Farmland Lease

[JohnBoyMD]

I have 3 acres that a farmer wants to lease for crops. It was previously grass that another farmer cut for hay twice a year, but he is getting out of having cattle and doesn't need the hay.

I'm not looking at this to be a major money maker, but if it's planted in crops instead of hay, I can save a substantail amount on my property taxes. So, it makes good financial sense and keeps the property from sitting vacant.

My questions are to those who either lease out farmland or lease from another party. Do you usually have a signed lease, or is it a handshake deal? I don't really know this guy, but he farms some of my neighbor's land. If you have a signed lease, does it limit what crops can be planted? How about other restrictions? If you use a lease, any chance you send me a copy? If so, let me know and I'll get you my contact info.

As you can see from the questions, this is all new to me. Thanks

 

[bigtiller]

If you don't mind sharing the risk, this way fair for all.

Average the crop price for the year of 5 agreed upon days. Say, April 1, June 1, October 1, November 1, and December 1. The owner gets 35% and the tenant gets the rest. That works good around here for corn and beens.

Another way would be cash rent. Go to your NRCS office or maybe the county extension ofice for help in figuring a rent price for your type of soil, crop and economey.

 

[NorTracNY]

Definitely in writing. Even if you decide to do it for free, make it a dollar and do it in writing. I've learned that the hard way.

 

[Western]

Here hay is a crop, is it possible to have the former guy your familiar with continue cutting it? You can pay him an agreed price for either a Per bale price or a % of the cutting and he can sell his.

I always agreed on a handshake, but I knew the fellas well, so I can see where something in writing protecting you is beneficial.

If it where me and I just wanted the place maintained, I would see if I could keep it grass and continue cutting hay. Hay is a AG use. (at least here, for taxes) I would just have reservations on turning it to dirt. IMO

 

[JohnBoyMD]

Here hay is a crop, is it possible to have the former guy your familiar with continue cutting it? You can pay him an agreed price for either a Per bale price or a % of the cutting and he can sell his.

I always agreed on a handshake, but I knew the fellas well, so I can see where something in writing protecting you is beneficial.

If it where me and I just wanted the place maintained, I would see if I could keep it grass and continue cutting hay. Hay is a AG use. (at least here, for taxes) I would just have reservations on turning it to dirt. IMO

Hay is a crop here too. Just not for tax purposes. The current guy doesn't have a use for it since he got rid of his cattle.

 

[MarkV]

Guess a lot depends on where you are. My Mother-in-law has 30 acres that we let someone hay for free. It gets cut and fertilized without costing her. She gets an Ag exemption for taxes on the land. We did sign a 5 year contract.

For 3 acres, if it gets you a tax exemption that you don't have now, I would do whatever the guy offers. I sure am surprised hay doesn't meet the same tax status as row crops in your area.

Where are you?

MarkV

 

[JohnBoyMD]

Guess a lot depends on where you are. My Mother-in-law has 30 acres that we let someone hay for free. It gets cut and fertilized without costing her. She gets an Ag exemption for taxes on the land. We did sign a 5 year contract.

For 3 acres, if it gets you a tax exemption that you don't have now, I would do whatever the guy offers. I sure am surprised hay doesn't meet the same tax status as row crops in your area.

Where are you?

MarkV

I'm in Maryland. Maybe I didn't make it clear that it is basically pasture that he let grow up and cut twice a year. He didn't actually plant anything. However, the rules seemed pretty clear when I looked at them last. Needed to be a crop and hay was excluded. I'll have to look at them again, but this guy wants to do corn and/or beans so doesn't matter too much.

 

[MarkV]

I'm in Maryland. Maybe I didn't make it clear that it is basically pasture that he let grow up and cut twice a year. He didn't actually plant anything. However, the rules seemed pretty clear when I looked at them last. Needed to be a crop and hay was excluded. I'll have to look at them again, but this guy wants to do corn and/or beans so doesn't matter too much.

Whatever your local rules are it sure is worth getting the tax exemption.

MarkV

 

[polo1665]

Whatever you plan to do, make sure you know all the rules that surround a agricultural tax exemption. Here in Ohio you have to have at least ten acres in crops before you can apply for the "current agricultural use value" (or cauv) exemption. If you decide to change your mind five years down the road, you have to pay back the money you saved on your taxes for the last three years.

As far as the lease goes, I asked the same question a while back. I lease out six acres to a neighbor (farmer), because it is only six acres I get no tax exemption, but it is six acres I don't have to take care of myself, and he pays me $300 a year. Not a lot, but he's a good neighbor and takes good care of the land.

Mark

 

[ShenandoahJoe]

I'll send you the one I use.

But an equine friend tells me he's worried about getting hungry next winter. With the way corn prices are going, lots of hay fields are being plowed for corn. A few acres of hay could make you some very sincere friends.