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