Record high commodity prices have landlords wondering about the determination of cash lease rental rates. Farmers are wondering where the expenses will end as the cost for producing crops are also historically high and continue to climb every day.
Recently, I've been scolded by a couple tenants. It seems that they are upset that I am telling landlords that cash rents are going up. Let me point out that I report what our UNL Land Value Survey says, I am not making up the information that I am reporting.
It is coming to my attention that a few landlords have selective hearing for the information that I do share. For instance, if the range for irrigated crop rent is from $150 to $205 per acre, with an average of $176, the landlord tends to remember the $205 number, while a few of the tenants remember the $150 number. So both parties are frustrated.
In this case, neither is really right. Both groups should start talking around the average number, then adjust up or down according to the situation. Adjustments should be made for the quality of the land, local market conditions, and how the irrigation system costs are divided.
The cash rent survey is reported assuming that the landlord covers all irrigation system ownership costs (repairs, depreciation, interest, taxes and insurance).
In addition, adjustments should be made if the tenant is covering other costs of maintaining the farm ground. Examples might include: maintenance of terraces, weed control, fence maintenance, and waterway mowing or maintenance. The cost of caring for these items would typically be the owner's. If the tenant is covering the costs, then the tenant should be paid, or there should be an adjustment to rent.
Good Communication is the key to all of these negotiations. I usually tell everyone that it doesn't matter what the survey from UNL says, what matters is that both parties are open, honest, and come to an agreement that they both support.
As I began, tenants and landlords are very welcome to call or come to the office to visit. With historic commodity prices, (and expenses) determining a fair rent is an important step.
For more information or assistance, please contact Allan Vyhnalek, Extension Educator, University of Nebraska-Lincoln, Extension in Platte County. Phone: 402-563-4901 or e-mail AVYHNALEK2@unl.edu .
