July 2, 2014. Time, patience, and communication are key to negotiating an equitable crop share lease agreement. The productivity of the land in question will have a direct impact on the equitable distribution determined through the agreed to crop share lease.
The development of an equitable crop share agreement should adhere to several basic principles to ensure that it is a workable agreement for both parties involved and can lead to the long term financial success of both the landlord and tenant. The North Central Farm Management Extension Committee has done a great job of identifying and explaining five critical principles to account for when negotiating and developing a crop share agreement. These principles include:
- Variable expenses that increase yields should be shared in the same percentage as the crops are shared.
- Share arrangements should be adjusted to reflect the effect new technologies have on relative costs contributed by both parties.
- The landowner and operator should share total returns in the same proportion as they contribute resources.
- Operators should be compensated at the termination of the lease for the underappreciated balance of long-term investments they have made.
- Good, open, and honest communication should be maintained between the landowner and operator.
Source: Crop Share Rental Arrangements for Your Farm (NCFMEC-02) – North Central Farm Management Extension Committee, at pg. 2.
By adhering to the broad principles identified above, landlords and tenants will be able to produce profitable and sustainable crop share agreements that can be adjusted to fit the specific details of any situation.