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Farm Transfer and Succession (3)

What is farm transfer planning?

Farm transfer planning refers to the process of developing a plan to transfer a farm operation and its assets, including land. The plan includes several components such as a retirement and estate plan, land use plan, business plan, and management transfer plan. The foundation of a good plan is goal setting and communications. One study found that 75% of farmers do not have a farm transfer plan. The Gaining Insights study by American Farmland Trust and Land For Good found that nearly 30% of New England’s farmers are likely to exit farming in the next 10+ years, and 9 out of 10 of them are farming without a young farmer alongside. While this does not mean that these farmers don’t have plans to transfer their farms, it suggests that the future of many of these farms is uncertain.

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What is farm succession?

Farm succession implies the transfer of the farm business (as opposed to the farm real estate assets). The use of the term often suggests the transfer of the farm within the family. Two-thirds of retiring farmers in one national survey did not have an identified successor.

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What is farm transfer?

Farm transfer refers to passing a farm business and/or farmland from one generation or owner to another. Other related terms that are often used interchangeably  are “farm succession” and “farm transition.”  92% of farmland in New England is owned by people over the age of 45, and 70% of New England farmland is expected to change hands in the next two decades.

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General Info (8)

What is “farmland access”?

Farmland access refers to the various methods – and challenges – by which farmers can acquire land to farm. Access to farmland is typically achieved through purchase or lease. Groups like Land For Good work to promote traditional and innovative ways for farmers to access farmland.

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Who are farm seekers?

Farm seekers are new and beginning farmers who want to access land for the first time or scale up their operations, as well as established farmers who want to expand or relocate their farms. Access to farmland is a top obstacle for new and beginning farmers, according to surveys by the National Young Farmers Coalition (2011) and the American Farm Bureau (2013). The traditional pattern of farm succession (i.e., younger male farmers inheriting a farm) no longer holds. The most common method of land acquisition for beginning and established farmers is from a non-relative (USDA, 2013). Immigrant, minority, women and other socially disadvantaged farmer populations face additional challenges in accessing land to farm.

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Why are farmland access, tenure and transfer so important?

The future of farming and food security depends on farmers being able to start and grow their farm operations. Land held by retiring farmers, non-farming landowners and institutional and public entities must be made available, affordable and secure for new and established farmers.

Permalink.

What is farm transfer planning?

Farm transfer planning refers to the process of developing a plan to transfer a farm operation and its assets, including land. The plan includes several components such as a retirement and estate plan, land use plan, business plan, and management transfer plan. The foundation of a good plan is goal setting and communications. One study found that 75% of farmers do not have a farm transfer plan. The Gaining Insights study by American Farmland Trust and Land For Good found that nearly 30% of New England’s farmers are likely to exit farming in the next 10+ years, and 9 out of 10 of them are farming without a young farmer alongside. While this does not mean that these farmers don’t have plans to transfer their farms, it suggests that the future of many of these farms is uncertain.

Get started

Permalink.

What is farm succession?

Farm succession implies the transfer of the farm business (as opposed to the farm real estate assets). The use of the term often suggests the transfer of the farm within the family. Two-thirds of retiring farmers in one national survey did not have an identified successor.

Permalink.

What is farm transfer?

Farm transfer refers to passing a farm business and/or farmland from one generation or owner to another. Other related terms that are often used interchangeably  are “farm succession” and “farm transition.”  92% of farmland in New England is owned by people over the age of 45, and 70% of New England farmland is expected to change hands in the next two decades.

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What is land tenure?

Tenure means “to hold.” It describes the relationships among people or entities with respect to land and related resources. Rules of tenure define how property rights to land are allocated. The two main modes of holding rights to land in the U.S. are ownership or tenancy.

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What are farm link programs?

“Farm link” programs have been around since the late 1980s. Originally, they were intended to help retiring farmers find someone to take over the farm. Recently, “linking” programs have proliferated. These days, the land holding side of the linking equation is not limited to retiring farmers with farms. All kinds of landowners are served.

What do farm link programs do? It depends, but all have the basic intention of helping farmers and farmland find each other. One way to describe the differences among farm linking programs is by the services they provide. “Listing” services are simply that — a list of available farm properties for rent or purchase. Sometimes there is a list of farm seekers as well. The New England Farmland Finder website is an example of a regional farm property clearinghouse that allows landowners to post available farm properties. This service is not a real estate listing, although real estate agents (and others representing landowners) are welcome to post farm properties. “Linking” services typically screen seekers and landowners and provide contact information to the parties based on the screening criteria. Think of a traditional or online dating service. “Matching” services go one step further by actively facilitating connections, negotiations and agreements. Some programs also offer educational materials, training and networking events, and more extensive direct advising.

Whether they offer listing, linking or matching services, the bottom line for all farm link programs is to help beginning farmers, other farm seekers, and farmland owners connect with each other and related resources.

More about farm linking in our region

Resources

Farm linking programs – New England

Farm linking programs – beyond New England

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Land Access (2)

What are the challenges of farmland access?

The current challenge facing today’s farmers is accessing farmland that has all of the following characteristics:

  1. Available: There must be enough land for everyone who wants to farm.
  2. Appropriate: Land must be suitable for a successful farm operation.
  3. Affordable:  The farmer must be able to purchase or rent the property.
  4. Accessible:  The farmer must have physical and legal access to the land
  5. Secure:  The farmer must have adequate security of use of the land to make investments in the business and the land.
  6. Equitable:  There must be an equitable assignment of land rights and obligations. Farmers’ opportunity to build equity must also be considered.

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What are farm link programs?

“Farm link” programs have been around since the late 1980s. Originally, they were intended to help retiring farmers find someone to take over the farm. Recently, “linking” programs have proliferated. These days, the land holding side of the linking equation is not limited to retiring farmers with farms. All kinds of landowners are served.

What do farm link programs do? It depends, but all have the basic intention of helping farmers and farmland find each other. One way to describe the differences among farm linking programs is by the services they provide. “Listing” services are simply that — a list of available farm properties for rent or purchase. Sometimes there is a list of farm seekers as well. The New England Farmland Finder website is an example of a regional farm property clearinghouse that allows landowners to post available farm properties. This service is not a real estate listing, although real estate agents (and others representing landowners) are welcome to post farm properties. “Linking” services typically screen seekers and landowners and provide contact information to the parties based on the screening criteria. Think of a traditional or online dating service. “Matching” services go one step further by actively facilitating connections, negotiations and agreements. Some programs also offer educational materials, training and networking events, and more extensive direct advising.

Whether they offer listing, linking or matching services, the bottom line for all farm link programs is to help beginning farmers, other farm seekers, and farmland owners connect with each other and related resources.

More about farm linking in our region

Resources

Farm linking programs – New England

Farm linking programs – beyond New England

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About Land For Good (LFG) (3)

How do I work with Land For Good?

We provide various tiers of direct services to individuals and organizations who need help with farmland access, tenure and transfer situations or issues. Most of this help is provided at no-cost thanks to the support of individual, foundation and corporate donors. Read more then contact us. For more in-depth assistance we charge a fee and offer a sliding scale and cost-share so that no one is turned away. We welcome consulting and project collaborations with organizations, communities and agencies. Read more about how we work.

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Why are farmland access, tenure and transfer so important?

The future of farming and food security depends on farmers being able to start and grow their farm operations. Land held by retiring farmers, non-farming landowners and institutional and public entities must be made available, affordable and secure for new and established farmers.

Permalink.

What are the challenges of farmland access?

The current challenge facing today’s farmers is accessing farmland that has all of the following characteristics:

  1. Available: There must be enough land for everyone who wants to farm.
  2. Appropriate: Land must be suitable for a successful farm operation.
  3. Affordable:  The farmer must be able to purchase or rent the property.
  4. Accessible:  The farmer must have physical and legal access to the land
  5. Secure:  The farmer must have adequate security of use of the land to make investments in the business and the land.
  6. Equitable:  There must be an equitable assignment of land rights and obligations. Farmers’ opportunity to build equity must also be considered.

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Landowners (5)

Who are farmland owners?

Owners of farmland today are a varied group. We divide them into two major categories: those who farm their land (owner-operators) and those who do not (non-farming landowners). Non-farming landowners are made up of private, institutional and public landowners. These include farm inheritors, educational institutions, conservation organizations and municipalities, to name a few. 98 percent of farm landlords in the U.S. are not farmers. Of the 20,000 landowners who lease land for farming in New England, 88% are non-farmers.

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Who are farm seekers?

Farm seekers are new and beginning farmers who want to access land for the first time or scale up their operations, as well as established farmers who want to expand or relocate their farms. Access to farmland is a top obstacle for new and beginning farmers, according to surveys by the National Young Farmers Coalition (2011) and the American Farm Bureau (2013). The traditional pattern of farm succession (i.e., younger male farmers inheriting a farm) no longer holds. The most common method of land acquisition for beginning and established farmers is from a non-relative (USDA, 2013). Immigrant, minority, women and other socially disadvantaged farmer populations face additional challenges in accessing land to farm.

Permalink.

What are farm link programs?

“Farm link” programs have been around since the late 1980s. Originally, they were intended to help retiring farmers find someone to take over the farm. Recently, “linking” programs have proliferated. These days, the land holding side of the linking equation is not limited to retiring farmers with farms. All kinds of landowners are served.

What do farm link programs do? It depends, but all have the basic intention of helping farmers and farmland find each other. One way to describe the differences among farm linking programs is by the services they provide. “Listing” services are simply that — a list of available farm properties for rent or purchase. Sometimes there is a list of farm seekers as well. The New England Farmland Finder website is an example of a regional farm property clearinghouse that allows landowners to post available farm properties. This service is not a real estate listing, although real estate agents (and others representing landowners) are welcome to post farm properties. “Linking” services typically screen seekers and landowners and provide contact information to the parties based on the screening criteria. Think of a traditional or online dating service. “Matching” services go one step further by actively facilitating connections, negotiations and agreements. Some programs also offer educational materials, training and networking events, and more extensive direct advising.

Whether they offer listing, linking or matching services, the bottom line for all farm link programs is to help beginning farmers, other farm seekers, and farmland owners connect with each other and related resources.

More about farm linking in our region

Resources

Farm linking programs – New England

Farm linking programs – beyond New England

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How can I find a farmer to work my land?

Once you’ve determined what you have to offer in terms of farmland – and what you are looking for – you can develop an outreach plan that might include advertising, posting on a farm property website, and email messaging. Consider professional support such as from Land For Good to help you develop your farmer recruitment and selection plan. Read more about how we work with Landowners.

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How do I find farmland leasing rates for my area?

There is no simple method or standard for determining farmland leasing rates. Cash rental rates for farmland depend on the local market, the quality of the rented parcel, and the landowner.

County-level statistics can be useful in getting a general read on what renters are paying for farmland. The USDA National Agricultural Statistics Service (NASS) compiles county-level statistics for per-acre cash rental rates for irrigated farmland, non-irrigated farmland, and pasture. NASS has maps of average lease rates by state. One can subscribe to the NASS Cash Rents Report by region (Northeast) and cash rents can be searched using the NASS Quick Stats tool.  For the “Cash Rents” data in QuickSTATS, paste this into your browser: https://quickstats.nass.usda.gov/?sector_desc=ECONOMICS&commodity_desc=RENT&agg_level_desc=COUNTY

Searching “[state name] farmland lease rates” online will also yield resources, including PDF versions of the NASS reports for your state and any state extension resources.

In general, cropland rental rates are higher than hay and pasture land. New England cropland lease rates can range from $40 per acre/year to $300 per acre/year. If the soil is decent, and there is no infrastructure such as buildings, municipal water, fencing, etc. a reasonable cropland lease rate might be $75 per acre/year.

Landlords and farmers should not, however, base rental rates solely on benchmark data like NASS county-level data. These are only averages that can obscure big differences in land rental rates across a county. Actual farmland rents may diverge significantly from the available benchmarks for a variety of reasons specific to the parcel, area, and owner.

When determining rental rates, an understanding of the going rates in your area is critical.  Landlords and farmers have several potential sources of information, including other landlords and producers, ag lenders, Farm Service Agency employees and ag real estate agents. Some state extension services have information on rental rates. The staff at your local Conservation District or USDA Farm Service Agency offices might have a pulse on local cropland leasing rates.

Landlords might consider basing their rental rates on land values. Others base lease rates on the landlord’s carrying costs, which would be different for town-owned farmland than privately owned farmland.  Some farmers and landlords negotiate the rent based on a farmer’s business plan, which can show what the business can reasonably carry for land rent. Many farmers and landowners work out a payment that is flexible, such as one based on how well the farmer does financially that growing season, instead of a fixed amount of cash per acre.

Typically, landlords and renters begin thinking about rental rates for the next crop season soon after harvest.

Our Toolbox for Farm Leasing contains guides for landowners and farm tenants, as well as lease templates. See also UVM Extension’s Online Tools For Determining Farmland Rental Rates.

Coming soon! If you want to be notified of the launch of our interactive, build-a-lease tool, subscribe to our email list.

If you have a story of a successful or unusual example of leasing farmland, we’d love to hear from you. Contact us!

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Farm Seekers (4)

How can I find land to farm?

There is no “one-stop shop” for finding available farmland. It takes diligence and creativity to find the right farm property. It’s important to prepare – and develop a plan – for acquiring farmland by learning your options, assessing your capacity and goals, and developing a strategy. Get started on our Farm Seekers page.

Land For Good and other farm link programs in New England can help with your search. Some farm link programs  include online postings of farm properties. Read more in our FAQ on farm link programs.

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Who are farm seekers?

Farm seekers are new and beginning farmers who want to access land for the first time or scale up their operations, as well as established farmers who want to expand or relocate their farms. Access to farmland is a top obstacle for new and beginning farmers, according to surveys by the National Young Farmers Coalition (2011) and the American Farm Bureau (2013). The traditional pattern of farm succession (i.e., younger male farmers inheriting a farm) no longer holds. The most common method of land acquisition for beginning and established farmers is from a non-relative (USDA, 2013). Immigrant, minority, women and other socially disadvantaged farmer populations face additional challenges in accessing land to farm.

Permalink.

What are farm link programs?

“Farm link” programs have been around since the late 1980s. Originally, they were intended to help retiring farmers find someone to take over the farm. Recently, “linking” programs have proliferated. These days, the land holding side of the linking equation is not limited to retiring farmers with farms. All kinds of landowners are served.

What do farm link programs do? It depends, but all have the basic intention of helping farmers and farmland find each other. One way to describe the differences among farm linking programs is by the services they provide. “Listing” services are simply that — a list of available farm properties for rent or purchase. Sometimes there is a list of farm seekers as well. The New England Farmland Finder website is an example of a regional farm property clearinghouse that allows landowners to post available farm properties. This service is not a real estate listing, although real estate agents (and others representing landowners) are welcome to post farm properties. “Linking” services typically screen seekers and landowners and provide contact information to the parties based on the screening criteria. Think of a traditional or online dating service. “Matching” services go one step further by actively facilitating connections, negotiations and agreements. Some programs also offer educational materials, training and networking events, and more extensive direct advising.

Whether they offer listing, linking or matching services, the bottom line for all farm link programs is to help beginning farmers, other farm seekers, and farmland owners connect with each other and related resources.

More about farm linking in our region

Resources

Farm linking programs – New England

Farm linking programs – beyond New England

Permalink.

How do I find farmland leasing rates for my area?

There is no simple method or standard for determining farmland leasing rates. Cash rental rates for farmland depend on the local market, the quality of the rented parcel, and the landowner.

County-level statistics can be useful in getting a general read on what renters are paying for farmland. The USDA National Agricultural Statistics Service (NASS) compiles county-level statistics for per-acre cash rental rates for irrigated farmland, non-irrigated farmland, and pasture. NASS has maps of average lease rates by state. One can subscribe to the NASS Cash Rents Report by region (Northeast) and cash rents can be searched using the NASS Quick Stats tool.  For the “Cash Rents” data in QuickSTATS, paste this into your browser: https://quickstats.nass.usda.gov/?sector_desc=ECONOMICS&commodity_desc=RENT&agg_level_desc=COUNTY

Searching “[state name] farmland lease rates” online will also yield resources, including PDF versions of the NASS reports for your state and any state extension resources.

In general, cropland rental rates are higher than hay and pasture land. New England cropland lease rates can range from $40 per acre/year to $300 per acre/year. If the soil is decent, and there is no infrastructure such as buildings, municipal water, fencing, etc. a reasonable cropland lease rate might be $75 per acre/year.

Landlords and farmers should not, however, base rental rates solely on benchmark data like NASS county-level data. These are only averages that can obscure big differences in land rental rates across a county. Actual farmland rents may diverge significantly from the available benchmarks for a variety of reasons specific to the parcel, area, and owner.

When determining rental rates, an understanding of the going rates in your area is critical.  Landlords and farmers have several potential sources of information, including other landlords and producers, ag lenders, Farm Service Agency employees and ag real estate agents. Some state extension services have information on rental rates. The staff at your local Conservation District or USDA Farm Service Agency offices might have a pulse on local cropland leasing rates.

Landlords might consider basing their rental rates on land values. Others base lease rates on the landlord’s carrying costs, which would be different for town-owned farmland than privately owned farmland.  Some farmers and landlords negotiate the rent based on a farmer’s business plan, which can show what the business can reasonably carry for land rent. Many farmers and landowners work out a payment that is flexible, such as one based on how well the farmer does financially that growing season, instead of a fixed amount of cash per acre.

Typically, landlords and renters begin thinking about rental rates for the next crop season soon after harvest.

Our Toolbox for Farm Leasing contains guides for landowners and farm tenants, as well as lease templates. See also UVM Extension’s Online Tools For Determining Farmland Rental Rates.

Coming soon! If you want to be notified of the launch of our interactive, build-a-lease tool, subscribe to our email list.

If you have a story of a successful or unusual example of leasing farmland, we’d love to hear from you. Contact us!

Permalink.

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Leasing (15)

What are a tenant’s obligations if his/her lease is terminated due to tenant default?

If a lease is terminated due to the tenant’s default, the tenant’s obligations depend on the terms of the lease. The tenant could be required to pay the rent for the full (or remaining) lease term as damages. Typically all provisions in the lease pertaining to termination would also apply.

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What does “lease to own” mean?

In general, lease-to-own refers to methods by which a lease contract provides for the tenant to eventually purchase the property. One common lease-to-own strategy is to include an “option to purchase” provision in the lease. This clause states that the tenant may purchase the leased premises during a particular time period and according to terms specified in the lease. Another is with a “right of first refusal (ROFR)” written into the lease. With a ROFR, the tenant has an exclusive opportunity to make an offer on the property before it is offered to others. A third method that is sometimes seen as a lease-to-own method is a land contract. See our fact sheet Lease to Own (Coming Soon!)

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What is the difference between a short-term and a long-term lease?

Short-term typically describes a term of 1-2 years, sometimes up to 5 years. A long-term lease can be 10, 20, or 50 years, for example. Leases can be for up to 99 years; there are examples of leases for longer than that. Some states limit the term of an agricultural lease by statute. Typically, longer-term leases are more complex.

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What does it mean to “record a lease,” and why should the parties to a farm lease do it?

Recording a lease means that it (or a Notice of Lease) is submitted to the public record, usually at the local Registry of Deeds following the signing of it by both parties. Generally, recording of the lease protects the tenant against subsequent claims to the property. If the lLandowner dies or sells the property during the lease term, a recorded lease helps ensure that the new owner adheres to the lease agreement (if that is specifically stated in the lease). Some states require that certain kinds or length of leases be recorded, so parties should review their applicable state laws.

 

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What’s the best way for the parties to a lease to communicate permission or approvals to each other (e.g., regarding a particular use of a barn)?

Approvals or permission for material changes or actions pertaining to a lease should be communicated in writing and delivered as required in the lease (e.g., by surface mail, email, in person). This way, whenever questions arise about who said what to whom, there is a record showing the timing and substance of the approvals.

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What rights might a landowner reserve in a farm lease?

Reserved rights might include rights to:

  • use a portion of a barn that is part of the tenant’s leasehold
  • hold a party on a certain hayfield
  • extract minerals
  • hunt
  • harvest timber

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What happens if a leased property is sold to another owner during the lease term?

In this situation, the terms of the lease will govern. The lease will continue to apply to the subsequent owner if so stated in the lease. Or the lease may require that upon transfer, the lease terminates and the existing owner compensates the tenant per the terms in the lease.

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To whom do new structures or other improvements to the premises belong?

A lease should specify the answer to this question. Generally, if the structure was placed by the tenant at his or her expense, and it can be removed, it belongs to the tenant. The lease will say if and how it should be removed at termination, or how the tenant will be compensated for the investment.

Where the improvement is permanent there are several considerations and ways to address ownership and disposition. See this fact sheet.

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Can a tenant terminate before the end date of the lease?

Yes, a tenant can terminate before the end of the lease, but depending on how the lease is written, s/he may be liable for the remaining rent. A lease may permit the tenant to terminate at any time with notice. If the landowner defaults, as defined in the lease, this may constitute grounds for early termination without penalty to the tenant. See fact sheet “Termination…”.

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How are improvements to the soil and other natural resources considered in a lease?

Unless otherwise accounted for in the lease, a farmer’s soil improvements are not compensated. Some leases place a value on natural resource improvements as part of the overall calculation. See our fact sheet.

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What types of farm leases and lease provisions should be in writing?

All agreements to use agricultural property should ideally be in writing. In some states, a lease for more than one year must be in writing.  Any changes to the lease terms should be in writing. Also, any financial transaction such as for improvements should be put in writing. Major permissions (e.g., constructing an improvement, engaging in a use not clearly permitted, etc.) should be required to be in writing by the terms of the lease. Generally, such written documents should be signed by the parties.

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Can the landowner (or other persons) use the premises that they lease to someone else?

The landowner may want to use the premises or a portion for certain purposes. If so, and if the tenant agrees, the lease should specify those purposes and who the additional users – beyond the tenant – will be. For example, the landowner may reserve the right to hold a wedding or barn dance within the leased premises. Or s/he may want to give the right to use one stall of a barn within the leasehold to a neighbor. If the landowner wants to retain the right to drive on any portion of the premises (such as to access another part of his or her property), this should be spelled out as a reserved right in the lease.

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How do I know what is permitted or prohibited in a lease?

The best way to avoid uncertainty about permitted or prohibited uses is to be as clear and comprehensive as possible in the lease language. That said, it’s impossible to list or anticipate every kind of use. When in doubt, check with the other party, either according to the directions in the lease for doing so, or by simply asking. The adage that it’s “better to ask forgiveness than permission” is not a best practice when it comes to harmonious farm leases.

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What is the definition of agriculture or farming – and what constitutes a “normal” or “generally accepted” farming practice?

The answers to these questions are not straightforward. Agriculture is defined differently in various Federal, state, and local laws and regulations. Perceptions of farming differ as well. For example, is agri-tourism farming? Is turning apples into apple pie on the farm an agricultural activity? Commercial composting? Horse boarding? Aquaculture? Ultimately, it’s up to the landowner and farmer to come to a mutually agreeable definition for them (provided that whatever they agree on does not contradict any laws).

Agriculture evolves, and farmers innovate to be viable. Farming practices considered customary by some may be questioned by others. Some leases simply permit “generally accepted agricultural practices,” while others are more specific. The parties may insert a definition of farming from a local or state regulation, or may use this section to expand or limit this definition through the permitted, restricted, and prohibited uses.

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How should parties in a lease determine the rent?

There are several factors to consider when determining the rent: market rental rates; the Landowner’s costs; the amount the tenant can afford to pay; and other costs or benefits the farmer or landowner add to the arrangement.

For a more thorough explanation, including alternative methods of payment, see the Determining Rent Fact Sheet  (COMING SOON!) and resources in the Rent section of the Farm Leasing Tool (COMING SOON!)

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