Mike Rankin, Hay and Forage Grower Managing Editor
(Previously published in Hay & Forage Grower: December 26, 2023)
Leasing
a pasture is a common practice regardless of where you hang your hat. What isn’t common is for any two pasture rental agreements to be exactly alike. This is because no two pastures and their associated infrastructure (buildings, water sources, livestock working facilities, and fencing) are the same.
“For every pasture rental agreement, there are at least two viewpoints,” notes Andrew Griffith, an extension agricultural economist with the University of Tennessee (UT). “The landowner needs a rental rate that pays for all annual costs associated with owning the land, plus being compensated for the assets and resources on the property. The potential tenant is concerned with the resources available on the property and how they will contribute to generating revenue in the livestock operation.”
Griffith lists some of the resources that influence the rental rate include the grass stand and the types of forages; fences and cross fences; water sources and their locations throughout the property; working facilities; structures for hay, feed, and equipment storage; total number of acres; length of the agreement; and proximity to other land being utilized for similar purposes.
Other factors that may be important to the landowner include maintaining soil fertility, maintaining the grass stand, maintenance of infrastructure, and that the property remain aesthetically pleasing.
“As landowners and tenants work on an agreement, it is important to establish the expectations of both parties and what they contribute to meeting their goals,” Griffith writes in a UT Beef & Forage Center blog. “As goals and expectations are established, this may result in additional costs to one party over another, which means the rental rate could be impacted.”
In citing an example, Griffith says if a landowner asks the tenant to do something to the land that returns the tenant nothing, then the landowner may have to be willing to accept a lower rental rate. Likewise, if the landowner takes on responsibilities for the tenant, then the rental rate may need to be raised.
“As landowners and tenants think about what fair and equitable rates and agreements are, it is important that both parties be satisfied with the rental rate and the expectations,” Griffith asserts. “The best place to start for both parties is determining the costs they will have and what rental rate will provide a positive return. This is not always easy, and it is rarely a process people desire to go through, but it certainly aids in constructing a satisfactory agreement,” he adds.
A straightforward cash rental rate is the easiest type of agreement to formulate; however, other agreement structures may be more appropriate for one or both parties involved.
Griffith emphasizes that the primary objective of a lease agreement is to establish the expectations of both parties and attempt to structure it in such a way that the landowner and the tenant can be successful in achieving their individual objectives. “This is much easier said than done because this is a process than can take work,” Griffith notes. “Another consideration is that some people are easier to work with than others, and it is sometimes much better to fail to come to an agreement than sever a good relationship.”
Griffith suggests that potential rental parties visit aglease101.org for web resources pertinent to developing a lease contract. This website contains several publications concerning agricultural lease agreements and templates for written agreements. Even with a variety of templates and resources available for renting pastures, the agricultural economist emphasizes that there is no one-size-fits-all agreement. In fact, most agreements should be tailored to the specific situation.