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Neighbors unite in farm lease pact

Opportunity. That’s what young farmers Dustin and Scynthia Schnake found five years ago when they entered a lease agreement with neighbors Clif and Alice Harrington. The arrangement has proven fruitful for both parties — providing the Schnakes room for expansion and the Harringtons a chance to scale back their operation.

About seven years ago, nearing retirement, Clif and Alice Harrington ran about 150 cows and replacement heifers, and backgrounded steers on their farm north of Stotts City.

“That was too much,” Alice recalls. With acreage on both sides of a county road, she says it made sense to center their operation on the north side, next to their house and barn.

Key Points

• Retirees and young farmers work together in farm lease agreement.

• Communication is the key element to establishing leases.

• There’s no rush in working out the details of a lease.

Just around the corner from the Harringtons, Dustin and Scynthia Schnake were looking to expand their operation. “We just had 80 acres and were running a spring and fall herd, backgrounding our calves,” Dustin explains. “We fed hay most of the time.”

Scynthia’s dad, a Stotts City native, actually suggested to Alice that the Schnakes might be interested in helping them down-size their operation.

“We spent a lot of time around the kitchen table,” Alice notes. “We discussed everything, not just leasing or buying land. We got to know each other.”

Developing a lease

Communication is one of the biggest factors in forming a lease, according to Whitney Wiegel, a University of Missouri Extension agricultural business specialist. “Tenants and landowners have to have clear expectations for one another with regard to farm maintenance, fertility management, cropping plans, payment arrangements and the duration of the lease.”

Wiegel cites fairness as another key factor in lease development. “One way to ensure that expectations are clearly communicated by both parties is to develop a written farm lease that includes provisions for those items.”

“We had to make it work for us,” Alice says. “We negotiated price, we negotiated items.”

The Harringtons and Schnakes used a lease form from the University of Missouri Extension Service as a guide to develop their own five-year lease agreement, which includes about 400 acres of pasture that joins the Schnake farm.

In addition, the Schnakes purchased two-thirds of the Harrington’s cow herd at the time the lease was established.

Scynthia says they spent about a year talking with the Harringtons, and they all took a lot of notes before the agreement was finalized.

“Trust is a big part of it,’ Clif notes. “Everything is written down — not because we don’t trust each other, but because we tend to forget things. We can go back and say, ‘Here’s what we agreed on.’ ”

Plan for improvements

While Wiegel cautions tenant farmers about making long-term improvements to a farm they do not own, the Schnakes are looking to establish alfalfa in one of the pastures they lease.

Still, the Harringtons realize the Schnakes need an extended period of time to be secure in having pasture with the alfalfa investment.

According to Wiegel, permanent fixtures placed in service belong to the landowner after a lease expires or is legally terminated. “Unless a tenant and landowner have a written lease with provisions to compensate the tenant for his portion of remaining value in improvements, ownership and value of all fixed improvements is transferred back to the landowner when the lease ends,” he explains.

Open communication lines

The Harringtons note that finding the “right people” was key for their lease agreement with the Schnakes. “We left it so that if at any time, something wasn’t working, we could discuss it and fix the problem,” Alice says. “That goes back to trust.”

“Honesty and communication are vital,” Alice emphasizes. “There are no secrets on either side of the road.”

Pipkin writes from Republic.

Most important point with leases: write it down, write it down, write it down

A handshake doesn’t always make it so these days. That’s why farm lease experts find value in written leases, which serve as a contract in helping the prospective landowner and tenant think about and agree upon the ins and outs of leasing and operating a farm.

According to University of Missouri Extension, a written lease should at least include:

• Names of parties and description of property

• Term of lease

• Rental rates and arrangements

• Right of entry statement

• Signatures

Other provisions to consider in a written lease are:

• A description of farm operating expenses and how they will be shared (for crop-share leases)

• Conservation and improved practices

• Improvements and repairs

• Records

• Statement of non-partnership

• Arbitration (settlement)

• Additional agreements and modifications

Whitney Wiegel, a University of Missouri agricultural business specialist, says farm lease arrangements vary from one tenant-landowner relationship to the next, but most leases will fall into one of three categories: fixed cash rent, flexible cash rent, or crop share. “Once a farmer knows this information, he can assess whether or not the farm for lease will fit his existing operation.”

Leases with exceptionally long duration can be a concern. Wiegel says these come with risks — as over time relationships can turn sour, business plans evolve and individuals’ goals change.

“Before entering into any lease, understand how the lease will affect your business and your family,” Wiegel advises. “Farmers should also understand what it would mean to their operation to lose the leased farm. It’s always best to have a contingency plan should a lease arrangement end unexpectedly.”


WORKING TOGETHER: Dustin (from left) and Scynthia Schnake formed a farm lease agreement with neighbors Alice and Clif Harrington. The partnership enabled the Schnakes to expand their operation at the same time the Harringtons were ready to downsize theirs.

This article published in the October, 2012 edition of MISSOURI RURALIST.

All rights reserved. Copyright Farm Progress Cos. 2012.