Preliminary reports are not surprisingly calling for additional rental rate increases for 2012. According to the Iowa State University Farmland Cash Rental Amount Survey, the average cash rent paid in Iowa in 2011 was $214, a $30 per acre increase over the previous year. Further, substantial disparity will likely continue to be found in 2012 between the low and high rental amounts. Reports of a $200 difference for adjoining pieces of farmland were reported in 2011.
As a recent DTN blog update pointed out, the disparity in rent is often due to the social and family aspect engrained in many landlord-tenant relations. Privately negotiated rent between family members or long time tenants and landlords is substantially lower than rents obtained from competing farmers at a public auction. While some express concern that low rents may be a result of farmers taking advantage of uninformed landowners, many owners will state they don’t mind charging less because their tenant “takes good care of things.”
There is certainly nothing wrong with giving a family member, friend, or other tenant a break for going above and beyond their responsibilities as a tenant. However, there are concerns, by farm management experts as well as family members, that some tenants are taking advantage of the goodwill of some landowners. There may be some merit to this, and perhaps a tenant’s occasional shoveling of their landowner’s driveway doesn’t justify several thousand dollars of foregone rent.
However, landowners should not be chastised or made to feel taken advantage of for seeking less than top dollar rent where a farmer is providing good stewardship of the land. In fact, much of the “Landowner’s Guide to Sustainable Farm Leasing” is dedicated to creative ways landowners can incentivize their tenants to practice sustainable land management. What is important, is to put down in writing, preferably within the lease document, not only what the rent is but why it is.
While this proposition may cause some to balk, or at least hesitate, the recording of the rent, as well as any additional responsibilities or practices that protect the land, provides safeguards for both landowner and tenant. The landowner knows their farm is being managed well in exchange for the lower rent, and the tenant has a record to show concerned family members and potential heirs why they’re getting such a “sweetheart deal.” The DTN blog post quotes Kansas State University Extension Economist Kevin Dhuyvetter: “It’s in their [the tenant’s] interest to be transparent in how they establish rents and pay bonuses. Maybe the current elderly owner doesn’t need or want all this detail, but their heirs likely will.”