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Understanding long-term farmland leases

Understanding long-term farmland leases

Expert discusses how producers may benefit from these agreements

By Kaitlynn Anderson
Staff Writer
Farms.com

Producers who want to rent land for extended periods may want to consider long-term leases.

Farmers may enter into these agreements if they want to rent properties for more than two years. However, these leases typically last for four or five years, Nathan Kolomaya, a lawyer at Brimage Law Group in Simcoe, Ont., told Farms.com today. Producers and landowners can enter into agreements that exceed five years but those cases are less common.

Farmers may sign these leases for many reasons. For example, they may deal with long-term crops, like ginseng, which require multiple years to grow before harvest, he said.

These agreements can also provide producers with more certainty than short-term leases.

“Farmers in long-term leases have the security they need to plan for their crops for many years and run their businesses smoothly,” Kolomaya said.

By finding land to rent for multiple years, producers can also commit fewer financial resources than they would need to purchase the land.

“If you want to have the highest level of security, then you buy the property,” he said. “However, when you make that purchase, you commit a lot of capital. You may tie up financing that you could’ve used elsewhere.”

These leases are beneficial for property owners too, as they can ensure they have reliable sources of income.

“Rather than trying to find new tenants each year, these landowners will have multiyear commitments to provide revenue streams they can count on,” Kolomaya said.

Depending on the relationship between the two parties, the process to create and sign the contracts can be relatively simple.

Sometimes, the two parties will agree upon the basic terms – including the rent amount, duration and any maintenance provisions – and then reach out to lawyers to write up the contracts, he said. Other times, producers will contact these professionals for advice earlier in the process.

“It really depends on how well the parties know each other,” Kolomaya said.

Regardless of the route people take to put these agreements in place, they usually work cooperatively.

“Typically, both parties are farmers, and understand the benefits and potential pitfalls,” Kolomaya said. “They both want these leases to work.”

 

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