives you exceptional rights, but private property rights can have limits. Make sure you understand your private property rights before you purchase a piece of land. Doing so could influence where you choose to buy property and how you use it.

When it comes to learning about your property rights, Accredited Land Consultant Matt Davis with Cushman & Wakefield in San Diego, CA, says “In addition to the personal enjoyment you and your family may receive from spending time on your property, owning land is a tried and true way of preserving and growing wealth. By leveraging the expertise of a land professional early in your property search, you can be confident you know what you are buying, what rights others may have that impact the property, and that you will be able to use the property the way you desire, for generations to come.”

The best way to learn about your property rights or to learn about the property rights of a property you are interested in purchasing is to Find A Land Consultant, like an Accredited Land Consultant, in your area with expertise in the land market.