Red Deer County News

Posted on: March 23, 2018

Negotiating Cropland Rental

Cropland (1)

After harvest is the time of year when landowners and tenants typically meet to discuss and negotiate their cropland rental agreements, particularly rental rates. “While Alberta Agriculture and Forestry does do a rental survey annually, the response to the survey has been disappointing,” says Ted Nibourg, business management specialist, Agriculture and Forestry. “For example, this year we received only 68 responses to survey requests. Considering that over 21,000 farms rent land in the province these limited responses are not a sufficient sample size to benchmark rental rates.”

Rental rates are a function of productivity and grain prices. To supplement the survey results, a calculated approach can be used to arrive at economic cash rents. Coupling local yield data with current commodity prices and blending three different crops into a four year crop rotation can give managers an economic base rent.

“Other factors also play into establishing rental rates, such as local demand for rental acres, proximity to a tenant’s own operation, field topography, field size, and field obstructions, to name a few,” says Nibourg.

After a rental rate is established, both parties need to have a written rental agreement. The primary purpose of a written agreement is to avoid disputes, and mitigate them should they arise. The most common reason for a dispute in a cropland rental agreement is the failure to document the initial agreement. “During times of stress disputes become more prevalent,” says Nibourg. “A written agreement helps prevent, or at least minimize the scope of a dispute.”

At a minimum, the rental agreement should include the name, address and contact information for the parties involved, the property involved, options for renewal, rental rate, payment schedules, and a method for resolving disagreements. Landowners and tenants may also have some of their own specific items to include in the agreement and these can be dealt with through the use of additional clauses. A valuable resource for developing a cropland rental agreement is a publication entitled Leasing Cropland in Alberta, which can be obtained from Agriculture and Forestry’s Publication office by calling 1.800.292.5697.

“At the end of the day, a successful cropland rental agreement is determined by negotiation between a willing tenant and a willing landlord,” says Nibourg. “The key to a successful cropland rental arrangement is communication and trust between the parties involved.”

For assistance in determining a cash rental rate, landowners and tenants can call the Ag-Info Centre at 310.FARM (3276).

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