Wisconsin Cash Farmland Lease Example

Written by Bill Halfman, UW-Madison Extension Monroe County agriculture agent and Carl Duley, UW-Madison

Extension Buffalo County agriculture agent.

It is critical that landlords and renters spend time addressing the terms of the rental agreement

before finalizing the agreement to prevent problems over the duration of the contract. Maintaining

positive working relationships between landlords and renters is vital for long-term success.

The following considerations and example farmland rental agreement can help landlords and

renters assemble a fair and equitable written agreement specific to their situation. While the list of

items to consider is not all encompassing, it provides common items that should be considered for

inclusion in farmland rental contracts. However, not all items may be necessary to include in the

rental agreement.

Farmland Agreement Sections

Each section of land rental agreement is described, and examples are provided of items to consider

in each section:

1. Contracting Parties and Date

This section of the contract should state starting date, ending date, and who the contract will

be between. The landlord will be the person or persons who own the land and the renter will

be the person or persons who will rent the land. This section lays the foundation for making

sure that it is clear from the beginning who will be involved in the leasing process and the

time period it is in effect

2. Property Description

This section can be a detailed or a general description that clearly identifies the property. A

legal description of the land could be entered here, a map of the property showing the

actual rented acres, or a written description. It is important to list the actual number of acres

that are being rented and where they are located. It may be necessary to identify specific

usage of some acreage, for example tillable acres and pasture acres. If participating in USDA

farm programs, consider attaching the USDA Farm Service Agency (FSA) maps to the lease

agreement.

An EEO/AA employer, University of Wisconsin-Madison Division of Extension provides equal opportunities in employment and

programming, including Title VI, Title IX, the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act requirements.

3. General Terms of the Lease

This section includes the length and/or time frame of the lease, and specific uses that the

renter is granted and/or not granted by the lease. It may also include rights that the landlord

reserves with respect to the property. Specific dates should be used. Other items may be

added to this section. Note that under Wis. Stat. § 704.05(2), unless otherwise stated in the

lease, the tenant has exclusive possession of the property with some limited exceptions. For

example, with advance notice and at reasonable times, the landlord can inspect, repair, or

show the property to prospective tenants or purchasers. Examples:

a. Hunting rights on the property

b. Snowmobiling, cross country skiing, ATV/UTV, horseback riding

c. Grazing livestock on crop residue or removing crop residue

d. Grazing livestock on permanent pasture or growing crops

e. Water source- irrigation and or livestock housed as part of agreement

f. Use of buildings or grain bins

g. Others relevant to property

h. Landlord’s right to enter the property

i. Proof of liability insurance coverage

4. Land Use

This section may include management practices that may or may not be used by the renter.

Local Natural Resource Conservation Service (NRCS) and County Land Conservation

Departments can be resources to help review and develop conservation plans for farms that

may not have one. Examples:

a. Cropping and soil conservation practices

i. tillage practices

ii. crop residue management

iii. cover crops

iv. rotation

v. conservation structures

b. Fertilizer and manure application protocols or limitations

c. Pesticide application protocols or limitations and setbacks (grapes, hops, others)

d. Procedures for physical changes to property (trees, fences, field roads, etc.)

5. Payments and Due Dates

This section addresses when payment(s) is/are due and how much the payment(s) will be.

Details can be added as needed. If the contract is a flexible lease or some form of a crop

share agreement, then details of what each party is responsible for, and/or factors that

An EEO/AA employer, University of Wisconsin-Madison Division of Extension provides equal opportunities in employment and

programming, including Title VI, Title IX, the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act requirements.

trigger changes from the base lease, should be defined and stated here. If the landlord

requires a deposit for potential damage repair, it should be included in this section.

Most rental contracts are based on tillable acres, and/or only the acreage used by the tenant.

It may be necessary to identify different rental rates for specific parcels depending on usage,

potential productivity or other factors agreed upon by both parties. Examples may include

tillable vs. pasture, potential large yield differences, etc.

Federal Farm Program - Most, but not all, farms have some program crop base acres

enrolled in the federal farm program. These base acres generally have potential payments

tied to them and may require both the landowner and tenant to sign forms to make

program decisions. Many Federal Farm program payments are paid to the party assuming

production risk. A landlord receiving straight cash rent is not assuming production risk.

6. Termination/Amendment of Agreement

This section should include reasons and/or procedures for early termination, and procedures

for amending the contract. This section could also include procedures for renewal or

nonrenewal of the contract, including date of notice and date by which the agreement is

reviewed to determine if it continues as is or with changes for the following year(s) of the

contract.

7. Signatures

This section seals the agreement with all parties’ signatures. All parties listed in section one

of the agreement should also be included with their signatures in this section.

Determining the Rental Rate

Following is a list of criteria that may be considered when determining the rental rate.

• Potential crop returns - Knowing what your actual costs of production are and what yields to

expect from an individual farm can help determine how much money will be available to pay

rent. Farm operators need to know their own costs of production! Using average costs or

costs derived from other sources can be a recipe for disaster. When calculating crop returns

do not use historically high prices, but also do not use the historically lowest prices. Use what

you received as your annual average price for corn, beans, small grains or other crops for the

past 5 to 10 years.

An EEO/AA employer, University of Wisconsin-Madison Division of Extension provides equal opportunities in employment and

programming, including Title VI, Title IX, the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act requirements.

• Land quality - All fields do not have the same yield potential! It is important to know the soil

types on a farm and the yield capability of that land. Past yields can be an indicator of

potential land capability. The NRCS Web Soil Survey

may be a good reference.

• Slope and erosion potential or wetlands - This can influence cropping practices, the amount

of land that can actually be cropped in a parcel, and management practices the land may

require. Large, open, easy-to-farm level fields may have higher rent value than small, odd-

shaped parcels that are difficult to farm.

• Previous crops, herbicides and fertility - Cropping history and past herbicide usage can limit

crop options in the coming year. Soil fertility levels are often overlooked. Land with high

phosphorus and potassium soil test levels will require considerably less fertilizer for crop

production, and thus may have more initial rental value.

• Use of facilities and services provided - Use of grain drying/storage, machinery storage and

other facilities can add to the value the tenant receives from the cash rent. It is

recommended to develop a separate lease to address any facilities that may be rented.

Clarification on fencing maintenance may also be needed.

• Previous history - The working relationship and previous experiences between landlord and

tenant are often an important factor in determining final cash rental rates. If your tenant is

taking care of the land as you would (keeping down weeds, maintaining soil fertility,

preventing erosion), mowing the lawns and waterways, and plowing snow from your

driveway, this may be worth a reduced rent rate. Trust, respect and good communication are

essential in maintaining good landlord/renter relations.

• Area Demand – Competition, or the lack thereof, can sometimes have a significant impact on

land rental rates. Some neighborhoods or areas have many farm operators looking to rent

more land while others have only one or maybe two choices.

• Having the rental income pay the property taxes - Some landowner’s objective of land rent is

to completely pay for their property taxes. There are some potentially serious flaws in this

objective. In some cases this may work, primarily where there are a large enough number of

tillable acres to spread the cost out and still have a reasonable rent payment by the renter.

On parcels that have a high percentage of forest land or other land not useable by the renter

or buildings that are of high value, and not used by the renter, it may be an unreasonable

goal to have the tillable land carry the tax burden of the entire property.

Additional information can be found at: http://aglease101.org/

An EEO/AA employer, University of Wisconsin-Madison Division of Extension provides equal opportunities in employment and

programming, including Title VI, Title IX, the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act requirements.

Following is an example of a cash rental agreement. It should be viewed as a guideline to follow,

not as an absolute way a lease should be written. Landowners and renters should discuss the

provisions they want to have in their lease and feel free to adapt this example lease to meet their

situation. It is important to seek professional legal counsel for legal advice and considerations

unique to the state the property is located, and the purposes of the lease contract.

1. CONTRACTING PARTIES AND DATE:

This lease begins on , 20 and

ends on , 20 .

Landlord(s) - Renter(s) –

Address - Address –

2. PROPERTY DESCRIPTION:

The landlord hereby leases to the renter the following described property:

of tillable acres situated in County. A map of the property is attached to this lease

identifying the rented land represented in this agreement.

3. GENERAL TERMS OF THE LEASE:

Uses: This rental agreement is solely for growing agricultural crops.

Time Period: This agreement will be in effect from to

(and/or) this many years/growing seasons .

Subleasing: The landlord does not convey to the renter the right to sublease any part of

the described property.

Review of Lease: May be done at any time with written agreement and signed

consent of both the landlord and the renter. (Recommend an August 1 deadline

for review due to increased fall seeded crops and cover crops and pre-purchasing

inputs.)

Partnership: Not intended or implied by this agreement (this is a cash lease only).

Right of Entry: The landlord reserves the right to enter the property at any reasonable

time.

Buildings: This lease does not include the use of any buildings on the property.

4. LAND USE:

The renter agrees to follow a farm conservation plan, approved by NRCS and/or the

County Land Conservation Department.

The renter cannot make physical changes to the property without written consent of

the owner, as required by Wis. Stat. § 704.05(3). (Examples: cutting trees,

An EEO/AA employer, University of Wisconsin-Madison Division of Extension provides equal opportunities in employment and

programming, including Title VI, Title IX, the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act requirements.

removing/moving fences)

The renter must maintain existing conservation practices. (Example: grass waterways)

The renter is responsible for maintaining soil pH and fertility.

Governmental payments will follow USDA Farm Service Agency and NRCS rules.

5. PAYMENTS AND DUE DATES:

The annual cash rent for the above described property paid by the renter to

the landlord will be

tillable acres @ $_ per acre = $

pasture acres @ $_ per acre = $

other acres @ $_ per acre = $

Total $

Payments will be made directly to the landlord as follows:

i. $ paid by _ (Date)

ii. $ paid by _ (Date)

6. TERMINATION/AMENDMENT OF AGREEMENT:

This lease terminates on the ending date stated in Section 1 without any notice from

either party.

The landlord shall have the absolute right to terminate this lease by written notice in the

event the renter shall violate Section 2, 3, 4 or 5 of this agreement or if the landlord sells

this property, by giving the tenant written notice by September 1 that the lease would end

at the completion of the current crop year, or current calendar year, whichever comes

first. In the event the above occurs, the Renter would be allowed until the end of the

current calendar year to complete the harvest of crops grown during the current year. If

the property is vacated by the renter, mid-calendar year or crop year, the landowner, shall

have exclusive right to occupy the property and take control of any crops remaining and

profit thereof.

Either party may request a meeting to review and possibly amend the lease for the

following years in the current contract by sending written notice to the other party by

August 1. Both parties must agree to any amendments. The lease will continue beyond

the ending date stated in paragraph 1 only by mutual agreement.

7. SIGNATURES:

Landlord(s): Renter(s):

(Date) (Date)