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Full text of "Your cash farm lease"

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Historic, archived document 

Do not assume content reflects current 
scientific knowledge, policies, or practices. 







Other publications on farm leases available from the U.S. Department of Agricul- 
ture, Washington 25, D.C. are: 

Your Farm Renting Problem, Farmers' Bulletin 2161. 

Your Farm Lease Contract, Farmers' Bulletin 2164. 

Your Farm Rent Determination Problem, Farmers' Bulletin 2162. 

Your Crop-Share-Cash Farm Lease, Miscellaneous Publication 838. 

Your Livestock-Share Farm Lease, Miscellaneous Publication 837. 

Your Farm Lease Checklist, Farmers' Bulletin 2163. 

The following farm lease forms may be obtained from your County Agricultural Agent 
or from Correspondence and Publications Distribution, Agricultural Research Service, 
U.S. Department of Agriculture, Washington 25, D.C. : 

Crop-Share-Cash Farm Lease (Form AD 561). 
Cash Farm Lease (Form AD 562). 
Livestock-Share Farm Lease (Form AD 563). 
Annual Supplement to Farm Lease (Form AD 564). 

The bulletins supersede Farmers' Bulletin 1969, "Better Farm Leases," and Miscel- 
laneous Publication 627, "Your Farm Lease." The lease forms supersede "Standard Farm 
Lease" (Form Agri.-l) and "Annual Supplement to Standard Farm Lease" (Form Agri.-3). 

Growth Through Agricultural Progress 



Method for Estimating Rent 3 

Filling Out the Cash Farm Lease 7 

A. Property Rights 7 

B. Land Use and Livestock Production 8 

C. Improving, Conserving, and Maintaining the Farm 8 

D. Sharing Costs and Returns 14 

E. Term of Lease 15 

F. Miscellaneous Provisions 16 



CASH farm lease 

by Marshall Harris, agricultural economist 

Farm Economics Research Division, Agricultural Research Service 

Your cash farm lease may well influence your net 
income as greatly over a period of years as the pro- 
ductivity of the land, the kind and quantity of fer- 
tilizer you use, the quality of your livestock, or the 
cultural practices you follow in producing your 
crops. It should be tailored to fit the farm, the 
landlord, and the tenant. It should set forth 
clearly the rights, duties, and responsibilities of each 
party. Some of its provisions must be rigid and in- 
flexible, yet it must provide for change and adapt- 
ability to meet the requirements of modern 
technology in a dynamic economy. 

Your farm lease should go a long way toward 
providing for good overall management by outlin- 
ing clearly the cropping plan to be followed and 
the way the farm will be operated to maximize 
net income for the whole farm. It should indicate 
in general terms the amount of livestock farming 
that will be involved. 

Your farm lease should provide for further de- 
velopment, improvement, and maintenance of the 
land, buildings, fences, and other structures that 
are a permanent part of the farm, and for con- 
servation of its soil and water resources. The 
landlord is in a good position to cash in on all im- 
provements that may be made, whether he con- 
tinues to rent the farm, operates it himself, or sells 
it. The tenant may be in an uncertain position re- 
garding added improvements, for unless the lease 
otherwise provides he must leave most of the im- 
provements he makes on the farm when his lease 
terminates. However, the lease can be written to 
assure the tenant reasonable reimbursement for in- 
vestments that he may leave behind when his 
occupancy of the farm ends. 

Your farm lease can be most effective in the long 
run only if farm expenses are divided between the 
two parties on the basis of what each can best con- 
tribute to farm production and if income is divided 
in the same proportion as expenses of production 
are shared. The division of costs and returns is 
important on cash-rented farms. In your agree- 
ment, try to attain equitable division. The basic 
idea is for each party to receive income from the 
farm in proportion to what he has contributed to 

Your farm lease will fail, at least partly, to 
measure up to these requirements unless it pro- 
vides a reasonable opportunity for longtime plan- 
ning of the farm business. Adequate planning is 
possible only if the term or duration of the lease 
provides assurance of stable and secure occupancy. 
Consider various renewal, cancellation, and termi- 
nation provisions in arriving at the one that best 
fits the particular farm, landlord, and tenant. 

Your farm lease may well contain several mis- 
cellaneous provisions designed to make most effec- 
tive the contributions of both landlord and tenant 
to farm production. Fit these to your particular 
situation, but safeguard the interests of both parties. 
Provide incentives for maximum contributions to- 
ward attaining a highly productive farm. 

In view of the many things you want your farm 
lease to do, it is advisable to have your lease 
written. Make a copy for each party. Be sure 
both copies are alike. 


Two of your main decisions in developing a good 
cash farm lease are those that concern the level 
of rent and the division of expenses between land- 
lord and tenant. If you use the Table for Esti- 
mating Rent, take seven major steps: 

• Determine the estimated total value (col. 2) of 
each item under fixed investment expenses. 

• Decide on the estimated interest rate for each 
fixed investment (col. 3). 

• Enter the total annual cost (col. 2 multiplied 
by col. 3) in column 4. 

• Estimate the annual cost of each fixed operat- 
ing expense (lines 1 1 to 22), showing the whole 
farm's costs in column 4. 

• Decide what items of fixed investments and fixed 
operating expenses and how much of each will be 
furnished by each party and enter each party's 
share in columns 5 and 6. 








Estimated annual cost 

Item of expense 








I. Fixed expenses: 

A. Fixed investment expenses: 

1 . Land 






2. Farm buildings 

3. Tractor, truck, and automobile 

4. Machinery and equipment 

5. Breeding stock 

6. Operating cash 




10. Total section A 


B. Fixed operating expenses: 

a. Tenant's 

b. Unpaid family 

d. Hired 

12. Depreciation 

a. Buildings, fences, and others 

b. Tractor, truck, and automobile 

c. Machinery and equipment 

13. Repairs 

a. Buildings, fences, and others 

b. Machinery and equipment 

1 4. Taxes * 

15. Insurance * 

1 6. Limestone 

17. Rock phosphate 

18. Conservation measures 

19. Management 




23. Total section B 

24. Total section I 

24a. Percent contributed by: Landlord 




Item of expense 


Estimated annual cost 







II. Variable expenses: 


Hired labor, including board .... 

Tractor operating costs 

Truck operating costs 

Automobile, farm operating costs 

Machine work hired 


Commercial fertilizer 

Pesticides, insecticides 

Other crop expenses 


Veterinary and sanitation 

Other livestock expenses 

Electricity for the farm 

Telephone for the farm 




42. Total section II 

43. Grand total: Sections I and II 

Income to be divided 

Cash rent on farm dwelling: 
Estimated value % 



Depreciation, insurance, and upkeep (add) 
Total dwelling rent 

* Include taxes and Insurance only if they have been deducted from (or not included in) annual cost of property in col- 
umn 4, section A. 


• Determine the total amount of the variable ex- 
penses, all of which are paid by the tenant. 

• Total all fixed and variable expenses for the 
whole farm and for each party in line 43. 

Now follow one of two procedures: (1) Estimate 
total farm income and divide it in the same pro- 
portion that you divide total farm expenses. The 
landlord's share would be the amount of cash rent. 
Or (2) decide upon an acceptable rate of return 
on the landlord's resources and multiply his fixed 
expenses by this, as shown in line 24, column 5; 
this would be the amount of the cash rent. These 
steps are discussed in the following paragraphs. 

The values to be placed on the fixed investment 
expenses are important because this group of items 
makes up a significant part of total farm expenses. 
Estimate the value of each of these items on the 
basis of current market value, or present usefulness 
for agricultural purposes, as of the beginning of 
the lease. Visualize the value that a willing buyer 
and a willing seller would agree upon. Do not 
think in terms of a forced sale. Do not depend 
upon what you paid for the items perhaps several 
years earlier. Make separate estimates for the 
landlord's and for the tenant's property. 

You may want to develop a worksheet with sev- 
eral of these general categories broken down into 
specific items. For example, the real estate may be 
more accurately estimated if land, farm buildings, 
and the dwelling are treated separately. This 
separation will be helpful in calculating deprecia- 
tion for farm buildings on line 12a and in making 
other calculations. 

The estimated interest rate used in calculating 
the annual cost may well be the going rate in the 
community for investments with similar returns and 
risks. If this interest rate is high enough to cover 
such costs as taxes, repairs, insurance, and deprecia- 
tion, these items should not be included separately 
later in the rent table. 

For land and buildings, the interest charge might 
well vary around that paid on a sound real estate 
mortgage. For livestock, machinery, and tractor, 
the interest charge might well vary around that 
paid on a sound chattel mortgage. Usually, this 
is a slightly higher rate than that paid on a real 
estate mortgage. Now calculate the interest charge 
for each item. Place the landlord's share in column 
5 and the tenant's share in column 6. The total 
charge goes in column 4. Add the respective col- 
umns and place totals on line 10. 

In estimating the annual cost of fixed operating 
expenses, the value of the tenant's labor might well 
be the going rate for a good, full-time, hired man, 
living on the farm, line 11a. His management 
services are taken care of in line 19. Other labor 
should be calculated in terms of man-labor units 
at the same rate as the tenant's labor. 

Base the annual charge for depreciation on the 
estimated life of each item, using information avail- 
able from your county agricultural agent or State 
college of agriculture. Be realistic in estimating 
the costs of repairs. Usually these estimates are 
too low. 

Divide each item in column 4 between landlord 
and tenant on the basis of who will furnish it, 
placing the results in columns 5 and 6. Total each 
column in line 23. 

The total annual cost of the fixed investment ex- 
penses and of the fixed operating expenses represent 
your best estimates of those costs that must be met 
regardless of how the resources are used in any 1 
year or of the amount of total farm income that will 

In estimating variable expenses, be sure to pro- 
vide for all variable costs needed to maximize net 
returns. Adequate labor is a "must." Do not 
skimp on seed, feed, fertilizer, fuel, and electricity. 
Be sure to include insecticides and pesticides. 
Estimate the quantity of each on the basis of the 
farm plan to be followed throughout the year. 
Break each item into its separate parts. Show the 
quantities of each and use anticipated market 
prices. Enter your estimate in column 4. Add 
other items if needed. Use information available 
from your own farm records and the college of 

In general terms, these variable expenses should 
be the responsibility of the tenant under cash rent. 
He is the one whose income will be affected by 
such expenditures. He will want, therefore, to de- 
cide how much to spend on each of these items. 

The landlord's interest in expenses will be con- 
fined largely to those items that will be of value 
to the farm after the end of the lease year or when 
the tenant leaves the farm. These are largely fixed 
operating expenses. He may well share in the ex- 
penses for repairs to buildings, fences, and other 
structural improvements, by paying for the mate- 
rials. He may well share in the expenditures for 
limestone, rock phosphate, and conservation meas- 
ures. Space is provided for such sharing in the 
cash lease form. The agreement regarding these 
might well be a part of the provision related to 
conservation measures and practices and capital 

You need to estimate expenditures by using the 
Table for Estimating Rent for these reasons: (1) 
To assist in completing the lease form, showing 
the expenditures that each party will pay, and (2) 
to serve as a basis for determining the amount of 
the cash rent. 

The landlord or tenant may not want to make 
these calculations of fixed and variable expenses 
on his own. But making them will give a good 
idea as to how much rent is to be paid or received. 


f As the dwelling is a consumption and not a pro- 

I duction item, we recommend that a cash rent for 
the dwelling be calculated separately. 

When you have the total estimated annual cost 

I for columns 4, 5, and 6, you have all the expense 
data necessary to decide upon what the cash rental 

j payment will be. But you do not have the esti- 
mated income — a second ingredient. 

You may arrive at a cash rent figure without 
the estimated income data. The amount of cash 

1 rent would include — 

• The estimated annual cost of the fixed invest- 
ments supplied by the landlord. 

i • His estimated annual expenditure for fixed oper- 
ating items. 

• His estimated annual expenditures for variable 
operating expenses, if any. 

. • An estimate of any profits due him. 

A more accurate estimate of the cash rent could 
be determined if an estimate of income were avail- 
able. This estimate could be made by dividing 

I the estimated total income on the basis of the pro- 
portional contributions of each party to production 
cost including the risk borne. The cash rent 
would be the amount of income assigned to the 
landlord. As the rent paid to the landlord is a 
fixed amount that must be paid regardless of 
changes in production or prices, the landlord does 

i not share risk and a cash rent should be less than 

i a share rent with the same contribution. The rent 
should be reduced by the value of the additional 
risk borne by the tenant. 

Still another procedure would be to follow cus- 
tomary bargaining on the basis of what farms rent 
for in the community This method is not 

j recommended. 

Additional ideas about how to figure cash rent 

i are presented under Sharing Costs and Returns, 
page 14.' 


The Cash Farm Lease (Form AD 562) includes 
the usual items that are essential for a good farm 
lease. This lease form should be used only for cash 

A sample copy of the Cash Farm Lease is shown 
on pages 9 to 12 of this publication. Copies of the 
form may be obtained from your county agricul- 
tural agent or from Correspondence and Pub- 
lications Distribution, Agricultural Research Serv- 

1 Further details of farm rent determination procedures 
may be obtained from your county agricultural agent or 
from the U.S. Department of Agriculture, Washington 25, D.C. 

ice, U.S. Department of Agriculture, Washington 
25, D.C. Other good lease forms may be avail- 
able from your State agricultural college or State 
department of agriculture. 

The Cash Farm Lease form is not well adapted 
to crop-share, crop-share-cash, or livestock-share 
leases. Specific forms are available for these types 
of renting. You may want to obtain one of them 
to meet your particular needs. It is important 
that the provisions of your lease be fully applica- 
ble to your farm, and to both landlord and tenant. 

In completing the form, fill in each blank space. 
Either fill in figures, description or similar mate- 
rial, write "none" or "not applicable" in the 
space, or draw a line through the space. You 
may want also to delete all or a part of some sec- 
tions. If so, draw a line through each word to be 
deleted. Be sure that all copies are exactly alike. 
Each item of the lease form is discussed below. 

The date. — Indicate on the first blank space in 
the lease the day you enter into the agreement. 
This usually is the day on which you sign it. 

Designating the parties. — Show the name and ad- 
dress of both landlord and tenant. Since either may 
be a private individual, an estate, a partnership, a 
corporation, or a government agency, give names 
and usual business addresses. Make them accu- 
rate and complete enough to meet requirements in 
case a legal notice must be sent. 

A. Property Rights 

Specify the real estate included in the agree- 
ment. You need not describe it as completely as 
you would in a deed but it may be in legal terms. 

List the county, the State, and number of acres 
in the farm. Give the name by which the farm 
is known locally, its location on a particular road, 
or the number of miles in a certain direction from 
a specified town. If the information can be ob- 
tained readily, refer to the real estate described on 
a particular page in a certain deed book in the 
appropriate county office. 

1. Right of Entry 

A right-of-entry provision permits the landlord 
or his representative to enter upon the farm only 
for the purposes and under the conditions specified. 

Usually the landlord retains no right to come 
upon the farm unless this privilege is provided in 
the lease. According to our landlord and tenant 
law, the lease usually gives the tenant the right to 
exclude any and all parties except law-enforce- 
ment officers from entering upon the farm. He 
can even exclude the landlord. This is what his 
possession means. The right of possession is simi- 
lar in scope to the right of exclusive use. Unless 
a reservation is made in the lease, this right is 
presumed to be held by the tenant. 


2. Transfer of Farm 

A provision in the lease concerning the tenant's 
rights in event of transfer of title to the farm is an 
added safeguard for the tenant. The landlord 
should agree to offer this protection. The tenant 
could safeguard his interests by recording the lease. 
But most farm leases are not recorded, and record- 
ing is not generally necessary. 

3. Heirs and Successors 

Certain happenings might mean that the re- 
sponsibilities of either or both parties under the 
lease would be transferred to another party. If 
either landlord or tenant should die, his place in 
the lease contract would be taken by the executor 
of his will or the administrator of his estate. Both 
parties might die in a common accident, such as a 
fire or an automobile wreck, and two new parties 
would become the landlord and tenant. A debtor 
of one party could force the sale of his property. 

This provision states explicitly that the lease is 
binding upon those who may take the place of 
landlord or tenant, or both. They should know 
specifically all the provisions in this complex agree- 
ment. Therefore, put your agreement in writing. 

4. Right to Lease 

The landlord should warrant that he has a right 
to lease the farm; that is, that he guarantees that the 
tenant's possession and other rights under the lease 
will not be disturbed. The landlord need not hold 
title to the property, but he should have, and 
should affirm that he has, the right to lease the 
property to the tenant. 

5. Additional Agreements 

Show here any additional restrictions, explana- 
tions, or qualifications as to the property rights 
transferred or withheld under the lease. Remem- 
ber, the several parts of this section on Property 
Rights should convey a complete and accurate 
picture of the rights in the farm real estate that 
are transferred. 

B. Land Use and Livestock Production 

1. Land Use and Kind of Livestock 

Your farm lease should indicate clearly the use 
that is to be made of the land. This may well be 
done by designating the crops or uses to which 
the land should be put; for example, corn, wheat, 
tobacco, meadow, or pasture. Indicate in the 
blanks on the lease form the acreage to be de- 
voted to each. The "acres" column should add 
up to the total number of acres in the farm. 
Specify the fields by number or name, if it is feas- 
ible to do so. 

The kinds and numbers of livestock that the 


tenant will keep on the farm should be discussed. 
You may want to show the maximum number or 
a range in numbers, as the landlord will not par- 
ticipate in the livestock enterprises. If livestock 
are an important source of income, you may want 
to use the livestock-share-lease form. 

2. Acres and Numbers 

This provision is widely and appropriately used. 
It is essential, for acres and numbers are subject 
to change within the year and from year to year. 
Planned annual changes can be recorded on the 
Annual Supplement to Farm Lease (Form AD 

C. Improving, Conserving, and Maintaining 
the Farm 

1. General Maintenance 

This is a typical provision on maintenance. It 
is found in many cash leases in most parts of the 

2. Good Husbandry 

This is a typical provision on caring for crops 
and is applicable to most rental situations. It is 
particularly important for cash leases. 

3. Cropping Practices 

These specific items cover six troublesome prac- 
tices. They are singled out because of their im- 
portance and their general applicability. Rigid 
adherence to this provision will encourage greater 
landlord participation in improving pastures and 

4. Manure and Crop Residue 

Any exceptions to this provision should be noted 
in specific terms. 

5 and 6. Pasturing and Waste 

These two general provisions are frequently in- 
cluded in lease forms to direct attention to im- 
portant, good farming practices. 

7. Fire Protection 

This is a reasonable fire protection precaution. 
But the landlord is responsible for making the 
provisions of his insurance policy known to the 

8. Replace Losses 

This provision is designed to protect the tenant, 
so far as is reasonably possible and to assure him 
that needed buildings will be replaced immedi- 
ately. It makes more meaningful what is ex- 
pected of the tenant as outlined in item 7 of this 
section. Both sections 7 and 8 indicate the com- 
plementary nature of due care on the part of the 
tenant and prompt action by the landlord. 

AD 562 (Mar 1960) 


THIS LEASE is entered into this 


day of 

., 19. 

between , landlord, of 


and -. , tenant, of 


lease is given, of plowing, seeding, fertilizing, and such customary 



The landlord hereby leases to the tenant, to occupy and use for 
agricultural and related purposes, the following-described property, 

hereinafter referred to as the "farm," located in 

County, State of , and commonly known 

as the farm: 

seasonal work, none of which is to interfere with the tenant in 
carrying out regular farm operations. 

2. Transfer of farm. — If the landlord should sell or otherwise 
transfer title to the farm, he will do so subject to the provisions of 
this lease. 

3. Heirs and successors. — The terms of this lease shall be binding 
upon the heirs, executors, administrators, and successors of both 
landlord and tenant in like manner as upon the original parties. 
However, in the event the lease is for more than one year, the heirs 
or successors of the tenant shall have the option to give written 
notice of termination effective at the end of the lease year in which 
death occurs. 

4. Right to lease. — The landlord warrants that he has the right 
to lease the farm, and will defend the tenant's possession against 
any and all persons whomsoever. 

5. Additional agreements regarding property rights: 

and consisting of acres, more or less, together with all 

buildings and improvements thereon and all rights thereto except 
as specified below. 

1. Right of entry. — The landlord reserves the right of himself, 
his agents, his employees, or his assigns to enter the farm at any 
reasonable time for purposes (a) of consultation with the tenant; 
(b) of making repairs, improvements, and inspections; (c) of develop- 
ing mineral resources; and (d) after notice of termination of the 


1. Land use and kind of livestock. — Except when mutually 
agreed otherwise, the land use and cropping plan shall be as follows 
and the numbers of each kind of livestock shall not exceed those 
shown in the following table: 

B. 1. Land Use and Livestock Production Table. 










2. Acres and numbers. — The acres of crops and the fields on 4. Manure and crop residue. — The tenant will spread the manure 

which grown and the numbers of livestock shown above are those straw, or other crop residues on the farm as soon as practicable on 

planned for the first year of this lease. They may be adjusted within fields agreed upon by the two parties, except as follows: 
the year or from year to year by mutual agreement. 


To improve the farm, conserve its resources, and maintain it in a 

high state of cultivation, the two parties agree as follows: _ ______ _ ___ 

1. General maintenance.— The tenant will maintain the fa™ Pas turing.-The tenant will prevent tramping of fields by 
during his tenancy m as good condition as at the beginning normal f . » £ | m fa d 
wear and depreciation and damage from causes beyond the tenant s J» J & ' J 

control excepted. *>. Waste. — The tenant will not commit waste on, or damage to, 

2. Good husbandry.— The tenant will operate the farm in an the farm and will use due care to prevent others from so doing, 
efficient and husbandlike way, will do the plowing, seeding, culti- 7. Fire protection. — The tenant will not, without written consent 
vating, and harvesting in a manner that will conserve the landlord's of the landlord, house automobiles, motortrucks, or tractors in barns, 
property. or otherwise violate restrictions in the landlord's insurance policy 

3. Cropping practices. — The tenant will not, without oral consent which restrictions the landlord shall make known to the tenant. 

of the landlord, (a) plow permanent pasture or meadowland, (b) 8 . Replace losses.— The landlord will replace or repair as 

cut live trees for sale or personal uses, but will take for fuel or use promptly as possible the dwelling or any other building that may be 

on the farm only dead or unmarketable timber designated by the destroyed or damaged by fire, flood, or other cause beyond the 

landlord, (c) allow livestock other than his own on stalkfields or con trol of the tenant or make rental adjustments in lieu of 

stubblefields, (d) burn or remove cornstalks, corncobs, straw, or replacements, 
other crop residues grown on the farm, (e) pasture new seedings of 
legumes or grasses in the year they are seeded, and (f) plant legumes 
on land not known to be thoroughly inoculated without first inocu- 
lating the seed. 

9. Noxious weeds. — The tenant will use diligence to prevent 
noxious weeds from going to seed on the farm and will destroy the 
same, and will keep the weeds and grass cut or destroyed on the 
fields, farmstead, roadside, and fence rows. Treatment of weed 
infestation and cost thereof shall be handled as follows: 

12. Purchase of materials. — The tenant may buy, without 
further authorization, materials for normal maintenance and repairs 

in a total amount not to exceed $ — within each year, 

and the landlord will credit or reimburse the tenant for such ex- 
penditures as follows: 

10. Maintenance of improvements. — The tenant will keep the 
buildings, fences, and other improvements on the farm in as good 
repair and condition as they are when he takes possession, and in as 
good repair and condition as they may be put during the term of the 
lease, ordinary wear and tear, loss by fire, or unavoidable depre- 
ciation or destruction excepted. 

11. Materials and labor. — The landlord will furnish materials 
and the tenant will perform labor for normal maintenance and 
repairs, except that skilled labor which the tenant himself is unable 
to perform satisfactorily will be furnished by the landlord. Addi- 
tional agreements regarding materials and labor: 

13. Add improvements. — The tenant will not, without written 
consent of the landlord, (a) erect or permit to be erected on the farm 
any nonremovable structure or building, or (b) incur any expense 
to the landlord for such purpose, or (c) add electrical wiring, plumb- 
ing, or heating to any buildings, and if consent is given, he will make 
such additions meet standards and requirements of power and 
insurance companies. 

14. Conservation practices. — The tenant will control soil erosion 
as completely as practicable by stripcropping and contouring, and 
by filling in or otherwise controlling small washes or ditches that 
may form. 

15. Conservation structures. — The tenant will keep in good 
repair all terraces, open ditches, and inlets and outlets of tile drains, 
preserve all established watercourses or ditches including grass 
waterways when seed and fertilizer are furnished by the landlord, 
and refrain from any operation or practice that will injure them. 

16. Compensation for improvements. — The two parties will carry 
out new conservation practices and measures and make other im- 
provements, and share contributions and costs necessary for com- 
pleting such practices and improvements as set forth below. The 
tenant will be reimbursed by the landlord when the practice, measure 
or improvement is completed, or will be compensated for its un- 
exhausted value when the tenant leaves the farm, according to the 
table below: 

16. (Cont'd) Compensation for Improvements Table. 






















17. Additional 

agreements relative to conservation and 

18. Review of conservation program. — A new schedule covering 
conservation practices and improvements will be prepared each year 

on an appropriate form, which will become a part of this lease when 
signed by the two parties. 

19. Preparing or seeding land. — When the tenant leaves the 
farm, if the total acreages of prepared or seeded land are greater 
than at the beginning of his tenancy, he will be compensated by the 
landlord on the basis of the value of such excess acreages. If such 
total acreages are less than at the beginning of his tenancy, the tenant 
will compensate the landlord on the basis of the value of such de- 
ficiency, provided that the deficiency is not due to drought, flood, or 
other causes beyond the control of the tenant. The acreages at the 
beginning of this tenancy and the basis of payment are as follows: 

19. (Cont'd) Preparing or Seeding Land Table. 







20. Removable improvements. — Minor improvements of a tem- 
porary or removable nature, not provided for in item 16 of this 
section, which do not mar the condition or appearance of the farm 
may be made by the tenant at his own expense. The tenant may at 
any time this lease is in effect, or within a reasonable time thereafter, 
remove such improvements, provided he leaves in good condition 
that part of the farm from which they are removed. 

21. Compensation for damages. — When the tenant leaves the 
farm he will pay the landlord reasonable compensation for any 
damages to the farm for which the tenant is responsible, except 
ordinary wear and depreciation and damages beyond the tenant's 



All costs and returns shall be divided between landlord and tenant as provided below, unless otherwise specifically stated elsewhere in 
this lease. 

1. Rental rates. — The tenant agrees 

to pay as cash rent the amount as calculated below in 

either method 1 or 2 as completed: 





















X X X X X X X 

X X X X X X X 



X X X X X X X 

X X X X X X X 







X X X X X X 

X X X X X X X 

X X X X X X 

2. Variations for price (for method 2). — The prices to be used in 
column 8 will be determined as follows: 

and the amount of column 9 will be the product of column 7 multiplied 
by column 8. 

3. Variations for production conditions. — The total amount of 
rent for the entire farm as shown in either column 4 or as calculated 
for column 9 shall be adjusted for any year in which the yield of 

as reported by the State Crop 

Reporting Service is percent above or below the 

county average yield for the previous years, as follows: 

4. Rental payment. — The annual rental due shall be paid as 

follows: $ on and $ 

on , and the payments shall be made at ._ 

5. Additional agreements in regard to rental rates: 

6. Expenses. — Expenses shall be supplied by the tenant except as included in section C and except as follows: 






























7. Record of expenses. — The tenant will keep a record of expenses 
furnished by the landlord, and settlement will be made by mutual 
agreement or at the time that final rent payment is due. 

8. Additional agreements relative to expenses: 

2. Government programs. — The farm will be operated in com- 
pliance with Government programs as follows: 


1. Term. — The term of this lease shall be year(s) 

from , 19 , to , 19 , 

and this lease shall continue in effect from year to year thereafter 
until written notice of termination is given by either party to the 

other at least months before expiration of this lease or any 


2. Continuous occupancy. — The tenant agrees that he or his 
agent will possess and occupy the farm continuously during the term 
of the lease. 

3. Surrender of possession. — The tenant agrees to surrender pos- 
session and occupancy of the premises peaceably at the termination 
of the lease. 

4. Review of lease. — A request for general review of the lease may 

be made at least days prior to the final date for giving 

notice to terminate this lease. Amendments and alterations to this 
lease shall be made in writing. 


1. No partnership created. — This lease shall not be deemed to 
give rise to a partnership relation, and neither party shall have 
authority to obligate the other without written consent, except as 
specifically provided in this lease. 

3. Debts and accidents. — Each party agrees that the other party 
shall in no way be responsible for the debts of, or liabilities for 
accidents or damages caused by, the other party. 

4. Willful neglect. — Willful neglect, failure, or refusal by either 
party to carry out any substantial provision of this lease shall give 
the other party the benefits of any proceedings provided by law. 

5. Arbitration of differences. — Any differences between the parties 
as to their several rights or obligations under this lease that are not 
settled by mutual agreement after thorough discussion, shall be sub- 
mitted for arbitration to a committee of three disinterested persons, 
one selected by each party hereto and the third by the two thus 
selected; and the committee's decision shall be accepted by both 

6. Additional agreements: 

IX WITNESS WHEREOF, the parties have signed this lease on the date first above written. 



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9. Noxious Weeds 

The war against weeds demands special attention 
in many areas. If needed, indicate in the lease 
the specific treatment to be used and how costs 
will be divided. These matters should be agreed 
upon when you draw up the lease. Do not wait 
until the day or week the treatment should be 

10, 11, and 12. Maintenance of Improvements, 
Materials and Labor, and Purchase of Materials 

The maintenance of all physical structures on 
the farm is important to both landlord and tenant. 
This is a matter to which daily attention must be 
given. Such thinks as a leak in the roof, a broken 
window, or a loose door, gate hinge, or latch, de- 
mand immediate care. A nail here, a staple there, 
or a few shovelfuls of dirt on a terrace or waterway 
might save major expense later. 

The tenant can be expected, reasonably, to ac- 
cept fully the responsibility for carrying out such 
maintenance, and the landlord should furnish the 
materials. The items to be included in the blank 
space in item 1 1 are those known to need special 
attention. Agree upon them when you make the 
lease. Do not put the matter off for later deci- 
sion. If you do, you encourage misunderstanding. 
Inclusion of specific maintenance items here does 
not imply that other skilled labor will not be fur- 
nished by the landlord. 

Usually, the landlord will find it good economy 
to be liberal on the costs of materials for mainte- 
nance (item 12). But the tenant should keep a 
complete and accurate account of each expenditure. 

13. Add Improvements 

With the recent emphasis on modern conven- 
iences in the home and labor-saving devices on 
the farm, some major improvements have been 
undertaken without complete understanding be- 
tween landlord and tenant. This provision at- 
tempts to safeguard the interests of both parties. 

So far as possible, any major needed improve- 
ment should be agreed upon when the lease is 
made. Outline the agreement in items 12 and 16 
of this section, using an additional sheet if neces- 
sary. The main point is this: The best time to 
reach agreement on such improvements is when 
the lease is made. Do not put this off for later 
negotiation, unless the situation is unusual. 

14 and 1 5. Conservation Practices and Structures 

These two provisions are designed to safeguard 
conservation structures and to encourage conserva- 
tion practices. They should be adhered to strictly. 

16. Compensation for Improvements 

This provision affords the two parties a ready 
means of recording their agreements as to com- 

pensation for a variety of improvements and con- 
servation measures. Investments may involve 
limestone, rock phosphate, commercial fertilizer, 
terraces, grass waterways, buildings, fences, tiling, 
permanent pastures, meadows, forestation, the water 
supply, electric wiring, bathroom, painting, paper- 
ing, central heating, and many other improve- 
ments. As labor-saving devices are becoming in- 
creasingly important, they should be given special 

The crucial decisions are: 

• What improvements will the tenant make, or 
cooperate in making, for which he will receive 
compensation for their unexhausted value when he 
leaves the farm? 

• How will the various expense items be divided 
between landlord and tenant? 

In most instances, the valuation placed on the 
tenant's contribution can be no more than an es- 
timate. If the tenant is to be reimbursed when 
the work is completed, the last column may be 
left blank. 

The various costs can be calculated, and the 
percentage to be furnished by each party can be 
determined by discussion, but the rate of deprecia- 
tion may be difficult to decide. 

These arrangements regarding compensation for 
improvements should not be included in any way 
in the section on Sharing Costs and Returns, nor 
is it necessary to divide costs of improvements be- 
tween tenant and landlord in the same proportion 
as the farm costs and returns are shared. 

Your county agricultural agent, soil conservation 
supervisor, or college of agriculture might have 
available specific data that will fit your situation. 
If not, decide upon a depreciation rate that ap- 
pears to be reasonable. Much of the success of 
your farm lease may well depend upon the agree- 
ment about such improvements and conservation 
measures. These items are more important than 
they were before the conservation movement and 
the development of modern technology. 

1 7. Additional Agreements Relative to 
Conservation and Improvements 

Any agreements relative to conservation and im- 
provements that cannot be recorded clearly in the 
table or elsewhere in the lease should be described 
in item 17 immediately below the table. 

18. Review of Conservation Program 

The soil and water conservation and develop- 
ment program for the farm is of such importance 
to successful farming that it should be reviewed at 
least once each year. Incorporate your specific 
plans for the next year in a table similar to that 
in item 16. The Annual Supplement to Farm 
Lease (Form AD 564) is available for that purpose. 


For sale by the Superintendent of Documents. U.S. Government ' 5 rinrincr Ofnrp Wa«hi 

.PrirP S ^ 

19. Preparing or Seeding Land 

A provision that all farmwork is to be done at 
the normal time encourages good tenant farming. 
This means that the outgoing tenant will do some 
seeding, some plowing, and a few other things that 
will benefit directly the incoming tenant. The 
objective might well be for the outgoing tenant to 
complete as many of such operations as had been 
completed when he first occupied the farm. As 
this is not always possible, the tenant should be 
paid for any overage and he should stand the cost 
of any deficiency. 

Insert in the lease a record of the number of 
acres at the beginning of the lease of each type of 
seeded or prepared land and the rate per acre 
that will be applied to any excess or deficient 
acreage when the lease is terminated. Include in 
the rate per acre the tenant's labor and machinery 
expense and any contribution that he makes to- 
ward seed, fertilizer, and similar cash costs. 

20. Removable Improvements 

Some cash-rented farms do not have enough 
temporary buildings, fences, or feeding conven- 
iences for good livestock farming. In an instance 
of this kind, the tenant may be in position to sup- 
ply the needed items at his own expense, provided 
he can take them with him when he leaves the 
farm. Under the law of the State it may be diffi- 
cult to determine what has become attached to 
the landlord's property and must be left on the 
farm, or the law may provide that some improve- 
ments made by the tenant are removable. In either 
instance, the tenant should be encouraged to sup- 
ply any of these minor items. This can be done 
by assuring him that he can take them with him 
when he leaves the farm. These items would include 
no improvement listed in item 16 of this section. 

21. Compensation for Damages 

Although in item 6 of this section, the tenant 
agrees not to commit waste, he may fail to live up 
to this agreement. If he fails, he should pay the 
landlord for the damages. Also, this provision for 
compensation for damages and the provision that 
deals with compensation for improvements (item 
16) confer similar privileges and impose similar 
responsibilities on both landlord and tenant. 

D. Sharing Costs and Returns 

Study the Table for Estimating Rent and the 
accompanying explanatory material on pages 3 to 7. 
Use the table in estimating expenses, in dividing 
some of the expenses, and in arriving at the rental rate. 

If suggestions are followed in completing the 
Table for Estimating Rent, much of the data called 
for in the lease form will be readily available and 
might well be transferred directly. 

If you follow the suggested procedure, you will 
be more likely to arrive at an equitable division 
of costs and returns than if you make no estimate 
of fixed and variable costs. 

1. Rental Rates 

The cash rent method table in the Cash Farm 
Lease (Form AD 562) should be completed in 
every detail for either method 1 or method 2. Do 
not complete it for both methods. Cross out the 
method not used. Show fully what rent is to be 
paid, and so far as possible show for what it will 
be paid and how it will be calculated. 

Method 1 . — Use this part of the table for straight 
cash rent. List in column 1 each kind of land 
use separately. Base the need on what will be 
recorded in the other three columns. If the rate 
is to differ for the various land uses, enter each 
use on a separate line. 

Show in column 2 the number of acres in each 
land use. The total should be the same as that 
on the first page on the lease. Enter in column 3 
the rate per acre for each land use. The amount 
in column 4 is the result of multiplying column 2 
by column 3. 

If the rent is a lump sum for the entire farm, 
enter this amount in the last line (col. 4). 

Method 2. — Use this part of the table for sliding- 
scale or flexible payment cash rent. This method 
is an attempt to shift a part of the risk of changes 
in production conditions (yield) and prices to the 
landlord. When used alone and items 2 or 3 are 
not used, it would provide for a fixed amount of 
cash rent. This would be comparable in principle 
to method 1 — the difference would be in the way 
the rent is calculated. So fill out both items 2 
and 3. 

2. Variations for Price 

Item 2 would be used if you agree that a fixed 
quantity of each crop is acceptable, but you want 
rent to depend upon what the produce would sell 
for when it is ready for market. Write in the blank 
space how the prices will be determined; for ex- 
ample, the price for a certain day on a certain 
market. Use only the major sources of income. 

3. Variations for Production Conditions 

In general, flexibility in cash rent based on pro- 
duction changes is not recommended because (1) 
if the flexibility is based on county or other area- 
wide changes, there is a possibility of a particular 
farm's production changing in the opposite direc- 
tion, and (2) if the flexibility is based on the pro- 
ductivity of the particular farm, the landlord 
would be sharing in changes in production which 
are partly under the control of the tenant. The 
tenant would thus not have the incentive to make 
maximum effort to increase production. Suppose. 

for example, that production on the farm is raised 
above its average by the tenant's applying more 
fertilizer. If the lease provides for an adjustment 
upward in the cash rent, the landlord is in effect 
participating in a return due solely to the tenant's 
labor and expenditures. In most production con- 
ditions, it is impossible to separate the effects of 
efforts made by the operator and conditions such 
as climate over which the operator has no control. 
It may be preferable if landlord and tenant wish 
to allow for production variation to use a share 
lease form. 

However, if the tenant and landlord desire to 
allow for such variations on the cash rent basis, 
item 3 may be used if it is so agreed that the quan- 
tity, column 7, should be varied up or down, ac- 
cording to production conditions. Again use only 
the major sources of income. Do not be con- 
cerned with less than 10 percent variations in yield. 

This provision could also be used in another 
way, together with method 2 and also with method 
1. The total rent for the entire farm, column 4 
or column 9, would vary according to production 

4. Rental Payment 

By using this provision, you will show when the 
rent payment or payments are due and where the 
payments will be made. 

5. Additional Agreements 

Any arrangements that cannot be shown clearly 
in the rental rate table should be described in 
these blank spaces. 

6. Expenses 

Since the cash tenant usually bears most, if not 
all, of the variable expenses, it would seem best to 
put this general responsibility on him by showing 
only what the landlord will furnish. The land- 
lord's share of expenses may be recorded in dollar 
value, as a fractional part, as a percentage, or as 
rates per unit such as per acre, bushel, or bale. 

7. Record of Expenses 

The tenant's record of operating expenditures 
furnished by the landlord should show for what 
the expenditure was incurred and should include 
appropriate sales statements, receipts, checks, and 
similar evidence. 

8. Additional Agreements (Operating Expenses) 

Describe in item 8 any expense that cannot be 
recorded clearly in the table. 

E. Term of Lease 
1. Term 

We have left the term of the lease for consider- 
ation last. The length of the term for which the 
lease is drawn should be decided in light of the 

land use and livestock systems, the steps to be taken 
to improve, conserve, and maintain the farm, and 
how costs and returns are to be shared. It is only 
after these matters have been decided that the two 
parties are in position to discuss the length of the 
lease term. 

The basic objective is to make the term of the 
lease fit the kind of farming that is to be done. 
Sound land use, conservation of land and water, 
development of good herds and flocks, and maxi- 
mization of net income are possible only when 
longtime planning is practiced. Yet the two par- 
ties may have many impelling reasons for not 
wanting to be tied up for a number of years. 

A situation in which longtime planning is rea- 
sonably possible may be created by a long-term 
lease — 3 to 7 years or longer — or by a lease that 
continues in effect from year to year until written 
notice of termination is given well in advance of 
the lease year. The term should fit farm, land- 
lord, and tenant. Regardless of whether the lease 
is for a term of years or continues automatically 
from year to year in the absence of a notice of ter- 
mination, the termination process should give both 
landlord and tenant the time necessary to make 
other arrangements for the coming year. This may 
be only a few months, perhaps 4 to 6, or it may 
be a year or more. 

The period for which the lease is drawn should 
be shown in the blank spaces. Show the number 
of years and the date on which the tenant's occu- 
pancy is to begin and end, using month, day, and 
year. If the lease is to continue automatically from 
year to year in the absence of termination notice, 
indicate when notice of termination is to be given, 
showing the number of months before the last date 
(the expiration date) entered in the first part of 
this item. 

2. Continuous Occupancy 

The tenant or his agent should physically oc- 
cupy the farm during the entire lease period, 
particularly when farm buildings are included. 
This is necessary to protect the landlord's property 
and in some instances to make insurance on build- 
ings effective. 

3. Surrender of Possession 

The law usually requires the tenant to surrender 
possession at the end of the lease. This is a spe- 
cific reminder and covenant to that effect. 

4. Review of Lease 

The reason for putting your lease agreement in 
writing applies equally to putting all amendments 
and alterations in writing. A form is provided on 
which to record annual adjustments — those that 
apply to the next lease year — see Annual Supple- 
ment to Farm Lease (Form AD 564). 


Record adjustments agreed to during the year 
on a separate sheet of paper to be signed by both 
parties. Many discussions held and decisions made 
during the year do not alter the original lease. Do 
not record all of these decisions. Write only those 
that change the written provisions of the lease. 

In case either party wishes to make major 
changes for the next year, he should notify the 
other party at least a month, and preferably 2 
months, before the time specified for notice of ter- 
mination in item 1 of this section. 

F. Miscellaneous Provisions 

1. No Partnership Created 

Most landlords and tenants do not want their 
leases to create a partnership relation. They may 
have many reasons for this but one is overriding. 
They do not want to be responsible for the acts 
of the other party, as they would be in a partner- 
ship. If you wish a partnership, get a lawyer to 
draft a partnership agreement. It differs from a 

This provision will be ineffective in its purpose 
if the two parties operate as do partners and not as 
landlord and tenant. Be sure that the way you 
carry out your business transactions will help to 
make this provision effective. 

2. Government Programs 

The landlord and tenant should discuss the vari- 
ous Government programs that are applicable to 
the farm. Soil conservation, acreage allotment, 
marketing agreement, reforestation, farm improve- 
ments, production or commodity loan, rural tele- 
phone and electrification, small watershed, and 
other programs should be considered. 

Programs related to water supply command 
particular attention in some areas. Write in the 
blank space your agreement as to how you will 
work together in cooperating with each specific 
program. This is the agreement between landlord 
and tenant; it need not indicate the details of their 
agreement with the Government agency. List the 
program and how costs and benefits will be shared, 
when applicable. Use a separate sheet if necessary. 

Consideration should be given to the way in 
which benefits or taxes for social security are af- 
fected by the lease. For provisions of the law see 
your Social Security representative. 

Washington, D.C. 

3. Debts and Accidents 

This agreement may be effective only as between 
the two parties. It may bind only those who sign 
the lease and their successors. It is most effective 
where the "no partnership provision" is effective. 
Ordinarily, it does not apply to third parties, even 
if the lease is recorded. 

4. Willful Neglect 

This provision calls to the attention of both 
parties the privilege of enforcing the agreement. 

5. Arbitration of Differences 

Your lease should be completed in such a way 
that the likelihood of misunderstanding will be re- 
duced to a minimum. This can be accomplished 
best by studying each provision, filling out each 
blank, and arriving at an equitable division of re- 
ceipts and expenses. But conditions that could 
not be anticipated may arise, and good men may 
disagree. If this should happen, a practical way 
of settling the difference is to leave the decision to 
an arbitration committee. This clause is included 
in many farm leases used throughout the country. 
Its value lies partly in its presence rather than the 
number of differences submitted to arbitration. 

6. Additional Agreements 

This blank space is provided for any special pro- 
visions not covered elsewhere in the lease. 

7. Signing the Lease 

The lease should be signed in duplicate by both 
parties. In some States, it should be witnessed by 
two disinterested parties. In some instances, the 
landlord's wife should sign the lease also. Land- 
lord and tenant should each keep a signed copy. 
It is seldom necessary to record your lease or file 
it in the county office in which documents of this 
kind are recorded. Each of you may want to re- 
fer to the lease from time to time during the year, 
and in case of renewal you will want to use it. If 
the lease is terminated, adhere strictly to the notice 

Just before the lease is signed, do two things: 
(1) Use Farmers' Bulletin 2163, Your Farm Lease 
Checklist, to assure yourself that all pertinent items 
are covered, and (2) read the lease carefully to 
see that its provisions present your agreement 

Issued June 1961 

For sale by the Superintendent of Documents, U.S. Government Printing Office 
Washington 25, D.C. - Price 10 cents