I grew up in a small agriculture area with relatively low population density. You could see one, maybe two of your neighbour’s yardlights at night. It was very common to have the neighbour over helping with harvest or maybe we would be there helping with cattle. I grew up in a community of very down to earth, honest and hardworking people. I always looked forward to Sunday as friends would drop by after church. On rainy days, the parents would have card nights, which meant we got to play with friends and stay up late. It was a time when most deals were bartered and made on a handshake. Is that possible today? Can you make a deal on a handshake anymore? Or is that just old school?
Well, some of us live in a different world today. Now we have a much more populated landscape with more urbanites moving in. There are two or three homes on every quarter now. Farming and ranching have become either a big business or a hobby. Most of the family farms are lost. Have the morals and values been lost with them? If the handshake is no longer a feasible means of making a deal, we might need a contract.
I have had a few contracts drafted for me over the years. For those of you who don’t know, I am a custom grazier. I rent land from my landowners, and I bring in other people’s cattle to graze. So it looks like I need a minimum of two different types of contracts, a land lease agreement and a grazing agreement.
My landowners are great… all 21 of them. Each one is unique and they all have different ideas and backgrounds. Some are old school and are simply retired from farming. I enjoy going for tea with these landowners as it takes me back to the days of the handshake. I have other landowners who have inherited the land but do not farm it. Maybe they grew up on the farm but left years ago. These landowners still have an emotional tie to the land but are not too concerned about the details. I also have urbanites who just want to live in the country so they bought a chunk of land. Some are very concerned about how the land is managed and others are very new to the rural mentality. I also have an investment strategy for people who want to own land but need a little help tending Mother Nature. Will a handshake work for all these people? Not likely, so my contract comes into play.
On the first year of the lease, I almost always bring out my contract. Only the old-school landowners push it away. I love that. I get to use my handshake again. For all the rest, we go through each paragraph of the contract to make sure we are all on the same page.
My land lease agreement first lists the “who” and the “when,” names, addresses, email and fax of both parties. We need the date, a description of the land and the intent of the contract — all the basic lawyer stuff. Then we get into the meat and potatoes. We need to set the term of the lease with a start date and an end date. We need the rental rate, with a due date. This could be per acre, per year, per animal, however you have it set up. I personally like to rent on a per-acre basis. Does the rent stay the same each year or will it change annually? Is it paid up front, split payments or monthly?
Next we describe what the renter is allowed to do with the land. Is it only for pasture or could I plant wheat or corn or ginseng? What kind of management is allowed? Could I raise trout in the dugout… or not? What about sand, gravel or peat soil? Is the renter allowed to harvest any of these? Gas or oil exploration: who gets compensated and how can the lease be adjusted if any exploration or development occurs?
Another point that needs to be discussed is the beneficiary of any payment, subsidy or reimbursement from any agency, government or other, with respect of the said lands. Disaster relief, drought payouts and carbon credits are a few examples that could come up. Who gets them?
What kind of land development is allowed and who pays for it? Can we develop a water system or put in cross-fencing? Are we allowed to clear brush? Is the cross-fencing owned by the tenant or the landowner? After the lease is up, who owns the water pipe? For that matter, who is responsible for the fence repairs and who pays for the materials?
If I have more than a five-year lease, I cover all fencing costs. If I have less than five years on a piece of land, I supply the labour and equipment, the landowner provides the posts and wire.
One other point I deal with is who holds the hunting rights on the land? With cattle on the land late into the fall and winter, I like to know who is out there with a gun during hunting season. I always try to reserve hunting rights. I also get to use this as a bargaining tool. I can then provide another landowner with hunting privileges to more land in return for a better deal on his land. I have some landowners who purchase the land just so they can hunt. I found that the best way to control hunting on my land is to allow hunting by one person. Then they police it.
Then we finish off the contract with more lawyer talk. Consequences of default, disagreement resolution, heirs and successors, etc. etc. etc. and last but not least, signatures. Dated and witnessed.
My contract is three legal pages long. Phew! That is a lot of work for all those landowners every year. But wait, it is not that much work. After I prove myself to my landowners, once the first contract expires, it seems my handshake is valid again.
The biggest part of my business is human resources so developing good business relationships is very important to me. I work at it.
So, is the handshake dead? I am quite proud of the fact that currently, of my 21 different landowners, I have one active contract still valid. All the rest are now a simple handshake. I have found that even just going through the contract so that all the possibilities have been discussed, makes a big difference.
If you are looking at renting some land, I would advise you to take these points and have your lawyer draft something up. In the long run it is well worth the time and money invested to have the details in writing. I hope this helps set you in the right direction. Next month I’ll touch on my cattle contract. By the way, if you ever see me at a seminar or conference, I would be happy to shake your hand.