Key points for pasture lease agreements

There are a large number of producers that lease pasture as part of their summer grazing program. In fact, some operations rely entirely on leased pastures.

Related

Ship them or not? Key decision points for nonambulatory cattle

Specific rental agreements are important in pasture rent situations

West: Evaluating that summer pasture lease

Their success depends greatly on the availability of leased pastures each year. Therefore, developing a well-thought-out lease agreement is important for not only the producer but also the landowner.

Don’t have a formal lease agreement?

Don’t feel bad. There are probably more people without a written lease agreement than those that have one.

However, it is recommended that the landowner and the renter establish a written lease agreed upon by both parties. This helps to eliminate problems in the future.

What should be in it?

Dr. Larry Langemeier of Kansas State University published a paper titled “Pasture Rental Arrangements for Your Farm.” In his publication, Langemeier indicated that the following information should be included in a lease agreement:

1. Names – List the owner of the land and the owner of the livestock, as well as their spouses.

2. Property description – Include the legal and common descriptions of the property

3. General terms – There are several terms of the lease that will need to be discussed and agreed upon, including:

• Type of lease – The term of the lease, annual or continuous (multi-year), as well as the beginning and ending dates, should be listed in the agreement.
• Review of the lease – This term needs to be agreed upon by both parties. When can the lease be reviewed? Will both parties have the ability to request a review of the lease? How much lead time must the landowner give if the lease will be terminated? These are questions that need to be answered beforehand.
• Amendments to the lease – How will changes to the lease be handled when either party wants to make a change to the agreement? Amendments should be made in writing and be signed by both parties.
• Binding on heirs – If something happens to either party, in most cases, the lease agreement will be binding upon their heirs or the administrator of their estate unless the agreement states otherwise. This is another factor that needs to be considered.
• Transfer of the property – If the owner sells the property or transfers the title to another family member, what happens to the lease agreement? This should be written into the pasture lease agreement. If this is included in the lease, there will be no problems if the property is transferred.
• Right of entry – Will there be any restrictions on entry for either party? In almost all cases, the landlord and his agents will reserve the right to enter the farm or pasture at any time.
• Will this be a problem? If this interferes with the ability to operate, then the problem will have to be addressed. Will advance notification be necessary?
• Stocking rate – This is a huge concern for both parties. There needs to be an agreement in writing stating the maximum number and class of animals allowed on the property at any one time.

There should also be some provision for forage utilization. This information will prevent overgrazing resulting in reduced forage production, and will help maintain cattle productivity.

In most agreements, violation of this provision results in the termination of the lease.

4. Operation and maintenance – In this section of the lease agreement, the landowner and tenant need to come to an agreement on who will take care of a number of operation and maintenance items during the year including:

• Fencing – Who will inspect and furnish the labor to repair the fences each year? Who will purchase the fencing materials needed to repair or build the fences?
• Water – Who will make sure there is an adequate supply of water each day? Who will be responsible for the materials and labor to repair or maintain a watering system?
• Salt – Who will purchase and distribute salt and minerals for the cattle?
• Animal health – Who will monitor the health of the cattle and contact the veterinarian when needed? This should include fly control.
• Livestock handling facilities – Who will provide facilities for loading, unloading or working cattle?
• Counting cattle on the property – Who will be responsible to count the number of head on the property and how often must a count be taken?

There should also be an agreement to have all cattle branded or ear-tagged so that ownership can be established. Also, the tenant should not pasture cattle that continually push on the fences and break through frequently.

Rental rate

Of course the biggest issue that the landowner and the tenant need to discuss and come to an agreement on is the rental fee for the use of the pasture.

Determining a fair pasture rental rate is hard to do. There are many factors that have to be considered such as stocking rate, pasture location, water availability, forage quality, landowner ownership costs, livestock owner costs, historical rates, supply and demand – and much more.

Producers with access to the Internet can conduct a search and locate information on pasture rental rates. There are worksheets and other tools available. Oregon State University, North Dakota State University, Ohio State University and others have some valuable information online.

There are three main options available in regards to rental charges:

• Flat fee per acre or as a whole unit. This option does not take into account the number of cattle that graze the pasture during the grazing season. Rental payments may be paid after the grazing season or divided into monthly payments.
• Rental fee per head per month. With this payment option, a rental charge per month is applied to each animal. Payments can be made monthly or once following the grazing season.
• Other arrangements. Some producers that lease pasture for yearling cattle pay rent based on pounds gained per day. For example, let’s say the rental charge is 40 cents per pound gained.

We have steers that gain two pounds per day on the pasture. We graze them for 100 days and they put on 200 pounds each. The rental rate would be $0.40 x 200 = $80 per head.

With this option, payments are normally made following the grazing season when the cattle are weighed off the pasture. The agreement should establish weighing conditions on and off the pasture.

Renting pastures is a common management practice for many cattle producers. Developing written pasture lease agreements is good business. It provides guidance and protection for both landowners and producers wanting to rent pastures.

Good luck with your spring turnout activities and pasture lease arrangements this season. Most of all, smile! The winter feeding season has come to an end.

References omitted due to space but available upon request. Click here to email an editor.

PHOTO

Along with established stocking rates and operations facilities, a pasture agreement should specify who will inspect fencing and repair it. Photo by Progressive Cattleman staff.