I have a relative who has ‘leased’ the farm to the same farmer for decades. In fact, there is no written lease. The agreement was a result of a handshake. Over that time, the fee per acre has not changed and the verbal agreement has been renewed every fall when rent is paid. When asked why there has been no fee change and no written lease, my relative noted that “the farmer is a good steward of the land. He will pay, regardless of the success of the crop. He has been kind and helped out when issues arose on the farm.” I sense that the story is the same in much of Maryland where over 865,692 acres were leased in 2007 (Ag Census). Such annual verbal agreements are allowed by Maryland law. Any lease longer than a year must be in writing and signed by both parties to be valid.
Circumstances are changing, and farmers and landlords may want to put agreements in writing. With the rise in corn and soybean prices over the last few years, some landowners think that the annual per acre rental rate should increase. The National Agriculture Statistics Services reported that the average Maryland cash rent per acre was $70 in 2011, up from $55.50 in 2002 and a 26% increase in nine years. I have heard stories that some landlords are garnering up to $180 per acre on the Eastern Shore. Of course, the higher the cost, the more both parties expect from the agreement.
Another change in circumstance is that more farmers are pursuing crops besides corn and
Irrigation (e.g. drip irrigation shown here) is necessary for most vegetable crops. Source: NCDA.
soybeans, and their infrastructure needs are more complex than commodity crops. Many beginning farmers are favoring vegetable and livestock production, which require access to water and may require fencing to keep livestock in or wildlife out. However, only 10% of all Maryland farmland is currently irrigated. If the lessors have to pay for the infrastructure up-front, they will need a much longer lease to recoup expenses.
I am very pleased that the University of Maryland Extension has just published Agricultural Leasing in Maryland, a timely document which provides recommendations and examples for fixed cash rent farm leases, crop-share rent farm leases, flex cash leases and sample termination letters. It addresses improvements and fixtures, good husbandry practices, death of a landlord or tenant, right of reentry, third-party contractors, weed control, insurance, etc.
The hope is that by preparing a written document to resolve a landlord’s concerns about stewardship, safety, security, etc. and lessor’s concerns about access, infrastructure, and a reasonable opportunity to make a profit, we will see more land farmed and higher agricultural investments and returns.
Of course, lessors need to realize that many landlords turn to people they know because the farmland is usually at the landlords’ back door, either figuratively and/or literally. The landlords want to feel comfortable with the lessor; know that the lessor will be a good steward of the land and that neither they, nor their neighbors, will be impacted by a lessor who is careless or rude. It pays to build good relationships in the farming community if you want to lease land!