On September 1, 2016, all oral leases for agriculture ground in South Dakota will automatically renew. The automatic renewal includes all the current terms and conditions in the existing lease, including but not limited to: who the land is rented to, when payment is due, the per acre rate, stipulations for grazing, hunting or other land use restrictions, and any weed control or fencing agreements, etc.
Producers with an existing oral lease will want to evaluate those terms and conditions carefully in 2016. Changes in average cropland and rangeland values, as well as changes in the current crop and livestock commodity markets have created a new economic environment compared to just a couple of years ago.
Landowners or tenants must provide written notice to the other party if they want to make by the deadline changes to any of the components of the oral lease. Following the written notice, the oral agreement continues until March 1, 2017 at which time a new contract can take effect. This allows the tenant to finalize any harvesting or grazing on those acres. An exception to this would occur if either the landowner or tenant fail to live up to the terms and conditions of the original lease.
Ready to transition to a written lease?
Oral leases have been around for generations, written leases however are becoming more prominent across the state in the more recent past. Creation of a complete written, rental agreement provides security for all parties involved.
Example leases and more information about them are on the North Central Farm Management Extension Committee Ag Lease 101 website. Use of the templates can help ensure all parties involved understand and agree with the lease conditions. In addition to the templates, publications explaining the different types of leases are included on this website. The templates and publications are downloadable and printable for immediate use.
Some of the topics covered are:
- Fixed and Flexible Cash Rents
- Crop Share Rental Arrangements
- Pasture Rental Arrangements
- Building & Livestock Facility Rental Agreements
Determining a fair rate
In order to know what can be paid for rent requires the knowledge of other input prices. Creation of enterprise budgets can aid both the landowner and tenant during rate negotiations. SDSU Extension crop and livestock budget calculators can provide both parties with valuable information about expected expenses for the upcoming year. Data provided in the livestock and crop budgets are there to ensure all aspects of the budget are included and are examples only. To maximize the effectiveness of the calculators, actual input costs must be included.
Utilization of the tools and information available aids in the creation of an agreement that is fair to the landowner and the tenant.
For assistance regarding leases and rental rates, contact an SDSU Extension Specialist:
- Jack Davis, SDSU Extension Crops Business Management Field Specialist
- Heather Gessner, SDSU Extension Livestock Business Management Field Specialist
- Shannon Sand, SDSU Extension Livestock Business Management Field Specialist