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Friday, December 2, 2011

Home on the range

Oh, give me a home
Where the buffalo roam,
Where the deer and the antelope play…                     

Many of our grandparents or great-grandparents came west with the promise of land.  They came west to carve a new home out of the land where the deer and the antelope play.  They needed land for farming and land for grazing livestock.

Today, farmers and ranchers still have a fundamental need for land.  While the days of homesteading are over, land may be acquired in several ways:

1.  Purchase:  Land can be purchased from those who are selling.  The cost of good land can vary depending upon many different factors such as the quality of the soil, the water rights, and the location.  Purchasing land can be difficult in today’s economy as lenders typically require a significant down payment and will not finance 100% of the purchase price.  A 160-acre farm that sells for $5,000 per acre may require a $200,000 down payment to purchase.  This may be cost prohibitive to a small family farmer.

2.  Lease:  Land may be leased from the owner of the property.  A retired farmer may not want to sell his property, but may be willing to lease it for a year, or a period of years.  Farm leases are often structured as crop-sharing arrangements where the landowner and the tenant each take a percentage of the crop grown on the property.  This arrangement may benefit the tenant as the tenant is thereby guaranteed that his rent will not exceed the value of the crop.

Property may also be leased on a cash basis.  A farmer may pay a landowner a fixed fee to lease his property.  These cash arrangements often call for payment on a “per acre” basis.  For example, a farmer might pay $150 per acre to lease farm ground and will be responsible for the payment amount regardless of the success of his crop.

3. Blended Arrangements:  A lawyer may help a farmer or rancher with a blended arrangement that is part lease and part purchase.  For example, a farmer might lease property and structure lease payments so that they are a credit toward the eventual purchase of property.  A real estate lawyer may also assist a farmer or rancher with a blended arrangement that takes advantage of government programs designed to assist beginning farmers and ranchers.  Tax issues, liability issues, and regulatory issues may all factor into a blended arrangement.

Lastly, regardless of the agreement, whether a purchase or a lease, the law typically requires the arrangement to be in writing to be enforceable.  A good well-written purchase and sale agreement or lease can be as important to the success of your farming and ranching operation as the land itself. 

 - Lance J. Schuster is a lawyer at Beard St. Clair Gaffney.  He and his wife raise kids and cattle on their small farm near Idaho Falls.  He can be reached at 523-5171 or lance@beardstclair.com

Staff at 5:02 PM
Agribusiness
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