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Keep the landlord in the loopKeep the landlord in the loop

New flex rent leases require tailored communication.

Darren Frye

March 21, 2016

3 Min Read

Flex rents with a bonus program can be a good tool and a unique way for farm leaders to position their operations. This crop year is the first time that many farmers have signed flex lease arrangements with their landlords. But as with anything new, landlords may still have questions around how this type of lease will play out during the crop year.

It takes good communication on the farmer’s part to keep the landlord in the loop – especially the first year of a new type of lease. Clear, open communication can help landlords better understand what to expect as the year progresses, and that helps reduce their uncertainty.

Educate your landlord

Most landlords are generally familiar with the way a cash rent lease works, but likely aren’t as familiar with flex leases. You’ll want to be very intentional about continuing to educate your landlord on what they can expect, even after the lease is signed.

Step into your landlord’s mind for a second and consider the questions they may have. Chances are, the biggest question in their mind will be: ‘Will I get a bonus this year?’ They will want to hear updates on factors affecting their potential bonus.

The frequency of those updates depend a lot on your particular landlord and how familiar they are with flex rent leases and farming in general. If you sense they want to know more, then tailor your communication to give more frequent updates and additional explanation.

On the other hand, maybe they already understand flex arrangements well and don’t want frequent updates. That might mean a mid-summer update on the factors that impact their potential bonus, and then another update closer to the time when a bonus would actually be paid out.

On the same page

Keeping communication open around the lease’s structure and giving updates can have a lot of value for both you and your landlord. You might even be able to open up some conversations with your landlords that may be difficult to initiate otherwise.

For example, when you give your landlord an update on yields, you might also share about how the yield could be affected if you were able to tile that ground or add irrigation. You can then ask if those improvements would be something they would be interested in investing in as a landlord. You can show them how investing in their land could be beneficial to them in a flex rent situation.

Throughout the crop year, make sure to keep communicating with them about what to expect. Otherwise, they’re left to their own devices. They’ll put their own thought process around how they think the lease should work and whether they will get a bonus.

The understanding that the two of you build together can help keep everyone’s expectations on the same page. If you’d like to learn more or get some help with setting up a flex lease, you might talk with an ag finance specialist.

Get more ideas on farm business leadership and management in our Smart Series publication, bringing business ideas for today’s farm leader.

The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.

About the Author(s)

Darren Frye

CEO, Water Street Solutions

Darren Frye grew up on an innovative, integrated Illinois farm. He began trading commodities in 1982 and started his first business in 1987, specializing in fertilizer distribution and crop consulting. In 1994 he started a consulting business, Water Street Solutions to help Midwest farmers become more successful through financial analysis, crop insurance, marketing consulting and legacy planning. The mission of Finance First is to get you to look at spreadsheets and see opportunity, to see your business for what it can be, and to help you build your agricultural legacy.

Visit Water Street Solutions

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