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The Basics of Sustainability

American agriculture faces a growing number of challenges stemming from environmental degradation, increased competition for farmland, and a declining rural economy.

A few of the evironmental concerns related to conventional agriculture include the depletion of natural resources such as soil and water; degredation of water quality in our rivers, lakes, and oceans; contamination of drinking water; air quality issues; loss of wildlife habitat and biodiversity; and contribution to global warming.  The list goes on, though the environment is not the only challenge facing our agricutlural system.

Gaining access to land for beginning and even mid-sized farm operations is becoming increasingly difficult as these farmers compete for land with larger operations, wealthy investors, and the consumption of fertile farmland for development.  The farmers that do have access to land face a loss in independence and little to no control in the price they receive for their products as large agri-business interests gain more control of the production process.  This creates a system of farmers reliant on credit and the whims of large corporations, contributing to a decline in the number of farms, further concentration of farmland in the hands of a few entities, and the disintegration of rural communities.

However, It is important to recognize that along with challenges come opportunities.  Sustainable land management can aid in reducing the problems arising from certain conventional agricultural practices, while also mitigating harmful activities outside the realm of agriculture.  In essence, agriculture has the potential to provide solutions to environmental degredation, contribute to the nation’s energy supply, create employment and entreprenuerial opportunities, and assist in revitilizing stagnant rural economies.

This is not to say that every landowner should enter a specific type of lease arrangement or rent only to certain types of farmers.  Nor does it mean that every farm operation should use the same practices.  However, understanding the concepts and benefits of sustainable agriculture can guide the decision-making process to ensure the farm operation on your property benefits the natural resources of the farm itself, the environment as a whole, and the rural community, while continuing to meet your needs and those of your tenant.

What is Sustainability?

Sustainable agriculture has been defined by a number of individuals and institutions.  A few such definitions and elaborations on the concept of sustainable agriculture can be found in the U.S. Farm Bill, the National Agricultural Library, the Leopold Center for Sustainable Agriculture, and many other sources.  An essay, “On Defining Sustainable Agriculture,” is also available.  Videos of Dr. Fred Kirschenmann, Distinguished Fellow at the Leopold Center for Sustainable Agriculture, discussing the need for resilience in our agricultural system in addition to sustainability can also be viewed here.

In essence, sustainability means the utilization of a resource in a manner that allows its continued use indefinitely.  In terms of agriculture this necessarily relates to a number of topics.  The definitions in the above resources highlight the central concepts necessary for a continuously productive agricultural system.  The consistent elements in the definitions include:

  • Productivity
  • Long term profitability
  • Environmental stewardship
  • Quality of life for farmers and the community.

These elements are included in the definition of sustainable agriculture because they are all practical necessities in achieving an agricultural system that can meet the nation’s food and fiber needs on a continuous basis.  Agriculture, by definition, must be productive, and this productivity relies on the availability of natural resources and the profits and quality of life to keep farmers on the land and communities socially and economically stable.

As previously mentioned there is no one particular way in which to farm sustainably. Sustainable agriculture can include an array of practices, including crop rotations, planting cover crops, establishing buffer strips, integrating livestock and crop-production, developing on-farm energy sources, marketing fresh produce or value added farm items locally, or assisting a beginning farmer.

Additional Resources:

More information on sustainable practices and related matters can be found at the sites listed below or in Links and Resources.

For more information analyzing the benefits of certain conservation practices check out:

  • Environmental Benefits of Conservation on Cropland: The Status of Our Knowledge (Craig Cox and Max Schnepf eds., Soil and Water Conservation Society 2006), or visit

While sustainability can be achieved through a variety of practices, it is important to also remember that sustainability depends on an approach which addresses preservation of natural resources, while continuing to be productive, profitable, and beneficial for the community and society.  The versatility and wholistic nature of sustainability deserves special attention when developing an agricultural lease.  The property and the landowner may benefit more from adopting a lease that encourages sustainable practices or sets threshold requirements rather than mandating specific practices.  This can allow for greater flexibility and creativity on the part of the farm operator to promote the sustainability of the farm in a manner that minimizes their costs and risks.  The aspects playing critical roles in the adoption of sustainable practices are discussed further in Chapter Five, “Key Considerations for a Sustainable Farm Lease Agreement.”

It is important to mention that farmers and landowners should not be discouraged or intimidated by the scope of the challenges.  While it is an important issue, sustainability cannot be achieved overnight, and it is better to implement change incrementally while addressing financial and other needs of landowners and tenants than to estimate the challenge as insurmountable and continue to ignore the problem.

The Value of Sustainable Practices on Farmland

As has been discussed, sustainable agriculture, inherently benefits society as a whole and future generations by ensuring a stable food supply while protecting on-farm and off-farm resources.  While the protection of the land’s resources and helping to ensure the stability of the country’s social and economic fabric  is reward in itself, there is nothing wrong with asking what the financial benefits are for farmers and landowners who adopt sustainable management.  After all, the livelihood of those managing the land is of vital importance to ensuring the continuance of agricultural production, and the principle of expecting a return on investments in land is a well-engrained principle in American property ownership.

The lists below highlight some of the reasons for considering sustainable practices on agricultural land.  Many of the effects of sustainable agriculture produce both environmental and economic benefits.  It is important to understand these benefits not only for the purpose of recognizing the value of sustainable farming practices, but also in order to understand their effects on the landlord-tenant relationship.  The adoption of sustainable practices can create variations in the economics of the farm operation, effecting the costs and benefits of both parties.  It is crucial to the development of a stable, equitable, and profitable lease to recognize and address these variations.

Ecologic Benefits

  • Soil Conservation:  Soil is the principle resource for the farm operation, and it is essential to the sustainability of your land.  Sustainable practices and improvements that prevent runoff and erosion maintain the long term productivity of the land.
  • Water Quality:  Improving water quality protects drinking water and recreational resources which add value to the local economy through recreational activities and an overall improved quality of life.  Decreased sediment and nutrient runoff increases biodiversity in rivers and streams and reduces the effects of hypoxic “dead zones” in environmentally and economically sensitive areas, such as the Gulf of Mexico and Chesapeake Bay.
  • Flood Damage Mitigation:  Certain conservation practices, including conservation tillage, cover crops, buffer strips, and wetlands restoration reduce the amount of runoff from rainfall.  This not only reduces erosion on the farm but also decreases water velocity and damage downstream.
  • Air Quality:  Minimizing the release of particulates and noxious odors improves the health and quality of life in the surrounding community and encourages a more vibrant social and economic setting.
  • Wildlife Habitat:  Improves biodiversity and recreational opportunities both on the farm and off.
  • Mitigates Global Warming:  Sustainable farming can reduce the release of greenhouse gases on the farm while absorbing additional CO2 from the atmosphere, resulting in a net reduction to global warming.  This provides external benefits but also contributes to reducing the impacts of global warming on the farm.

Economic Benefits

  • Long Term Production:  As mentioned above soil conservation is essential to the sustainability of the land.  Because of soil conservation’s direct impact on long-term productivity it also deserves being mentioned here.
  • Reduced Inputs:  Conventional farming relies heavily on the use of off-farm inputs.  These inputs can include energy for running facilities; fuel for equipment; fertilizer in the form of nitrogen, phosphorous, or manure; and pesticides and herbicides.  Sustainable agricultural practices can eliminate or reduce the need for many of these inputs or supply them from on-farm resources.  This can result in additional stability for long term planning and financial savings for both the farm operator and landowner.  It should be noted that sustainable practices that decrease off-farm inputs may require additional labor, skill, and equipment.  This potentially creates a variation in the typical contributions of landlord and tenant, which should be discussed openly between the parties and addressed in the lease agreement.  Sharing costs is discussed further in the chapter, “Key Considerations for a Sustainable Farm Lease.”
  • Reduced Transaction Costs:  A reduction in inputs also reduces the expenses of complying with the rules and permits required for their application.  There may, however, be additional transaction costs if the landowner or operator decides to become certified as an organic producer.  Again, you may want to consider the contributions of the parties in order to share any costs that are increased.
  • Marketing Opportunities:  As consumers become more conscious of the nutritional value and other factors regarding the food they purchase, demand for sustainably raised food increases.  This can be seen in the recent growth of the organic food market and the rapid increase in farmer’s markets.  This can create additional sources of income, but there are leasing issues that might arise from taking advantage of these markets.  For instance, direct marketing on the farm, such as a produce stand, will create a number of legal concerns such as zoning, liability and insurance, licensing, and compliance with health regulations.  These are matters that will need to be addressed in the lease agreement.
  • Recreation Opportunities:  Demand for recreation on private land has seen a dramatic increase.  Providing access to the land for recreational enthusiasts can provide increased income through access fees or leasing as well as government programs.  The rights of the parties to use the property for recreational purposes, either personal or for profit, needs to be addressed within the lease agreement.  This is discussed more in the final chapter, “A Few Additional Considerations.”
  • Government Incentives:  There are a number of conservation programs, and a few programs addressing farmland tenure, administered through the USDA and individual states.  Many of these include incentives by way of cost sharing, tax credits, technical assistance, and rental payments.  It is important to understand the law governing participation in farm programs and to use the lease to address the roles of each party in program enrollment and their entitlement to program payments.  More detail is provided on this topic in Chapter Five, “Farm Leases, Sustainability, and the Law.”
  • Ecosystem Services:  This concept is used to create a market for providing environmental benefits.  Opportunities are available for payments for practices resulting in carbon sequestration, improving water quality, and increasing wildlife habitat and biodiversity.  Many of the programs require long term commitments, making it necessary for the tenant to have a long enough lease term to match the ecosystem services contract or to have the participation of the landowner.  Both parties can benefit from providing environmental services, but it is essential the parties discuss the issue and address such options in the lease.  A more in-depth discussion of the interaction between farm leases and ecosystem services contracts can be found in the final chapter, “A Few Additional Considerations.”

An Example:  Buffer Strips

“Conservation buffers are small areas or strips of land in permanent vegetation, designed to intercept pollutants and manage other environmental concerns.” – USDA, NRCS

A wooded buffer strip along a creek

Photo by USDA NRCS

Ecologic Benefits

  • Reduced soil erosion
  • Runoff retention
  • Improved water quality
  • Increased wildlife habitat

Economic Benefits

  • Long-term production benefits from soil retention
  • Recreational leasing opportunities due to increased wildlife
  • Cost-sharing of improvement costs through federal and state programs such CRP and EQIP
  • Ecosystem service payments for water quality and wildlife habitat improvements through CStP or a private organization

Farm Lease Basics

Creating a strong foundation is an important step in constructing a sustainable lease arrangement.  Developing such a foundation requires understanding some basic farmland leasing concepts.  The information provided below is meant to serve as an introduction to routine issues regarding agricultural leases, the essential terms of a farm lease agreement, and the various types of agricultural leases.  More in-depth information on the topics covered here and their relation to encouraging sustainable practices is provided in the chapters that follow.

Putting it in Writing

Oral lease agreements are not as common as they once were but still comprise about one-third of the farm leases in Iowa.  While representing a minority of the farm leases, this number is significant in light of the serious nature of such leases.  Farm leases create rights and obligations regarding substantial economic and often societal interests.

The continued use of oral leases is likely due to a number of factors.  These factors include a tradition of using oral leases in farming arrangements, a close relationship between the landlord and tenant, and anxiety about insulting the other party.  However, there are several reasons, both legal and practical, to put the lease agreement in writing.

The Statute of Frauds

A lease agreement, as with any other contract, must meet certain requirements to be legally enforceable.  All of the states have enacted a statute of frauds requiring contracts involving real estate to be written.  This would preclude the enforcement of oral leases.  However, the states have also adopted exceptions to this rule.  The statutory exception in Iowa (Iowa Code § 622.32(3)) is indicative of the law of most states, which allows leases of real estate for a year or less to be made by oral agreement.  However, there are variations.  Indiana law, for instance, allows oral leases for land for a term of up to three years.  It is important to note that oral leases made for a period greater than that allowed by law may still be enforceable as a year to year tenancy or a tenancy at will depending on state law.

Recording

In addition, a written lease can be recorded, and is sometimes required to be recorded, in order to protect the tenant against subsequent claims to the property.  For example, if the landlord sells the property during the lease term a recorded lease helps ensure the new owner adheres to the lease agreement.  The recording statutes for Iowa and select other states are further examined in the “Tenancy Law” resource.

Documentation for Third Parties

A written lease may also be beneficial in order to supply documentation to third parties.  For instance, a lease document can be used for assessing tax liabilities or entering government farm programs.

Practical Considerations

Using a written lease also has practical benefits.  A written lease provides an easily accessible reference tool.  Lease arrangements may continue for several years without renegotiation of the terms, and the parties may simply forget what the terms were.  A written lease is an easy way for the parties to refresh their memories.

It also acts as a reference should the interest of either party be transferred to a new landlord or tenant who was not present when the agreement was originally entered.  Having this reference helps ensure the provisions of the lease are honored and allows a new landlord or tenant to check the terms of the agreement without confronting the other party.

Putting the agreement in writing also helps ensure both parties understand the terms at the beginning of the lease.  A written document allows the parties to examine each provision together and address misunderstandings or concerns over particular terms.

The importance of providing a clause requiring further agreements or modifications regarding the lease arrangement be made in writing is also worth noting.  These are commonly found in typical form leases.

Important Components of a Farm Lease

The list below provides an overview of important provisions to include in a farm lease and their possible effects on sustainability.  More in-depth information on the elements that have a large impact on the adoption of sustainable practices is provided in the Chapter Five, “Key Considerations for a Sustainable Farm Lease.”

1. Identity and Signatures of the Parties

The names and contact information of both parties should be provided with designations for landlord and tenant or lessor and lessee.  Tax identification numbers might also be included for purposes of farm program payments.  Both parties should also sign the agreement to ensure its enforceability.  This includes all co-owners of the property.

2. Description of the Property

The description should be sufficient to allow a stranger to interpret the meaning and identify the location of the property.  This can be done informally through the use of road names, addresses, or similar characteristics, although a formal legal description in metes and bounds or using the government survey system is preferable.  A legal description is particularly important where only part of your property is leased or if the lease agreement contains an option to purchase or a right of first refusal.  Regardless of the method used, clarity is crucial and the number of acres should also be included.  If there are any buildings or improvements that are excluded from the lease, these should be noted.

3. Lease Term

The lease term describes the period of time for which the lease will last, or the lease’s duration.  A lease should specify the beginning and ending date of the lease and can also include the number of years it will last.  In Iowa, farm leases are statutorily required to terminate on March 1.  The term of the lease can have a significant impact on the adoption of sustainable practices.  A term of several years provides the tenant more incentive to care for and improve the farm’s resources.  It also, of course, binds the parties to the conditions of the lease for a longer period of time, a matter of great concern for landowners.  A detailed discussion of the importance of the term to a sustainable farm operation and considerations for addressing landowner concerns about long-term commitments is included in Chapter Five, “Key Considerations for a Sustainable Farm Lease.”

4. Termination and Renewals

The manner and time in which notice of termination must be given and the method for renewing the lease are also important provisions.  The lease should specify if and when notice must be given as well as the consequences of not providing proper notice, such as a renewal of the lease for another year.

It is important to ensure notice of termination procedures are in compliance with state law.  Iowa has specific, mandatory termination procedures with few exceptions.  The statutes and cases establishing these procedures and exceptions are discussed in “Chapter Four: Farm Leases, Sustainability, and the Law.”

5. Method and Amount of Rent

Agricultural leases are usually categorized by the type of payment used.  The most common categories include cash rent, flexible cash rent, and crop or livestock-share leases.  These categories are based on the type of rent paid, but typically vary in other matters as well.  The characteristics of these leases distribute the costs and risks of the farm operation in different ways, which can have a large impact on the tenant’s motivation and perhaps ability to adopt sustainable practices.  The basic characteristics of the different lease types are discussed below, but a more in-depth examination of how these characteristics impact the adoption of sustainable practices will be found in Chapter Five, “Key Considerations for a Sustainable Lease.”

It is also important to consider the effects of the type of farm lease you choose on self-employment and income taxes, estate planning, social security benefits, and farm program payments.  Generally, crop-share leases, particularly when the landowner “materially participates” in farm management, are more likely to be viewed as self-employment and make the landowner eligible for farm program payments. These matters are discussed further in Chapter Four, “Farm Leases, Sustainability, and the Law.”

  • Cash Rent. Cash leases specify a dollar amount for rent by the acre or for the entire farm.  Typically, the landowner provides the land but does not share in the costs or management of the farm operation.  This type of lease places nearly all of the costs and risks of the farm operation on the tenant.  Landlord-tenant communications are also generally fewer that in crop-share arrangements.
  • Crop-share. Crop-share leases establish a percentage of the harvested crop that is owed to the landowner as rent.  A crop share lease might also specify who will be responsible for storing and hauling the landowner’s share of the crop.  Because the rent is based on the productivity of the farm and is subject to fluctuations in the market price of the crops raised, the risk of farming is shared between landlord and tenant.  Typically, a crop-share landlord also shares the costs of the operation and may engage in management decisions as well.  This allows the tenant greater room to experiment with alternative practices and reduces the amount of capital required by the tenant.  Custom often dictates a 50/50 crop share arrangement, though an equitable lease will ensure the share of each party is proportional to the party’s contribution.  This is particularly important when engaging in creative cost sharing arrangements to encourage sustainable practices.   Any cash rent for pasture or buildings should also be included in the lease agreement.
  • Flexible Cash Rent. A flexible, or adjustable, cash lease provides a middle-ground between a straight-cash rent and a crop-share arrangement.  The tenant pays the landlord in cash, but the amount is based on the yield, market price, or both.  The parties often establish a base rent which must be payed regardless of production and revenue, and sometimes establish a ceiling that the rent will not exceed.

6. Contribution to Expenses and Management

Generally, landowner’s contribute more to the expenses and management of the farm operation in a crop-share lease than a cash rent lease.  However, it is important for the contributions of each party to be established regardless of the lease type.  This not only ensures the parties understand their respective responsibilities, but it also holds the parties accountable for those contributions.  Sharing the costs of the operation can be particularly helpful to beginning farmers or when sustainable practices are required that have additional expenses or an added amount of risk.

7. Purpose of the Agreement

The purpose can relate to both the type of relationship formed by the agreement and the reason for entering the arrangement in the first place.  Therefore, a farm lease will typically communicate the intent of the parties to enter a landlord-tenant relationship for the purpose of agricultural production.

The Type of Endeavor

Stating the agricultural purpose of the agreement assures the tenant’s right to use the land for farming and certain other uses, but also restricts the activities the tenant may engage in upon the property. It is important to understand state law relating to a tenant’s land use rights beyond the farming operation and the use of additional lease provisions regarding non-farming uses and activities on the property, a matter discussed in “Chapter Four: Farm Leases, Sustainability, and the Law.”

The Type of Relationship Formed

The landlord-tenant relationship is governed by state law.  Iowa, like a number of other states, has landlord-tenant laws relating specifically to the rights and duties of parties to an agricultural lease.  In order to ensure these laws are applied to the arrangement it is important for the lease agreement to clearly establish the intent of the parties to enter a landlord-tenant relationship.  It is also important to establish that other relationships, such as that of a partnership, do not exist in order to avoid additional liability for purchases made by your tenant or any negligent acts of your tenant.  Many leases contain provisions stating that the lease does not create a partnership and that neither party has the authority to obligate the other without written consent.  More information on the type of relationship formed can be found in the “Tenancy Law” resource to the right.

8. Allowed and Prohibited Uses

Both parties should understand the allowed and prohibited uses of the property.  Land use restrictions can apply to the entire farm, such as prohibiting the subleasing of the property for recreational purposes, or can specify limits on certain parts of the property, such as protecting permanent pasture.  Uses beyond the scope of agricultural production that might support the sustainability of the operation, such as a farm stand, are also important to include. It is also important to address the landowner’s rights regarding the property, such as entering to inspect or prepare the land for the following year.

9. Conservation

Leases often contain provisions addressing conservation on the property.  Conservation provisions range from placing a duty on the tenant to prevent soil erosion where feasible to the adoption of conservation plans and clauses requiring or prohibiting specific practices.  While the relationship of such provisions to sustainability is fairly obvious, not all conservation provisions are created equal, and a more in-depth discussion can be found in “Chapter Five: Key Considerations for a Sustainable Farm Lease.”

10. Repairs and Maintenance

Typically, the tenant is responsible for the expenses and labor associated with repairs that do not require skilled labor and the routine maintenance needed to prevent the deterioration of the facilities.  The landlord is usually responsible for major repairs and replacement of farm structures.

11. Improvements

Farm improvements, including everything from fences and tiling to conservation structures and soil amendments, can provide significant benefits for the tenant.  However, they can also require a lot of capital to complete, and the full benefits may not be realized during the term of the lease.  It is important the lease address the landowner’s consent regarding the tenant undertaking improvements, the contributions of both parties in completing improvements, the tenant’s ability to remove mobile improvements at the end of the lease, and reimbursement for the undepreciated value of improvements left on the property at the end of the lease.  A lease supplement detailing the contributions of the parties and ensuring reimbursement for the undepreciated value of conservation easements is provided by the Iowa State University Extension.

13. Remedies for Default

The law provides certain remedies when one party breaches the terms of a contract.  However, the parties are free, in part, to agree to their own remedies in case of default.  Possible remedies include termination of the lease, the right of the landlord to enter the land to care for and harvest the crop, and liquidated damages.  It is important to understand the limitations that are placed on the remedies to which the parties might agree.  The inclusion of such remedies are particularly valuable for landowners concerned about entering a long-term lease with an untested tenant.  Remedies for default are discussed further in Chapter Four, “Farm Leases, Sustainability, and the law.”

14. Dispute Resolution

As discussed, a written lease drafted after communicating concerns and goals with your tenant can reduce the number, as well as the costs, of conflicts between you and your tenant.  However, even the most carefully drafted lease may still give rise to disputes.  For this reason, and in light of the costs in time and money for a resolution through the judicial system, the parties should consider a provision establishing alternative avenues for dispute resolution.

Arbitration and mediation can provide tools to resolve disputes in a manner that reduces costs and is more likely to allow for the continuation of the lease relationship—an important matter for a sustainable lease arrangement.Some provisions mandate binding arbitration, meaning the parties are obligated to abide by the decision of the arbitors, while others require participation in alternative dispute resolution but allow the parties to seek legal remedies if dissatisfied by the outcome.  Again, it is important in developing a lease to recognize the role arbitration and mediation can play in the continuity and, therefore, sustainability of the landlord-tenant relationship.

15. Transfer of Interest

Farm leases often contain restrictions on the ability of either party to transfer their interest in the property.  Restrictions usually require the tenant to obtain the consent of the landlord before subleasing or assigning their lease interest.  This is an important means for landowners to ensure a competent tenant, who shares or at least understands the priorities of the landowner, is farming the land.  The tenant’s interest in the lease is protected by provisions stating that any sell or other transfer of the ownership of the property is subject to the lease.  This creates greater tenure security for the tenant, which provides greater incentive for conserving the farm’s resources.  It is still a good idea, and is sometimes required by law, to record the lease to ensure security during the lease term.

Many leases also provide that the lease will be binding on the heirs and successors of the parties.  This also ensures some amount of continuity in the lease arrangement.  Such a provision is in line with the law of most states, holding that leases constitute an interest in real property and as such are inheritable and devisable.  This aspect is particularly important to ensure the tenant’s tenure in the property.

It should be noted that some leases and state laws allow for the termination of leases for a term of more than a year in which the tenant has died or become otherwise incapacitated.  While this can hinder the continuity of the lease arrangement it also allows for the termination of a lease where the heir or successor tenant might lack the ability or desire to farm the property in a sustainable manner.

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