If you don’t want to alter the typical contributions of each party in a cash rent arrangment, another option is to simply reduce the rent in order to enable your tenant to adopt certain sustainable practices. This can be done in a couple of ways.
You can use a graduated rent. If the tenant is worried about an initial decrease in yield, a graduated rent will allow for a lower initial rental amount that will increase in the years after sustainable practices are adopted. Such a rent provision might look like this:
The total rental amount for the first year shall be reduced by 20%. This reduction shall be applied to the total for each subsequent year, but the reduction shall be decreased by 5% each year until the full rental amount is being paid.
Another option is to simply reduce the rent by a specific amount in the first year to account for the tenant’s cost in improving the land. The following provision is taken from Land for Good’s Sample Multi-year Lease Agreement.
Lessor recognizes that Lessee may incur start-up costs at the beginning of theLease term related to improving the agriculutral soils on the Premises or making other improvements to the Premises. Toward that end, the first annual Lease fee, due on _______________________, will be reduced by $______.
Yet another way to share the costs of building up the soil and improving the resources of the farm is to reduce the rent to encourage specific practices. For instance, your lease might contain the following provision.
The rent for cropland acres planted in hay shall be reduced by 20%.
It should be noted in this last example that this will require the division of rental rates based on the type of land use. For instance, the lease could set the rental rate for cropland at $______ per acre, pasture at $______ per acre, and so forth.
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