The type of lease can have a significant impact on the amount of risk taken by the tenant. A crop-share lease, for instance, where the landlord’s rent is a share of the product itself, distributes the risk of production and price on both parties. However, the method of payment is not the only characteristic that distinguishes crop-share leases and cash leases. It is important to understand the other characteristics of a crop-share lease, such as increased management responsibility and cost-sharing before deciding that a crop-share lease is the best way for you to proceed.
Risk-sharing can also be accomplished through the use of a flexible cash lease, in which the rent due the landlord is based on agreed upon factors, such as yield, price, or both. In order to take into account the risk that might be associated with sustainable farming practices it is important that the basis for the rent be actual farm yields or revenue received, rather than using a county wide average yield. It should be noted, however, that the basis of rent for flexible leases can have significant consequences on the division of farm program payments.
Sharing the costs of the farm operation can also reduce the risk taken be the tenant. This is especially true in circumstances where the adoption of sustainable practices requires additional equipment or labor. An example might be the use of flaming for weed control instead of chemicals. Sharing the costs of the operation is discussed further as its own answer to the question, “What methods are you willing to use to encourage sustainable practices on your farmland?”