This important concept is often overlooked or undervalued when determining cash rental rates. Both tenants and landlords agree that a fair lease is equitable or fair to both parties. However, in practice, it is much easier to talk about equitable agreement than to actually negotiate one. History and tradition have more to do with leasing arrangement than do economics or fairness.
While landlords secretly hope to receive the highest possible rate, and tenants secretly hope to pay the lowest possible rate, both parties are willing to negotiate to determine a rate that is fair to both. This is where the relationship between the landlord and tenant becomes so important.
A successful relationship depends on effective communication. Good communication includes understanding the values and objectives of each party. Tenants need leased farmland to have a business of adequate size and income. Good production management and marketing do not overcome insensitivity to their landlord’s values, objectives and frustrations. Many landlords depend on their lease income for financial security. They often have emotional ties to the land they are leasing. They likely assume that others, especially tenants, will be sensitive to the history, the sense of accomplishment, the sacrifice, and the pride embodied in the land. Understanding each other’s values and objectives can aid in developing a successful relationship.
The tenant bears the bigger part of the burden for making sure all aspects of the farming operation are adequately communicated. Some key points to communicate to landlords are 1)educating lessors about agriculture, 2)explaining farm costs and their changes over time, 3) providing regular crop reports during the growing season, 4) maintaining the appearance of the property and 5) treating landlords like family.
Landlords can also help build positive relationships by asking questions, providing information to tenants regarding their investment goals for the farm, staying informed about the economics of farming, land values, and rental rates and arrangements, scheduling an annual sit down meeting with the tenant, and being rational and using common sense when dealing with their tenant.
Communications between landlords and tenants should occur year round. A good business relationship is valuable to both landlords and tenants. For the landlord, an effective relationship helps to ensure their investment goals for the farmland are reached. For the producer, it is fundamentally important to their security of tenure. For both parties, it prevents or mitigates the “costs” of conflict and disagreement.
Finally, in an environment characterized by strong competition for leased acreage, volatile crop prices and expenses, superior relationships provide farmers and landlords with a strong foundation for negotiating fair and equitable lease agreements.
