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Creating Successful Leasing Arrangements Wesley Tucker Agriculture Business Specialist

Creating Successful Leasing Arrangements Wesley Tucker Agriculture Business Specialist University of Missouri Extension. Tucker Farms Tunas, MO. Rental Arrangements.

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Creating Successful Leasing Arrangements Wesley Tucker Agriculture Business Specialist

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  1. Creating Successful Leasing Arrangements Wesley Tucker Agriculture Business Specialist University of Missouri Extension

  2. Tucker Farms Tunas, MO

  3. Rental Arrangements Rental agreements create a relationship where both parties have the opportunity to gain from the strengths and assets of the other party.

  4. Experts tell us that positive relationships have: • Trust and support • Honesty and accountability • Respect • Responsible parties • Non-threatening behavior • Shared interests • Communication

  5. What makes an agreement work? • The most successful relationships occur: • when the parties have complimentary goals. • when parties are willing to compromise as necessary. • when parties communicate effectively.

  6. Laws and Customs • Statutes and Common Law • Binding contract, violations • Termination notice • Tenant liable for rent • Possession/right of entry • Property damage • Subleasing/soil fertility • Customs • Don’t have to follow

  7. “What makes a good lease?” • It’s not easy! • Takes lots of hard work • Careful thought by both parties • Generally a good lease is: • Landowner & tenant both agree it’s fair • Both clearly understand each other’s expectations

  8. “What makes a good lease?” • Verbal or Written – Discuss the details

  9. Benefits of a Written Lease • “What? Don’t you trust me?” • Documents Agreement • Prevents misunderstandings (communication) • Forces Consideration of All Details • Much easier before one party gets upset • Minor details = explosive problems

  10. Oral/Verbal Lease • Term • More than 1-yr invalid • Year-to-year tenancy • Binding on heirs or new owner • What was agreed? • Can’t testify

  11. How Do I get Out of This • Year to year terminates at anniversary with 60 day WRITTEN notice, otherwise it is continuous. • Month to month terminates with 30 day notice. • If an agreed date is set for termination then no written notice is necessary, tenant must vacate without notice.

  12. When Does This Start • Tenancy begins on day the agreement is made, not on the day possession is given.

  13. Written LeaseMinimum Requirements • Name, Address—all parties • Property Legal Description • Duration (term) of Lease • Extremely important consideration • Promote investment/Land value • Termination clause or amortization of investments • Rental Rate • Rent Payment Arrangements • Signatures

  14. Special Agreements: • Entry rights • Subleasing • Insurance • Use of buildings & grain bins • Fences • Repairs, maintenance, mowing • Hunting Rights • Fertility • Other special agreements

  15. Fertility is aDifficult Issue

  16. What’s It Worth? 1000 lb bale of grass hay • N - $5.32 • P2O5 - $4.12 • K2O - $12.37 • Total = $21.81 • 25 lb of N • 7.5 lb P2O5 • 22.5 lb K2O 30% N=$0.71, P=$0.55, K=$0.55

  17. Things Don’t go as Planned • Situations change • Death • Illness • Memory loss • Accident • Finances fall apart

  18. If There Is A Problem • Why is there a Problem? • Separate People from Problem • Perceptions – Emotions - Communication • Focus on Shared Interests not Individual Positions • He wins vs. I win • Work toward Mutual Gain • Original Objective – “gain from strengths & assets of one another”

  19. Rental arrangements • It’s the legal stuff. • Have things in writing. • Keep it simple if possible. • Think about your family. • It’s the money. • It’s the relationship. • Keep it honest. • Keep it open. • Keep it positive.

  20. Developing a Lease Agreement • North Central Farm Management Extension Committee - Pasture Lease • http://www.aglease101.org/DocLib/docs/NCFMEC-03A.pdf

  21. Livestock Lease Agreements • Situation: Farming is capital intensive • Land, Machinery, & Breeding Stock • Leasing land is common, why not cattle? • Young Producer vs. Ready to Retire

  22. Crop Share AgreementsDetermine a Fair Split

  23. Livestock Share AgreementsWhat’s a Fair Split?

  24. Livestock Lease Agreements • Important to consider all details in advance • Who’s responsible for: • Damaged Machinery • Fence Repair • Replacement Females • Bull Expense

  25. Lease Hunting

  26. Questions Wesley Tucker University of Missouri Extension 451 S. Albany Bolivar, MO 65613 417-326-4916 tuckerw@missouri.edu

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