It is no longer highly unusual for landowners to be an absentee landowner. More and more beginning farmers (and farmers in general) and renting land from absentee landlords. Are there any particular pitfalls or issues to be aware when working with an absentee landlord?
First, communication, while always important, is critical in situations with an absentee landlord. Communication is how trust is built. With an absentee landlord, communication becomes even more paramount because it is more difficult to be at the same place at the same time. Non-verbal cues, such as body language and that “gut feeling” you get, may be missing. If you communicate via the written word, tone, volume, and inflection are much harder to express. Misunderstandings may occur much quicker and escalate quickly without a commitment to communication. In the end, communicate with each other and then communicate some more.
An absentee landlord is also an ideal circumstance for a written lease and/or contract. With a written lease, each party knows the exact terms and conditions of the agreement at a glance. It also allows each party to know at a glance what they can or cannot do in regards to the lease. A written lease also provides more legal protection and certainty than a verbal lease.
In the end, a relationship with an absentee landlord does not have to be markedly different than a local landlord. It just may require a different approach. Take the time to communicate and resolve differences, just like in any landlord/tenant relationship. And if that requires conference calls, Skype, email, or other communicative aids, try to embrace the change in the method of communication.
I have been considering a story I heard from a colleague about the beginning farmers who are currently renting his crop land. The beginning farmers began to cultivate (pun not intended) a relationship with my colleague for a few years. They would call my colleague, ask if he had any land they could rent without disrupting any current tenants, if he knew of any other landowners looking for a tenant, keeping my colleague up-to-date on their operation and plans, and generally letting my colleague know they were interested should an opportunity ever arise.
The opportunity then came. My colleague was considering renting his land and, as he had in years past, received a phone call from the prospective tenant. This time, my colleague indicated he was interested in renting the land and asked for more details regarding the tenants’ operation, their agriculture and educational background, and ideas for maintaining the environmental integrity of the land. My colleague also discussed the use of the Nebraska Beginning Farmer Tax Credit program and the requirements for both himself and the tenants to qualify.
What have I gleaned from this story from the perspective of a beginning farmer?
- Polite persistence is key. We all know that access to land is the single most difficult barrier for beginning farmers to overcome. But that doesn’t mean you can’t talk to people in your community, create relationships with landowners, and generally let the word out that you’d like to rent land.
- Don’t expect immediate results. It took the tenants in the above story a few years for their persistence to pay off. But when my colleague was considering renting his land, the first people he thought of were the people who maintained a relationship with him and let him know about their interest in renting his land.
- Have a plan. Don’t just approach a landowner and state you’d like to rent the land. Know what type(s) of crops you wish to grow, your ideas on fertilization and pesticide use, whether you wish to pursue cash rent or share rent, your farming background, and any other pertinent details that demonstrate that renting to you is in the best business interest of the landowner.
- Be aware of any programs that assist beginning farmers. A tax credit is a wonderful tool in your plan. Know about it and discuss it with potential landlords.
What have I gleaned from this story from the perspective of the landowner?
- Be receptive to renting to beginning farmers. Sure, it may be a bit outside your comfort zone to rent to a beginning farmer but it may make business sense as well. Listen to the ideas and keep them in mind.
- Be aware of any programs that assist beginning farmers. Who doesn’t like a tax credit? As a landowner, you may qualify for the Nebraska Beginning Farmer Tax Credit. Calculate the tax credit and consider it in the larger picture of your operation’s financials.
- Have a plan. There may be a time when you can no longer cultivate your own fields. If that time comes, do you have relationships with other farmers who would be interested in renting your land to maintain your income stream? More long-term, if you want a successor to the operation, do you have one? Renting to a beginning farmer may provide you with a mechanism to maintain your operation for another generation.
Ultimately, there are benefits to both beginning farmers and landowners by being persistent and allowing persistence. You never know — you may just find the perfect fit if you persist.
This week, I’ve attended a workshop sponsored by the University of Nebraska – Lincoln Women in Ag and scheduled another workshop for women landowners in south-central Nebraska in mid-August (more info in a future post!). The workshops have got me thinking about women landowners, the possibility for beginning farmers to rent from a woman landlord, and if there are any differences between renting from a woman or renting from a man. These workshops, and previous workshops I’ve attended, demonstrate what the numbers bear out: there is a growing segment of landowners in farming and ranching and it is women.
Women landowners are a growing group and control significant amounts of farmland. In Iowa, women wholly or partially own 51% of the farmland. Some of the women landowners are non-operators, meaning have not operated the farming operation. The converse is that some women landowners are operators. What does this mean for the beginning farmer and for women landlords?
For the beginning farmer, it means that your landlord may be a woman. (And that’s okay!) A woman who likely spent years helping her father and/or husband with their farming operation. A woman who may, it turns out, be a source of immense knowledge of the land, its production history, and farming or ranching in general. A woman who may need a successor. Or a woman who is interested in helping beginning farmers get up off the ground.
For the women landlords, it means that you may have a younger person who may some new ideas they want to try. Maybe the operator wants to expand into value-added agriculture or specialty crops. A person who is invested in the idea of farming or ranching and wants to succeed. A person who may need and want a mentor.
Moreover, there is some evidence that women landowners have different goals and values with regards to use of the land than men. Knowing the goals and values of both the farmer and landowner is critical to creating a long-lasting, stable relationship. So beginners, ask what goals and values the landowner has! Landowners, don’t let someone farm your land without an understanding of your goals and values.
As with all landlord/tenant relationships, the key is communication. Women landlords should communicate what goals and values they have to the land. Tenants should decide if they want to work towards those same goals and if they can operate a successful business with the lease terms offered.
Want someone to further discuss the above issues with? Contact us! We’re happy to help if you are a beginning farmer or a landowner looking to create a business plan and/or succession plan.
Trust me on this, the doctrine of emblements is relevant to the transfer on death deed we discussed earlier this week. To explain why, it is necessary to discuss what the doctrine of emblements is.
An emblement is defined as annual crops produced by cultivation. Thus, an emblement is corn, soybeans, or the like. The doctrine of emblements is important because it addresses ownership of annual crops between the time they are planted and the time of harvest.
The doctrine arises most often during life estate issues because the doctrine is applicable when a tenancy is of an uncertain duration. A life estate is of an uncertain duration as the life estate terminates at death. As a result of the doctrine, when a life estate tenant dies between the time annual crops are planted and harvested, the crops and resulting profit belong to the estate of the life estate tenant. The crops and resulting profit do not belong to the person or entity who inherits the land where the crops are growing.
How is this relevant to TOD deeds? Nebraska has a special provision in its statutes which allows a transferor in a TOD deed to designate whether crops growing at the time of the transferor’s death are transferred to the transferor’s estate or to one or more of the designated beneficiaries listed on the TOD deed. This statutory provision is because the doctrine of emblements.
Confusing? Or just have questions about other beginning farmer or succession planning issues? You are welcome to contact us because we’re here to help.