Each month in Wallaces Farmer magazine, the Timely Tips panel answers questions sent by readers. Members of the Timely Tips panel are: Alejandro Plastina and Wendong Zhang, Extension economists, Iowa State University; Leslie Miller, Iowa State Savings Bank, Knoxville; and Rob Stout, Master Farmer, Washington, Iowa. Following are the questions they are answering this month.
I want to terminate my current cash-rent lease and renegotiate with the landlord for a reduced cropland rental rate for 2019. Iowa law says you have to notify the other party by Sept. 1 if you wish to terminate the lease. Otherwise, the lease for 2018 stays in effect for 2019 — unless both parties agree to draw up a new lease. I didn’t serve written notice by Sept. 1, and I need to get this high cash rent reduced. I sent a text message on Aug. 29, but the landlord didn’t respond. What are my options? I didn’t send a written letter.
Stout: A text message won’t serve as legal termination of the lease. It has to be a written termination, and the best way to be certain it was received is to send it certified mail with a return receipt. However, if both parties are agreeable, it can be modified at any time. I would approach it from that aspect and try to come to some mutually acceptable modifications of the rent. The landlord is under no obligation to do so; but given the economic situation in agriculture, hopefully he or she will be reasonable and agree to a rent reduction or change to a flex-cash lease.
Miller: Iowa Code §562.7 requires this written notice to be (1) served by certified mail before Sept. 1, (2) personally served on or before Sept. 1 in the same manner as original notice of a lawsuit is served, or (3) delivered to the other party with an acceptance of service signed by the person receiving the notice on or before Sept. 1. So, right now, the law is on the landlord’s side. It’s possible you can get the landlord to agree to sign a new lease if you explain your situation. Or, you might be able to offer an incentive for a new lease by offering to pay it all upfront. That will eliminate the landlord’s collection risk for the last half of the rent payment. As a last resort, I sometimes tell my borrowers to “blame the bank” — tell the landlord the bank won’t loan money for the lease payment unless the terms are renegotiated.
Plastina: Since a text message is not considered a valid method for serving statutory notice by Iowa Code §562.7, your only option after Sept. 1 is to entice the landowner to accept a lower cash rent, modify the lease accordingly, and have it signed by all parties involved. Only if mutually acceptable to all parties concerned, a lease can be terminated or modified at any time.
There are a few cases where auto-renewal can be avoided, including: a farm tenancy with an acreage of less than 40 acres where an animal feeding operation is the primary use; if you can be considered a “mere cropper” who has no interest in the land, and works it in consideration of receiving a portion of the crop for your labor; or if you decide to breach the terms of the lease (for example, by not paying rent on time) and the landowner wishes to terminate the lease due to the breach. In the latter case, the landowner may seek breach of contract damages against the evicted tenant.
See the fact sheet “Iowa Farm Leases: A Legal Review” by K. Tidgren for more details. It’s on the Iowa State University Center for Agricultural Law and Taxation website, calt.iastate.edu.
The relevant question is how to entice the landowner to accept a lower cash rent. One way is to offer a flexible cash rent, in which the rent to be paid depends on the actual yields attained and/or the selling prices available during the lease period. This ensures that the rent paid is in line with the profitability of the crops grown in 2019. The landowner shares some of the risk of low yields or declining prices, but also shares in the extra profits when prices and/or production exceed expectations.
Another way is to offer your time and effort free of charge to make permanent improvements to a farm property (such as buildings, storage structures, conservation structures, fences, waterways or drainage tile) in exchange for a lower cash rent. Explore the details of these two options in files C2-01 and C2-21 on the Ag Decision Maker website, extension.iastate.edu/agdm.
My son and I farm corn and soybeans and feed out hogs. We need to hire a full-time employee to mainly be in charge of equipment and technology. I used to think we needed someone with an ag background. Now, with all the digital advancements being used in farming, I’m not so sure. Maybe I should hire someone who is tech-savvy, with digital as the first priority. What do you think?
Stout: You shouldn’t have to choose between one or the other. Community colleges and universities with agriculture colleges have several classes in ag technology, so many are well-trained. If you can find a young person who has had an internship in that field, that would be a bonus. This person could help you in your operation in reducing potential downtime. Those specialists at the dealership are in high demand during planting and harvest season, so if you have someone in your operation to handle that, you wouldn’t have to wait. I have to relearn it all every spring and often have to call to get updates, so I firsthand could see the advantages. A tech-savvy person would be up on all of that information and have your equipment ready to go when it’s time. You need to offer a salary high enough to compete with the ag technology companies and machinery dealerships, but often a farm kid will jump at the chance to work on a farm and still use his or her technology and mechanical abilities.
Miller: In today’s world of technology interfacing with mechanical issues, you need to hire a person that has mechanical skills and technology skills. If he or she just has technology skills, it is difficult for that person to troubleshoot problems. We’ve all heard the technician say, “Well, the software appears to be working; it must be a mechanical issue,” or you get the mechanic telling you, “Everything appears to be working — it must be the software.” If you have an employee in place who understands both sides, the employee can deal more effectively with the outside technicians. Many community colleges are training young people to fit these roles — and some have not grown up on a farm but are exposed to working on farm equipment through hands-on courses at school. Touch base with the career placement person at your local community college and see if there are any candidates there that might fit your needs.
Zhang: It helps for you to clearly define the job duties of this new full-time employee, and the corresponding job qualifications. These qualifications essentially center on the knowledge, skills, education, experience and training necessary to perform the job. In your case, experience with your type of equipment and technology on your farm or similar machinery might be a necessary requirement for the candidate to be successful. However, I think most qualified candidates typically would have ag backgrounds. Also look for work ethics, ability to work in and potentially manage a team, and timeliness and quality of work from previous jobs.