The Good and Bad of Long-Term Farm Leases

11/23/2013 7:00 AM
By Andrew Jenner Virginia Correspondent

OTTOBINE, Va. — Phil Witmer was still a relatively young farmer in the late ’90s when he began thinking about starting a dairy on a 180-acre farm in western Rockingham County. He and his father had rented the place for several decades, but until that point, their leases — like the vast majority of farm leases in the region — had only been for a year.

If he was going to invest in a milking parlor, a herd of dairy cows and everything else that goes into a startup dairy, though, Witmer needed to be certain he’d be able to stay on the farm for a lot longer than a year. He approached his landlord and after they’d arranged a 10-year lease, Witmer went through with his plan.

Leasing, rather than buying, “was a way to get in and not be leveraged quite so heavily,” Witmer told a group of about two dozen people who recently visited his farm to learn more about long-term farm leases.

Eight years into that initial long-term lease, Witmer decided to build a loose housing facility on the farm, though the NRCS cost-share program he planned to use required a 15-year commitment. Witmer again found himself in need of longer-term security, so he was able to get a new, 15-year lease with his landlord, which is still in effect.

“In this part of the country, that’s extremely rare,” said Tom Stanley, a farm business management Extension agent, who organized the Nov. 13 workshop. “We need to cultivate the idea of long-term leases, because that’s where we have a real opportunity for farming.”

Stanley noted that while the large majority of full-time farmers in the Shenandoah Valley depend heavily on leased farmland, most of those leases are one-year leases. Stanley called that situation one of the biggest obstacles to the economic and environmental sustainability of farming. Because tenant farmers on year-to-year leases don’t have long-term security on the land, Stanley said they have little incentive to make investments that would otherwise make sense.

With the security of his long-term lease, Witmer has also been able to make other improvements to the farm he’s renting, including renovating an existing barn and installing cattle travel lanes and a pasture irrigation system.

In 2008, he transitioned his operation, called Grazeland Dairy, to an organic, grass-based dairy; he’s now milking 190 cows for the Organic Valley co-op. Since then, he’s also begun renting cropland in Augusta County. Those farms are rented on multi-year leases, he said, which allows him to invest in fertility and perennial forages like alfalfa.

“It brings advantages as well as disadvantages,” Witmer said of his long-term lease agreements.

The primary advantage to leasing — particularly in this area, where renting farmland is significantly cheaper than buying it — is not having a mortgage payment. On the other hand, Witmer doesn’t own the land and doesn’t know if he’ll be able to farm it forever. The tenant-landlord relationship also requires maintenance and attention, Witmer added. He tries to use the Golden Rule as a starting point for day-to-day decisions on the farm, asking himself what he’d want his tenant farmer to do if roles were reversed.

After the visit to Witmer’s dairy, the Nov. 13 workshop moved to nearby Montezuma, where John Flora, a Harrisonburg attorney who often works with farmers, spoke about legal issues related to leasing. One of his primary recommendations was that tenant farmers and landlords put leases in writing (Stanley estimated that no more than a quarter of farm leases exist in writing). Writing a lease with an attorney’s help might cost between $400 and $1,000, Flora said. He added that even a one-page, informal document agreed to and signed by both parties is preferable to a handshake.

If a dispute ends up in court, Flora said any lease longer than a year has to be in writing or it will not be legally enforceable. And legal proceedings aside, Witmer said writing the terms of the lease down will spare both landlord and tenant the hassle and heartache of having to remember exactly what was agreed to, and helps clearly spell out each side’s expectations.

Flora and Stanley both recommended that both tenant farmers and landlords look at sample leases posted on many states’ Extension websites. These provide good models for farmers in the area who want to write their own leases, Flora said, or help them minimize attorney’s fees by starting with clear, specific ideas about the terms they’d like to include.

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