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FEE TITLE
   PURCHASE WITH
   SIMULTANEOUS
   CONSERVATION
     EASEMENT


Contents
Various Agreements for Leasing and Owning Land..........page 2                                Finding Land to Farm.................................page 3
   •   Cash Lease
                                                                                              Resources for Farmers Seeking Land Tenure..11
   •   Crop Share
   •   Long-Term Lease                                                                        Land Linking Programs ...................................... 13
   •   Lease with Option to Buy or Right of First Refusal
                                                                                              Elements of a Good Lease.................................. 15
   •   Fee Title Purchase with Seller Financing
   •   Fee Title Purchase with Agricultural Conservation Easement                             Kinds of Consultants You May Need................ 15




             ATTRA—National Sustainable Agriculture Information Service is managed by the National Center for Appropriate Technology
             (NCAT) and is funded under a grant from the U.S. Department of Agriculture’s Rural Business-Cooperative Service. Visit the
             NCAT website, www.ncat.org for more information .
A Publication of ATTRA - National Sustainable Agriculture Information Service • 1-800-346-9140 • www.attra.ncat.org

Various Agreements for Leasing and Owning Land
This publication highlights some common ways to lease or        Lease with Option to Buy
own land. It outlines important considerations about each
of these leasing options and paths to ownership.                or Right of First Refusal
                                                                There are two ways a lease can improve ownership oppor-
Renting farmland is a common practice in U.S. agriculture,      tunities for a tenant farmer:
where more than 45 percent of the 917 million farmland
acres are rented. According to the 1999 Agricultural Eco-             • With a “Purchase Option,” the owner and ten-
nomics and Land Ownership Survey, 60 percent of farmland              ant pre-determine the purchase price, with a date
rent is paid in cash, 24 percent in shares of production, and         for execution of the purchase. The tenant pays for
11 percent in a cash/share combination. Following are short           this option up front, and the rent money can count
descriptions of the various leasing and ownership options
                                                                      toward an initial down payment.
covered in this publication.
                                                                      • With a “Right of First Refusal” clause, the
Cash Lease                                                            owner can only sell the land to a third party after
Most cash leases are short-term, requiring little commit-             the tenant has had a chance to “refuse,” by match-
ment from either landowner or tenant farmer. Long-term                ing that third-party offer and making the purchase
leases can be an affordable way for farmers to use more                first. This helps ensure that an owner doesn’t sell
sustainable practices and to invest more in their busi-               the land “out from under” the tenant, but the ten-
nesses. Many leases are based on a handshake. Verbal                  ant must be ready to act quickly.
agreements are considered legal leases for one year, but
this is NOT recommendable for either party, as conflicts         Fee Title Purchase with Seller Financing
can arise even among friends when terms are not clearly         In this model the new buyer takes possession of the land
stated on outset. A written lease provides benefits and          and makes payments directly to the seller, as written
security for both parties.                                      in a “note.” This works very well when a good relation-
                                                                ship has been established. The landowner can see the
Crop Share                                                      property transferred to a promising new farmer, and the
In this model, rent payment consists of part of the crop,       new farmer can secure that note—sometimes by virtue
most often paid as part of the income from total crop           of his or her “character” more than conventional lend-
sold. Also known as “share-crop” and “share lease,” this        ing requirements. Even better, brokerage fees are avoided
was historically disadvantageous to tenant farmers, but         by both parties. Payments can be structured like a typi-
can work well for beginning farmers without start-up            cal mortgage, or in the case of an installment or land
capital. Crop share arrangements are common in peren-           contract sale, made periodically. This strategy is often a
nial crops and some commodities, for example fruit and          good way to transfer land to the next generation within
nut operations, hay, field crops, processing tomatoes.           a family.
Agreements may have maximum and minimum limits
to protect the farmer and landowner, respectively.              Fee Title Purchase with Agricultural
                                                                Conservation Easement
Long-Term Lease                                                 An agricultural conservation easement forever extin-
This model is as close to ownership as a lease can get.         guishes development rights on that land, making it less
The term is usually 40 to 99 years depending on state           valuable to nonfarmers. These types of easements are
law. This is longer than the average mortgage. These            used if a landowner wishes to see the land remain avail-
types of leases may even be inheritable. They are used          able for agriculture: He or she donates or sells the land’s
for publicly owned land and commercial real estate, but         development rights in the form of an agricultural conser-
are less common in agriculture. They are sometimes used         vation easement to a nonprofit land trust or government
by cities and land trusts who own the land but wish to          agency, which ensures that the easement goals are upheld
guarantee farmers lifetime tenure. Because of their lon-        forever. This can drop the after-easement value, or “ease-
gevity, the intent and clauses of leases must be very care-     ment encumbered value,” of the land into an affordable
fully drafted so they will last as long as the lease term.      price range for a new farmer.

Page 2       ATTRA                                                                                 Finding Land to Farm
SORRY PEDRO — IF YOU ONLY HAD
                      A VERBAL AGREEMENT, IT‛S YOUR WORD
                           AGAINST THE LANDOWNER‛S,
                     AND IT COULD BE TIED UP IN THE COURTS
                      FOR A LONG TIME. IF YOU LEASE LAND
                         AGAIN, GET A SIGNED CONTRACT!




www.attra.ncat.org                                ATTRA      Page 3
Page 4   ATTRA   Finding Land to Farm
CASH LEASE AGREEMENTS
                     ◊ VARIABLE DURATION
                        • SHORT TERM LEASES ALLOW “TRIAL PERIOD” FOR
                            BOTH LANDOWNER AND FARMER
                        • LONG TERM LEASES ARE PREDICTABLE FOR THE
                            OWNER AND SECURE FOR THE FARMER
                     ◊ PAYMENT SCHEDULE NEGOTIABLE
                     ◊ FARMER & LANDOWNER KNOW HOW MUCH THE RENT
                       WILL BE

                     DISADVANTAGES (IF LEASE IS SHORT)
                     ◊ DIFFICULT TO MAKE LONG-TERM DECISIONS
                        AND INVESTMENTS
                     ◊ LENDERS MAY BALK AT FINANCING IMPROVEMENTS
                     ◊ LESS INCENTIVE TO USE SUSTAINABLE PRACTICES
                        TO IMPROVE THE SOIL
                     ◊ NO EQUITY IS BUILT UP (SHORT OR LONG LEASE)
                     ◊ LANDOWNER DOESN‛T SHARE RISK IF FARMER HAS
                        A POOR CROP OR CROP HASN‛T COME IN YET




www.attra.ncat.org                                   ATTRA        Page 5
CROP SHARE LEASE
  ◊ RENT PAYMENT CONSISTS OF PART OF THE CROP, MOST
    OFTEN PAID AS PART OF THE INCOME FROM TOTAL CROP
    SOLD BUT CAN ALSO BE CALCULATED AS A PORTION OF NET     ◊ IF THE TENANT FARMER DOES VERY WELL, THE CROP
    INCOME AFTER EXPENSES. PAYMENT IS USUALLY NOT             SHARE RENT MAY EXCEED LOCAL CASH-LEASE RATES.
    REQUIRED UNTIL CROP COMES IN.
                                                                YOU MAY WISH TO INCLUDE A “MAXIMUM PAY-
  ◊ RISK IS SHARED BETWEEN PARTIES.                             MENT CLAUSE,” WHICH WOULD PROTECT THE
  ◊ THIS KIND OF LEASE IS HISTORICALLY DISADVANTAGEOUS          TENANT AGAINST PAYING TOO MUCH FOR RENT.
                   TO TENANT FARMERS, BUT MAY BE A GOOD
                   OPTION FOR BEGINNING FARMERS
                   WITHOUT START-UP CAPITAL.                ◊ CONVERSELY, A “MINIMUM PAYMENT CLAUSE”
                                                              WOULD PROTECT THE LANDOWNER FROM
                  ◊ IT CAN BE HARD TO BUDGET FOR AN EXACT     RECEIVING TOO LITTLE PAYMENT (FOR EXAMPLE,
                   RENT AMOUNT. NEITHER PARTY KNOWS
                                                              IN CASE OF CROP FAILURE BY TENANT), BUT
                   WHAT A FARM WILL YIELD, SO PAYMENT
                          AMOUNTS ARE UNCERTAIN.
                                                              SHOULD REFLECT THE “SHARED RISK” BETWEEN
                          OWNERS DON‛T WANT THE RENT TO       THE LANDLORD AND TENANT.
                          BE TOO LOW. TENANTS DON‛T
                          WANT IT TO BE TOO HIGH.




Page 6      ATTRA                                                                        Finding Land to Farm
LONG TERM LEASE
                     ◊ OFFERS MOST ADVANTAGES OF OWNERSHIP WITHOUT NEED
                        FOR DOWN PAYMENT OR HEAVY BORROWING. LESS COMMON
                        IN AN AGRICULTURAL CONTEXT.
                     ◊ SOME LONG-TERM LEASES ARE INHERITABLE AND ALLOW FOR
                        TRANSFER TO THE NEXT GENERATION. LOOK AT YOUR
                        STATE‛S REAL ESTATE CODE.
                     ◊ BECAUSE OF THEIR LONGEVITY, THESE LEASES CAN BE HIGHLY
                        COMPLEX. THE INTENT AND CLAUSES MUST BE VERY CARE-
                        FULLY DRAFTED TO LAST AS LONG AS THE LEASE TERM.
                     ◊ LANDOWNERS ARE NOT OFTEN WILLING TO MAKE SUCH A
                        LONG-TERM COMMITMENT, OR TO RISK TITLE
                        FOR TENANT FINANCING
                     ◊ TENANT IS SUBJECT TO LEASE TERMS WHICH
                        MUST REMAIN REASONABLE AND PRUDENT
                        FOR DURATION OF LEASE. MULTIPLE DECADES
                        ARE A LONG TIME TO PLAN FOR!
                     ◊ FARMER‛S ABILITY TO RECOVER EQUITY
                        IN LAND MAY BE LIMITED, DEPENDING
                        ON AGREEMENT.




                     IT DEPENDS ON WHAT THE LANDOWNER WANTS,
                     BUT LET‛S VISIT A FRIEND WHO HAS PURCHASED
                     SOME LAND USING AN EASEMENT TO REDUCE THE
                     COST OF THE LAND




www.attra.ncat.org                                          ATTRA       Page 7
Page 8   ATTRA   Finding Land to Farm
FEE TITLE PURCHASE WITH
                                                                AGRICULTURAL CONSERVATION EASEMENT
                                                           ◊ THE USE OF THE PROPERTY (THE DEVELOPMENT RIGHTS) IS
                                                              RESTRICTED BY THE TERMS OF THE CONSERVATION EASEMENT
                                                              AND THOSE RESTRICTIONS APPLY TO ALL FUTURE OWNERS OF
                                                              THE PROPERTY
                                                           ◊ THE DEVELOPMENT RIGHTS (IN THE FORM OF A CONSERVATION
                                                              EASEMENT) ARE DONATED OR SOLD TO A NONPROFIT LAND
                                                              TRUST OR GOVERNMENT AGENCY WHICH HOLDS THE
                                                              EASEMENT AND ENSURES IT IS UPHELD.
                                                           THE AFTER-EASEMENT VALUE (OR EASEMENT-ENCUMBERED
                                                           VALUE) OF THE LAND MAY DROP THE PRICE INTO AN AFFORDABLE
                                                           RANGE FOR A NEW FARMER. THIS CAN OCCUR IN SEVERAL WAYS:
                                                               ◊ THE LANDOWNER COULD SELL THE EASEMENT FIRST,
                                                               THEN SELL THE ENCUMBERED LAND TO A NEW FARMER.
                                                               ◊ THE NEW FARMER COULD PARTNER WITH A LAND TRUST
                                                               TO MAKE A JOINT PURCHASE OFFER TO THE LANDOWNER.
                                                               (OCCASIONALLY A LAND TRUST BUYS FIRST, THEN SELLS TO
                                                               A FARMER THROUGH A BIDDING PROCESS)
                                                               ◊ THE NEW FARMER COULD CREATIVELY FINANCE LAND
                                                               PURCHASE, WITH A COMMITMENT BY THE LAND TRUST TO
                                                               PURCHASE THE EASEMENT IN FUTURE.


            FEE TITLE PURCHASE WITH
      AGRICULTURAL CONSERVATION EASEMENT
 ◊ FARMERS SEEKING TO BUY LAND HAVE A BETTER CHANCE WHEN
   THEY‛RE NOT BIDDING ON RESIDENTIAL OR RANCHETTE REAL
   ESTATE VALUE. EASEMENTS CAN MAKE THE DIFFERENCE
   BETWEEN AFFORDABLE OWNERSHIP AND LIFELONG LEASING.
 ◊ SELLERS CAN SEE THEIR AGRICULTURAL LEGACY CONTINUED.
   WITH TAX BENEFITS, THEY CAN SOMETIMES RECEIVE CLOSE
   TO FAIR MARKET VALUE FOR THE LAND.
 ◊ BECAUSE EASEMENTS RESTRICT PROPERTY RIGHTS, THEY MAY
   LIMIT VALUES OR OWNERS‛ ABILITY TO GET FINANCING.
 ◊ AGRICULTURAL CONSERVATION EASEMENTS DON‛T ALWAYS
   WORK AS INTENDED. THESE EASEMENT-ENCUMBERED
   PROPERTIES OFTEN STILL HAVE HIGH RURAL-ESTATE
   HOME VALUE TO NON-FARMERS.
 ◊ PROCESS CAN BE SLOW, SINCE LAND TRUSTS USUALLY HAVE
   TO APPLY FOR FUNDING TO PURCHASE EASEMENTS.
 ◊ EASEMENTS ARE, IN THEORY, FOREVER. THIS PRESENTS
   CHALLENGES TO CURRENT AND FUTURE LANDOWNERS AS TO
   COMPLIANCE AND FUTURE ENFORCEABILITY OF EASEMENTS.




www.attra.ncat.org                                                                             ATTRA         Page 9
FEE TITLE PURCHASE WITH SELLER FINANCING

  FEE TITLE PURCHASE WITH SELLER FINANCING            ADVANTAGES (CONTINUED)
                                                      ◊ BROKERAGE FEES AVOIDED BY BOTH PARTIES
  ◊ IN THIS MODEL, THE NEW BUYER TAKES POSSESSION
    OF THE LAND, MAKES PAYMENTS DIRECTLY TO SELLER.   ◊ GOOD WAY TO TRANSFER LAND TO NEXT GENERATION
  ◊ THIS WORKS VERY WELL WHEN A GOOD RELATIONSHIP     ◊ INSTALLMENT PLAN MAY BE STRUCTURED FOR
    HAS BEEN ESTABLISHED. THE LANDOWNER CAN SEE          SMALLER INITIAL PAYMENTS WITH LARGER
    THE PROPERTY TRANSFERRED TO A PROMISING NEW          “BALLOON” PAYMENTS WHEN FARMER EXPECTS
    FARMER, AND THE NEW FARMER CAN BUILD EQUITY,         TO BE MORE FINANCIALLY PREPARED
    SOMETIMES WITHOUT HIGH DOWN PAYMENT
                                                      DISADVANTAGES
  ADVANTAGES
                                                      ◊ IF BUYER DEFAULTS, THE LAND GOES
  ◊ CHARACTER LOAN MAY BE EASIER IN THIS                 BACK TO THE SELLER AND THE BUYER‛S
    SCENARIO. BUYER DOESN‛T NECESSARILY                  EQUITY MAY BE LOST.
    HAVE TO QUALIFY FOR TRADITIONAL
    BANK OR GOVERNMENT LOAN.                          ◊ MOST INITIAL PAYMENTS COVER
                                                         INTEREST ONLY, OR MAY BE VERY
  ◊ LANDOWNER CAN SPREAD OUT CAPITAL
                                                         LARGE. REQUIRED DOWN PAYMENTS
    GAINS FOR TAX PURPOSES.
                                                         MAY ALSO BE LARGE.


                                                      ADVANTAGES
                                                      ◊ THE FARMER IS GUARANTEED THAT LAND WILL
                                                         NOT BE “SOLD OUT FROM UNDER” HIM OR HER.
          LEASE WITH OPTION TO BUY                    ◊ WITH AN OPTION IN WHICH THE RENT PAYMENT
                                                         GOES TOWARD EVENTUAL PURCHASE, THE FARMER
  THERE ARE TWO WAYS A LEASE CAN IMPROVE                 BUILDS EQUITY TOWARD OWNERSHIP.
  OWNERSHIP OPPORTUNITIES FOR A TENANT FARMER.        ◊ WHEN THE PURCHASE AGREEMENT IS ATTACHED,
                                                         FARMER CAN PLAN FOR A KNOWN PURCHASE PRICE.
  1) WITH A “FIRST RIGHT OF REFUSAL” CLAUSE, THE
     TENANT GETS TO MAKE THE FIRST OFFER PRIOR        DISADVANTAGES
     TO THE OWNER LISTING THE LAND FOR SALE, AT
                                                      ◊ WITH FIRST RIGHT OF REFUSAL, TENANTS HAVE
     THE SELLER‛S ASKING PRICE.
                                                        LITTLE NEGOTIATING POWER—THEY CAN ONLY EX
  2) WITH AN “OPTION AGREEMENT,” OWNER                  ERCISE THE RIGHT BY AGREEING TO SELLER‛S TERMS.
     AND TENANT PRE-DETERMINE PURCHASE                       ◊ IF THE FARMER IS NOT FINANCIALLY
     PRICE, WITH A REQUIRED DATE OF                               READY WHEN THE PROPERTY IS
     EXECUTION OF PURCHASE. TENANT                                PUT UP FOR SALE, OR AT
     PAYS FOR THIS OPTION UP FRONT,                               THE AGREED-UPON
     AND RENT MONEY SOMETIMES COUNTS                              PURCHASE DATE (OPTION),
     TOWARD INITIAL DOWN PAYMENT.                                 THE ADVANTAGE AND THE
                                                                  RENT EQUITY ARE LOST.




                                                                       THANKS FOR YOUR HELP, JOE!
                                                                 I‛M GOING TO THINK ABOUT THIS, STUDY
                                                                   THE RESOURCES* AND TALK WITH MY
                                                                    FAMILY. I‛VE LEARNED A LOT.




Page 10    ATTRA                                                                      Finding Land to Farm
Resources for Farmers Seeking Land Tenure
Publications and Web Resources                              Organizations
Farmers for the Future is an internet resource for          New England Small Farm Institute’s mission is to pro-
beginning farmers which can be found on the Farm            mote small farm development by providing information
Credit System-sponsored “Agriculture Online” web-           and training for aspiring, beginning and transitioning
site. It includes featured profiles of farmers, articles     farmers. NESFI maintains an extensive resource collec-
about farm transitions and beginning farmers who have       tion, produces publications, develops and offers innova-
“made it,” and a list of links for beginning farmers.       tive farmer-guided programs, and advocates for policies
www.agriculture.com/ag/category.jhtml?categoryid=/          that encourage sustainable small-scale agriculture.
  templatedata/ag/category/data/agfuturechannel.xml         275 Jackson St., Belchertown, MA 01007
                                                            413-323-4531; 413-323-9594 (fax)
A Farmers’ Guide to Securing Land, by California            info@smallfarm.org; www.smallfarm.org
FarmLink, 2008, provides tools and examples to help
landowners, farmers and service providers keep farmland     The Intervale Center of Burlington, VT supports
in viable agriculture. The book includes an overview        financially viable and environmentally sustainable agri-
of farmland tenure in the U.S.—who owns and oper-           culture. Its mission is to develop farm- and land-based
ates American farmland—and some of the challenges           enterprises that generate economic and social opportu-
to keeping land in the hands of farmers. Each chapter       nity while protecting natural resources. The Intervale
describes a land tenure “model” such as lease, partner-     Farms Program creates opportunities for new farmers
ship or ownership. These are explained by real case stud-   by leasing land and facilities to small organic enterprises.
ies collected by California FarmLink staff and associ-       The program provides technical support and network-
ates. The book includes a CD-ROM that contains many         ing among other more experienced farmers. The Suc-
of the actual lease, partnership or purchase documents      cess on Farms Program works one on one with farmers
used in these examples. www.californiafarmlink.org          throughout Vermont to help strengthen their businesses
                                                            through increased revenues, more effective marketing,
Holding Ground: A Guide to Northeast Farmland               consideration of processing value-added products at the
Tenure and Stewardship. Kathy Ruhf, Annette Higby,          farm, and other strategies.
Andrea Woloschuk and others. 2004. Belchertown, Mass.       180 Intervale Road, Burlington, VT 05401
The New England Small Farm Institute and Intervale          802-660-0440; www.intervale.org
Foundation (see “Organizations” section for more infor-
mation on each of these). This publication addresses        Land For Good’s mission is to keep New England’s
farmland access, transfer, affordability and stewardship.    productive land cared for and in active use for the ben-
It focuses on “non-ownership” tenure options and con-       efit of the owners, the land and the community. This
tains sample lease provisions with explanations, sample     New England nonprofit helps families and organiza-
stewardship standards, worksheets, and case studies.        tions plan for, manage and pass on working lands. The
$30.00; 162 pages, paperback.                               group fosters professional and community networks,
                                                            public awareness and policies to keep New England’s
Minority Landowner is a monthly periodical featuring        working lands working. Land For Good offers assis-
articles and information specifically targeting minor-       tance with farm transfer planning, leases and other
ity landowners in the southeastern United States and        land use agreements, farm design and land planning,
addressing the issues they face. Contact Victor L. Harris   and conservation development.
at 919-215-1632 or ccpublishing@earthlink.net               29 Center Street, Keene, NH 03431
National Farm Transition Network supports programs          603-357-1600
that foster the next generation of farmers and ranchers.    info@landforgood.org; www.landforgood.org
Below is a list of linking programs, which work with the    American Society of Farm Managers and Rural
NFTN. Value-Added and Alternative Agriculture Tool          Appraisers is a nationwide organization for profession-
Kit, from the NCSU College of Agriculture and Life          als who provide management, valuation, and consulting
Sciences, provides an overview and on-line references.      services on agricultural and rural assets. The California
www.ncvalueadded.org/business-management.html               Chapter publishes Trends in Agricultural Land and Lease


www.attra.ncat.org                                                                                ATTRA        Page 11
Values, an excellent guide to farm-land values. The Soci-      with advocacy at the national level, as well as support for
ety was formed in 1929.                                        the local Black farming community.
950 South Cherry Street, Suite 508                             P.O Box 61, Tillery, NC 27887
Denver, CO 80246-2664                                          252-826-2800
303-758-0190                                                   info@bfaa-us.org; www.bfaa-us.org
info@asfmra.org; www.asfmra.com
                                                               Agriculture and Land-Based Training Association
USDA Farm Service Agency (FSA) offers two financ-                (ALBA) provides educational and business opportunities
ing programs for land purchase which especially ben-           for farmworkers and aspiring farmers to grow and sell
efit beginning and socially disadvantaged farmers. The          crops grown on two organic farms in Monterey County,
new Farm Bill provides for the Land Contract Guar-             California. ALBA provides educational and economic
antee Program and the Direct Farm Ownership Loan               opportunities for limited-resource, aspiring and immi-
Program. Because traditional methods of farm entry             grant farmers.
and farm succession are no longer adequate to meet             P.O. Box 6264, Salinas, California 93912
current challenges, the agency also offers the Begin-           831-758-1469, 831-758-3665 fax
ning Farmer and Rancher Land Contract Guarantee                www.albafarmers.org
Pilot Program. This pilot program will explore whether
land contract sales are a viable alternative for facili-       Land Loss Prevention Project is dedicated to land
tating land transfers to beginning farmers and ranch-          retention and environmental justice by providing train-
ers. The pilot program will be available in Indiana,           ing and legal support. The organization is dedicated to
North Dakota, Oregon, Pennsylvania, Wisconsin, and             the preservation of the family farm. The project was
Iowa. Contact the local Farm Service Agency office.              founded in 1982 by the North Carolina Association of
www.fsa.usda.gov                                               Black Lawyers to curtail epidemic losses of Black-owned
                                                               land in North Carolina. The organization broadened its
American Farmland Trust, founded in 1980 by a group            mission in 1993 to provide legal support and assistance
of farmers and conservationists concerned about the            to all financially distressed and limited-resource farmers
rapid loss of the nation’s farmland to development, is a       and landowners in North Carolina.
nonprofit membership organization dedicated to protect-         P.O. Box 179, Durham, NC 27702
ing our nation’s strategic agricultural resources. The trust   919-682-5969
provides legislative updates, conferences and e-news.          www.landloss.org
1200 18th Street, NW, Suite 800
Washington, D.C. 20036                                         Appalachian Sustainable Agriculture Project sup-
202-659-8339                                                   ports farmers and rural communities in the mountains
info@farmland.org; www.farmland.org                            of Western North Carolina and the Southern Appala-
                                                               chians by providing education, mentoring, promotion,
Equity Trust is a small, national nonprofit organiza-           web resources, and community and policy development.
tion committed to changing the spirit and character of         729 Haywood Rd. #3
our material relationships. The Trust helps communi-           Asheville, NC 28806
ties gain ownership interests in their food, land, and         828-236-1282
housing. The group works with people to make eco-
nomic changes that balance the needs of individuals            FarmLASTS Project seeks to improve how farm and
with the needs of the community, the earth, and future         ranch land is acquired, stewarded, and passed on. Team
generations. Equity Trust offers land tenure counseling,        members are drawn from organizations across the U.S.
financing, and land stewardship services.                       The project’s working groups conduct research and edu-
PO Box 746 , Turners Falls, MA 01376                           cation on farmland access, farm succession, and the
Phone: 413-863-9038                                            impact of these arrangements on land use and the envi-
Fax: 413-863-9082                                              ronment. In June 2009 the project convened a national
                                                               conference in Colorado to address these issues. The
info@equitytrust.org; www.equitytrust.org
                                                               USDA/CSREES-funded project is directed by staff at
Black Farmers and Agriculturalists Association was             the University of Vermont and Land for Good.
created to respond to the issues and concerns of Black         Contact Kathy Ruhf, kzruhf@verizon.net;
farmers in the U.S. and abroad. The group is concerned         www.farmlasts.org


Page 12      ATTRA                                                                                Finding Land to Farm
Land Linking Programs                  Ag Link                                Fax: 517.323.6604
                                       Iowa State University                  Contact: Matthew Smego,
National Farm                          www.extension.iastate.edu/bfc/Aglink   msmego@mail.michfb.com
Transition Network                     Iowa State also has links to some      www.michiganfarmbureau.com/
                                       very good on-line presentations by     benefits/farmlink.php
The goal of the network is to sup-
port programs that foster the next     previous Ag Link presenters: www.
generation of farmers and ranchers.    extension.iastate.edu/bfc/pubs.html    Minnesota
Farm linking organizations develop                                            Land Stewardship Project
                                       Maine                                     Farm Beginnings
new transition and tenure strategies
for the entry of the next generation   Maine Farmlink                         P.O. Box 130
and the exit of the existing farmer.   97 Main Street                         Lewiston, MN 55952
Below is a list of linking programs    Belfast, ME 04915                      Office: 507.523.3366
that work with the Network.            Office: 207.338.6575                     Contact: Karen Stettler,
Beginning Farmer Center                Fax: 207.338.6024                      stettler@landstewardshipproject.org
10861 Douglas Ave., Suite B            Contact: Esther LaCognata,             www.landstewardshipproject.org
Urbandale, Iowa 50322                  esther@mainefarmlink.org
jrbaker@iastate.edu;                   www.mainefarmlink.org                  Montana
www.farmtransition.org                 New England Land Link                  Land Link Montana
                                       P.O. Box 608                           Community Food &
California                             Belchertown, MA 01007                  Agriculture Coalition
California FarmLink                    Office: 413.323.4531                     127 N. Higgins Ave., Suite 305
P.O. Box 2224                          Fax: 413.323.9594                      Missoula, MT 59802
Sebastopol, CA 95473                   Contact: Eric Toensmeier               Phone: 406.543.0542
Office: 707.829.1691                     E-mail: landlink@smallfarm.org         Contact: Paul Hubbard,
Fax: 707.829.1693                      www.smallfarm.org                      pfhubbard@gmail.com
Contact: Steve Schwartz                                                       www.landlinkmontana.org
E-mail: info@californiafarmlink.org    Maryland
www.californiafarmlink.org             Eastern Shore Land Conservancy         Nebraska
                                       P.O. Box 169                           Land Link
Connecticut                            Queenstown, MD 21658                   Center for Rural Affairs
New England Land Link                  Office: 410.827.9756                     145 Main St.
P.O. Box 608                           www.eslc.org                           PO Box 136
Belchertown, MA 01007                                                         Lyons, NE 68038
                                       Massachusetts                          Office: 402.687.2100
Office: 413.323.4531
Fax: 413.323.9594                      New England Land Link                  Fax: 402.687.2200
Contact: Eric Toensmeier               P.O. Box 608                           Contact: Michael Holton
E-mail: landlink@smallfarm.org         Belchertown, MA 01007                  E-mail: info@cfra.org
www.smallfarm.org                      Office: 413.323.4531                     www.cfra.org/issues/become.htm
                                       Fax: 413.323.9594
                                                                              Beginning Farmer Program
                                       Contact: Eric Toensmeier
Iowa                                                                          Nebraska Dep’t of Agriculture
                                       E-mail: landlink@smallfarm.org
Farm On – Beginning Farmer                                                    P.O. Box 94947
                                       www.smallfarm.org
Center                                                                        Lincoln, NE 68509-4947
Iowa State University Extension                                               Office: 402.471.6890
                                       Michigan                               Toll-free: 800.446.4071
10861 Douglas Avenue, Suite B
Urbandale, IA 50322                    FarmLink                               Fax: 402.471.2525
Office: 877.BFC.1999                     Michigan Farm Bureau                   Contact: Marian Beethe,
Fax: 515.252.7829                      7373 W Saginaw Hwy.                    mbeethe@agr.ne.gov
Contact: John Baker                    Lansing, MI 48917                      www.agr.ne.gov — click on
E-mail: jrbaker@iastate.edu            Office: 517.323.7000                       “Beginning Farmer”
www.extension.iastate.edu/bfc          Toll-free: 888.805.4864

www.attra.ncat.org                                                                            ATTRA        Page 13
New Hampshire                        programs, educational opportuni-     Virginia
                                     ties and financial resources.
New England Land Link                                                     Virginia FarmLink
                                     P.O. Box 1286
P.O. Box 608                                                              Virginia Department of Agriculture
                                     Molalla, OR, 97038
Belchertown, MA 01007                                                       and Consumer Services
                                     info@friendsoffamilyfarmers.org
Office: 413.323.4531                                                        P.O. Box 1163
                                     www.ifarmoregon.org
Fax: 413.323.9594                                                         Richmond, VA 23218
Contact: Eric Toensmeier                                                  Office: 804.786.3501
E-mail: landlink@smallfarm.org       Pennsylvania                         Fax: 804.371.2945
www.smallfarm.org                    Pennsylvania Farm Link, Inc.         Contact: William P. Dickinson, Jr.,
                                     PA Dept. of Agriculture              wdickinson@vdacs.state.va.us
New Jersey                           2301 N. Cameron Street, Rm 311       www.savefarms.com/farmlink_
                                     Harrisburg, PA 17110-9408            about.htm
Ag Development Committee
                                     Office: 717.705.2121
State of New Jersey                                                       Virginia Farm Bureau Federation
                                     Fax: 717.787.5643
PO Box 330                                                                P.O. Box 27552
                                     E-mail: mail@pafarmlink.org
Trenton, NJ 08625-0330                                                    Richmond, Virginia 23261-7552
                                     www.pafarmlink.org
Office: 609.984.2504                                                        Office: 804.290.1017
Fax: 609.633.2004                    Center for Farm Transitions          Fax: 804.290.1099
Contact: David Kimmel,               Pennsylvania Dept. of Agriculture    Contact: Brock Herzberg,
david.kimmel@ag.state.nj.us          2301 North Cameron Street            brock.herzberg@vafb.com
www.state.nj.us/agriculture/sadc/    Harrisburg, PA 17110-9408            www.vafb.com
  farmlink.htm                       Toll-free: 877-475-2686              and www.savefarms.com
                                     Contact: D. Robert Davidson
New York                             Email: ddavidso@state.pa.us          Washington
NY FarmLink                          www.iplantofarm.com
                                                                          Washington FarmLink
c/o NY FarmNet                                                            Cascade Harvest Coalition
415 Warren Hall                      Rhode Island                         4649 Sunnyside Avenue North,
Ithaca, NY 14853                     New England Land Link                Room 123
800-547-FARM                         P.O. Box 608                         Seattle, WA 98103
E-mail: info@farmlink.org            Belchertown, MA 01007                Office: 206.632.0606
www.nyfarmlink.org                   Office: 413.323.4531                   Fax: 206.632.1080
                                     Fax: 413.323.9594                    Contact: Mary Embleton
Ohio                                 Contact: Eric Toensmeier             E-mail: mary@oz.net
The Farmland Center, a program       E-mail: landlink@smallfarm.org       www.cascadeharvest.org/programs/
of the Countryside Conservancy       www.smallfarm.org                    washington-farmlink
2179 Everett Road                                                         and www.cascadeharvest.org
Peninsula, Ohio 44264                Vermont
330.657.2538                         Land Link Vermont                    Wisconsin
beth@thefarmlandcenter.org           Center for Sustainable Agriculture   Wisconsin Farm Center
www.thefarmlandcenter.org            Office: 802.656.0233                   Office: 800.942.2474 or
www.cvcountryside.org                Fax: 802.656.8874                    608.224.5049
                                     Contact: Deb Heleba                  Fax: 608.224.5107
Oregon                               www.uvm.edu/landlinkvt               Contact: Roger James,
Friends of Family Farmers man-       New England Land Link                Roger.James@datcp.state.wi.us
ages ifarmoregon.org, an online      P.O. Box 608                         www.datcp.state.wi.us/mktg/
database that allows the user to     Belchertown, MA 01007                agriculture/farm-center/
search for agricultural services,    413.323.4531; Fax: 413.323.9594      transfers/index.jspvvvv
land for sale, land wanted, unique   Contact: Eric Toensmeier
leasing arrangements, partnership    E-mail: landlink@smallfarm.org
options, mentoring and internship    www.smallfarm.org

Page 14     ATTRA                                                                       Finding Land to Farm
Elements of a Good Lease

   This list is from California FarmLink                 7. Use restrictions or requirements
   www.californiafarmlink.org                                How is the land to be used?
                                                             Are there prohibitions or limitations on its
   1. Contact information                                     use, such as types of crops or production
       Be sure to include information for                     methods, for example?
        both landowner and tenant
                                                         8. Compliance with law
   2. Description of leased property                         Most leases reiterate that the tenant must
       Include a map if possible.                             comply with all appropriate laws.

   3. Length of term                                     9. Initial condition of premises
       How long is lease valid?                              Is the property okay as-is?
       Can it be renewed?                                    Are improvements or upgrades required
                                                               before or during the lease?
   4. Rental amount and how it is to be paid
       What is the amount per term?                      10. Alterations
       Is it as cash or share rent?                          Are there restrictions or allowances
       When is it payable?                                    concerning changes to the property?
       Are there periodic increases?                         What changes or improvements are allowed,
                                                              with and without specific permission?
   5. Maintenance and repairs
       Who is responsible?                               11. Subletting
       What are the monetary limits?                         Are there any restrictions or allowances?
                                                             Is tenant allowed to lease to a third party?
   6. Liability insurance and indemnification
       Is the tenant required to have liability          12. Dispute resolution
         insurance?                                          California FarmLink suggests specifying
       Most landowners want to specify that                   that disputes should be resolved first by
         they’re not liable for tenant’s operation.           mediation, then through binding arbitration.




                       Kinds of Consultants You May Need
                       1. Real estate agents
                       2. Real estate attorneys
                       3. Cooperative extension and other agricultural business consultants
                       4. Accountants and CPAs
                       5. Lenders such as Farm Service Agency (FSA), Farm Credit System,
                          banks, Community Development Financial Institutions (CDFIs),
                          Small Business Development Corporations (SBDCs)



www.attra.ncat.org                                                                             ATTRA        Page 15
Finding Land to Farm: Six Ways to Secure Farmland
                  By Kendra Johnson, California FarmLink
                  Rex Dufour and Marisa Alcorta, NCAT
                  © 2009 National Center for Appropriate Technology—
                    NCAT
                  Robert Armstrong, Illustrations
                  Karen Van Epen, Production
                  This publication is available on the Web at:
                  www.attra.ncat.org/attra-pub/PDF/finding.pdf

                  IP349, Slot 347
                  Version 070209




Page 16   ATTRA

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Finding Land to Farm: Six Ways to Secure Farmland

  • 1. FEE TITLE PURCHASE WITH SIMULTANEOUS CONSERVATION EASEMENT Contents Various Agreements for Leasing and Owning Land..........page 2 Finding Land to Farm.................................page 3 • Cash Lease Resources for Farmers Seeking Land Tenure..11 • Crop Share • Long-Term Lease Land Linking Programs ...................................... 13 • Lease with Option to Buy or Right of First Refusal Elements of a Good Lease.................................. 15 • Fee Title Purchase with Seller Financing • Fee Title Purchase with Agricultural Conservation Easement Kinds of Consultants You May Need................ 15 ATTRA—National Sustainable Agriculture Information Service is managed by the National Center for Appropriate Technology (NCAT) and is funded under a grant from the U.S. Department of Agriculture’s Rural Business-Cooperative Service. Visit the NCAT website, www.ncat.org for more information .
  • 2. A Publication of ATTRA - National Sustainable Agriculture Information Service • 1-800-346-9140 • www.attra.ncat.org Various Agreements for Leasing and Owning Land This publication highlights some common ways to lease or Lease with Option to Buy own land. It outlines important considerations about each of these leasing options and paths to ownership. or Right of First Refusal There are two ways a lease can improve ownership oppor- Renting farmland is a common practice in U.S. agriculture, tunities for a tenant farmer: where more than 45 percent of the 917 million farmland acres are rented. According to the 1999 Agricultural Eco- • With a “Purchase Option,” the owner and ten- nomics and Land Ownership Survey, 60 percent of farmland ant pre-determine the purchase price, with a date rent is paid in cash, 24 percent in shares of production, and for execution of the purchase. The tenant pays for 11 percent in a cash/share combination. Following are short this option up front, and the rent money can count descriptions of the various leasing and ownership options toward an initial down payment. covered in this publication. • With a “Right of First Refusal” clause, the Cash Lease owner can only sell the land to a third party after Most cash leases are short-term, requiring little commit- the tenant has had a chance to “refuse,” by match- ment from either landowner or tenant farmer. Long-term ing that third-party offer and making the purchase leases can be an affordable way for farmers to use more first. This helps ensure that an owner doesn’t sell sustainable practices and to invest more in their busi- the land “out from under” the tenant, but the ten- nesses. Many leases are based on a handshake. Verbal ant must be ready to act quickly. agreements are considered legal leases for one year, but this is NOT recommendable for either party, as conflicts Fee Title Purchase with Seller Financing can arise even among friends when terms are not clearly In this model the new buyer takes possession of the land stated on outset. A written lease provides benefits and and makes payments directly to the seller, as written security for both parties. in a “note.” This works very well when a good relation- ship has been established. The landowner can see the Crop Share property transferred to a promising new farmer, and the In this model, rent payment consists of part of the crop, new farmer can secure that note—sometimes by virtue most often paid as part of the income from total crop of his or her “character” more than conventional lend- sold. Also known as “share-crop” and “share lease,” this ing requirements. Even better, brokerage fees are avoided was historically disadvantageous to tenant farmers, but by both parties. Payments can be structured like a typi- can work well for beginning farmers without start-up cal mortgage, or in the case of an installment or land capital. Crop share arrangements are common in peren- contract sale, made periodically. This strategy is often a nial crops and some commodities, for example fruit and good way to transfer land to the next generation within nut operations, hay, field crops, processing tomatoes. a family. Agreements may have maximum and minimum limits to protect the farmer and landowner, respectively. Fee Title Purchase with Agricultural Conservation Easement Long-Term Lease An agricultural conservation easement forever extin- This model is as close to ownership as a lease can get. guishes development rights on that land, making it less The term is usually 40 to 99 years depending on state valuable to nonfarmers. These types of easements are law. This is longer than the average mortgage. These used if a landowner wishes to see the land remain avail- types of leases may even be inheritable. They are used able for agriculture: He or she donates or sells the land’s for publicly owned land and commercial real estate, but development rights in the form of an agricultural conser- are less common in agriculture. They are sometimes used vation easement to a nonprofit land trust or government by cities and land trusts who own the land but wish to agency, which ensures that the easement goals are upheld guarantee farmers lifetime tenure. Because of their lon- forever. This can drop the after-easement value, or “ease- gevity, the intent and clauses of leases must be very care- ment encumbered value,” of the land into an affordable fully drafted so they will last as long as the lease term. price range for a new farmer. Page 2 ATTRA Finding Land to Farm
  • 3. SORRY PEDRO — IF YOU ONLY HAD A VERBAL AGREEMENT, IT‛S YOUR WORD AGAINST THE LANDOWNER‛S, AND IT COULD BE TIED UP IN THE COURTS FOR A LONG TIME. IF YOU LEASE LAND AGAIN, GET A SIGNED CONTRACT! www.attra.ncat.org ATTRA Page 3
  • 4. Page 4 ATTRA Finding Land to Farm
  • 5. CASH LEASE AGREEMENTS ◊ VARIABLE DURATION • SHORT TERM LEASES ALLOW “TRIAL PERIOD” FOR BOTH LANDOWNER AND FARMER • LONG TERM LEASES ARE PREDICTABLE FOR THE OWNER AND SECURE FOR THE FARMER ◊ PAYMENT SCHEDULE NEGOTIABLE ◊ FARMER & LANDOWNER KNOW HOW MUCH THE RENT WILL BE DISADVANTAGES (IF LEASE IS SHORT) ◊ DIFFICULT TO MAKE LONG-TERM DECISIONS AND INVESTMENTS ◊ LENDERS MAY BALK AT FINANCING IMPROVEMENTS ◊ LESS INCENTIVE TO USE SUSTAINABLE PRACTICES TO IMPROVE THE SOIL ◊ NO EQUITY IS BUILT UP (SHORT OR LONG LEASE) ◊ LANDOWNER DOESN‛T SHARE RISK IF FARMER HAS A POOR CROP OR CROP HASN‛T COME IN YET www.attra.ncat.org ATTRA Page 5
  • 6. CROP SHARE LEASE ◊ RENT PAYMENT CONSISTS OF PART OF THE CROP, MOST OFTEN PAID AS PART OF THE INCOME FROM TOTAL CROP SOLD BUT CAN ALSO BE CALCULATED AS A PORTION OF NET ◊ IF THE TENANT FARMER DOES VERY WELL, THE CROP INCOME AFTER EXPENSES. PAYMENT IS USUALLY NOT SHARE RENT MAY EXCEED LOCAL CASH-LEASE RATES. REQUIRED UNTIL CROP COMES IN. YOU MAY WISH TO INCLUDE A “MAXIMUM PAY- ◊ RISK IS SHARED BETWEEN PARTIES. MENT CLAUSE,” WHICH WOULD PROTECT THE ◊ THIS KIND OF LEASE IS HISTORICALLY DISADVANTAGEOUS TENANT AGAINST PAYING TOO MUCH FOR RENT. TO TENANT FARMERS, BUT MAY BE A GOOD OPTION FOR BEGINNING FARMERS WITHOUT START-UP CAPITAL. ◊ CONVERSELY, A “MINIMUM PAYMENT CLAUSE” WOULD PROTECT THE LANDOWNER FROM ◊ IT CAN BE HARD TO BUDGET FOR AN EXACT RECEIVING TOO LITTLE PAYMENT (FOR EXAMPLE, RENT AMOUNT. NEITHER PARTY KNOWS IN CASE OF CROP FAILURE BY TENANT), BUT WHAT A FARM WILL YIELD, SO PAYMENT AMOUNTS ARE UNCERTAIN. SHOULD REFLECT THE “SHARED RISK” BETWEEN OWNERS DON‛T WANT THE RENT TO THE LANDLORD AND TENANT. BE TOO LOW. TENANTS DON‛T WANT IT TO BE TOO HIGH. Page 6 ATTRA Finding Land to Farm
  • 7. LONG TERM LEASE ◊ OFFERS MOST ADVANTAGES OF OWNERSHIP WITHOUT NEED FOR DOWN PAYMENT OR HEAVY BORROWING. LESS COMMON IN AN AGRICULTURAL CONTEXT. ◊ SOME LONG-TERM LEASES ARE INHERITABLE AND ALLOW FOR TRANSFER TO THE NEXT GENERATION. LOOK AT YOUR STATE‛S REAL ESTATE CODE. ◊ BECAUSE OF THEIR LONGEVITY, THESE LEASES CAN BE HIGHLY COMPLEX. THE INTENT AND CLAUSES MUST BE VERY CARE- FULLY DRAFTED TO LAST AS LONG AS THE LEASE TERM. ◊ LANDOWNERS ARE NOT OFTEN WILLING TO MAKE SUCH A LONG-TERM COMMITMENT, OR TO RISK TITLE FOR TENANT FINANCING ◊ TENANT IS SUBJECT TO LEASE TERMS WHICH MUST REMAIN REASONABLE AND PRUDENT FOR DURATION OF LEASE. MULTIPLE DECADES ARE A LONG TIME TO PLAN FOR! ◊ FARMER‛S ABILITY TO RECOVER EQUITY IN LAND MAY BE LIMITED, DEPENDING ON AGREEMENT. IT DEPENDS ON WHAT THE LANDOWNER WANTS, BUT LET‛S VISIT A FRIEND WHO HAS PURCHASED SOME LAND USING AN EASEMENT TO REDUCE THE COST OF THE LAND www.attra.ncat.org ATTRA Page 7
  • 8. Page 8 ATTRA Finding Land to Farm
  • 9. FEE TITLE PURCHASE WITH AGRICULTURAL CONSERVATION EASEMENT ◊ THE USE OF THE PROPERTY (THE DEVELOPMENT RIGHTS) IS RESTRICTED BY THE TERMS OF THE CONSERVATION EASEMENT AND THOSE RESTRICTIONS APPLY TO ALL FUTURE OWNERS OF THE PROPERTY ◊ THE DEVELOPMENT RIGHTS (IN THE FORM OF A CONSERVATION EASEMENT) ARE DONATED OR SOLD TO A NONPROFIT LAND TRUST OR GOVERNMENT AGENCY WHICH HOLDS THE EASEMENT AND ENSURES IT IS UPHELD. THE AFTER-EASEMENT VALUE (OR EASEMENT-ENCUMBERED VALUE) OF THE LAND MAY DROP THE PRICE INTO AN AFFORDABLE RANGE FOR A NEW FARMER. THIS CAN OCCUR IN SEVERAL WAYS: ◊ THE LANDOWNER COULD SELL THE EASEMENT FIRST, THEN SELL THE ENCUMBERED LAND TO A NEW FARMER. ◊ THE NEW FARMER COULD PARTNER WITH A LAND TRUST TO MAKE A JOINT PURCHASE OFFER TO THE LANDOWNER. (OCCASIONALLY A LAND TRUST BUYS FIRST, THEN SELLS TO A FARMER THROUGH A BIDDING PROCESS) ◊ THE NEW FARMER COULD CREATIVELY FINANCE LAND PURCHASE, WITH A COMMITMENT BY THE LAND TRUST TO PURCHASE THE EASEMENT IN FUTURE. FEE TITLE PURCHASE WITH AGRICULTURAL CONSERVATION EASEMENT ◊ FARMERS SEEKING TO BUY LAND HAVE A BETTER CHANCE WHEN THEY‛RE NOT BIDDING ON RESIDENTIAL OR RANCHETTE REAL ESTATE VALUE. EASEMENTS CAN MAKE THE DIFFERENCE BETWEEN AFFORDABLE OWNERSHIP AND LIFELONG LEASING. ◊ SELLERS CAN SEE THEIR AGRICULTURAL LEGACY CONTINUED. WITH TAX BENEFITS, THEY CAN SOMETIMES RECEIVE CLOSE TO FAIR MARKET VALUE FOR THE LAND. ◊ BECAUSE EASEMENTS RESTRICT PROPERTY RIGHTS, THEY MAY LIMIT VALUES OR OWNERS‛ ABILITY TO GET FINANCING. ◊ AGRICULTURAL CONSERVATION EASEMENTS DON‛T ALWAYS WORK AS INTENDED. THESE EASEMENT-ENCUMBERED PROPERTIES OFTEN STILL HAVE HIGH RURAL-ESTATE HOME VALUE TO NON-FARMERS. ◊ PROCESS CAN BE SLOW, SINCE LAND TRUSTS USUALLY HAVE TO APPLY FOR FUNDING TO PURCHASE EASEMENTS. ◊ EASEMENTS ARE, IN THEORY, FOREVER. THIS PRESENTS CHALLENGES TO CURRENT AND FUTURE LANDOWNERS AS TO COMPLIANCE AND FUTURE ENFORCEABILITY OF EASEMENTS. www.attra.ncat.org ATTRA Page 9
  • 10. FEE TITLE PURCHASE WITH SELLER FINANCING FEE TITLE PURCHASE WITH SELLER FINANCING ADVANTAGES (CONTINUED) ◊ BROKERAGE FEES AVOIDED BY BOTH PARTIES ◊ IN THIS MODEL, THE NEW BUYER TAKES POSSESSION OF THE LAND, MAKES PAYMENTS DIRECTLY TO SELLER. ◊ GOOD WAY TO TRANSFER LAND TO NEXT GENERATION ◊ THIS WORKS VERY WELL WHEN A GOOD RELATIONSHIP ◊ INSTALLMENT PLAN MAY BE STRUCTURED FOR HAS BEEN ESTABLISHED. THE LANDOWNER CAN SEE SMALLER INITIAL PAYMENTS WITH LARGER THE PROPERTY TRANSFERRED TO A PROMISING NEW “BALLOON” PAYMENTS WHEN FARMER EXPECTS FARMER, AND THE NEW FARMER CAN BUILD EQUITY, TO BE MORE FINANCIALLY PREPARED SOMETIMES WITHOUT HIGH DOWN PAYMENT DISADVANTAGES ADVANTAGES ◊ IF BUYER DEFAULTS, THE LAND GOES ◊ CHARACTER LOAN MAY BE EASIER IN THIS BACK TO THE SELLER AND THE BUYER‛S SCENARIO. BUYER DOESN‛T NECESSARILY EQUITY MAY BE LOST. HAVE TO QUALIFY FOR TRADITIONAL BANK OR GOVERNMENT LOAN. ◊ MOST INITIAL PAYMENTS COVER INTEREST ONLY, OR MAY BE VERY ◊ LANDOWNER CAN SPREAD OUT CAPITAL LARGE. REQUIRED DOWN PAYMENTS GAINS FOR TAX PURPOSES. MAY ALSO BE LARGE. ADVANTAGES ◊ THE FARMER IS GUARANTEED THAT LAND WILL NOT BE “SOLD OUT FROM UNDER” HIM OR HER. LEASE WITH OPTION TO BUY ◊ WITH AN OPTION IN WHICH THE RENT PAYMENT GOES TOWARD EVENTUAL PURCHASE, THE FARMER THERE ARE TWO WAYS A LEASE CAN IMPROVE BUILDS EQUITY TOWARD OWNERSHIP. OWNERSHIP OPPORTUNITIES FOR A TENANT FARMER. ◊ WHEN THE PURCHASE AGREEMENT IS ATTACHED, FARMER CAN PLAN FOR A KNOWN PURCHASE PRICE. 1) WITH A “FIRST RIGHT OF REFUSAL” CLAUSE, THE TENANT GETS TO MAKE THE FIRST OFFER PRIOR DISADVANTAGES TO THE OWNER LISTING THE LAND FOR SALE, AT ◊ WITH FIRST RIGHT OF REFUSAL, TENANTS HAVE THE SELLER‛S ASKING PRICE. LITTLE NEGOTIATING POWER—THEY CAN ONLY EX 2) WITH AN “OPTION AGREEMENT,” OWNER ERCISE THE RIGHT BY AGREEING TO SELLER‛S TERMS. AND TENANT PRE-DETERMINE PURCHASE ◊ IF THE FARMER IS NOT FINANCIALLY PRICE, WITH A REQUIRED DATE OF READY WHEN THE PROPERTY IS EXECUTION OF PURCHASE. TENANT PUT UP FOR SALE, OR AT PAYS FOR THIS OPTION UP FRONT, THE AGREED-UPON AND RENT MONEY SOMETIMES COUNTS PURCHASE DATE (OPTION), TOWARD INITIAL DOWN PAYMENT. THE ADVANTAGE AND THE RENT EQUITY ARE LOST. THANKS FOR YOUR HELP, JOE! I‛M GOING TO THINK ABOUT THIS, STUDY THE RESOURCES* AND TALK WITH MY FAMILY. I‛VE LEARNED A LOT. Page 10 ATTRA Finding Land to Farm
  • 11. Resources for Farmers Seeking Land Tenure Publications and Web Resources Organizations Farmers for the Future is an internet resource for New England Small Farm Institute’s mission is to pro- beginning farmers which can be found on the Farm mote small farm development by providing information Credit System-sponsored “Agriculture Online” web- and training for aspiring, beginning and transitioning site. It includes featured profiles of farmers, articles farmers. NESFI maintains an extensive resource collec- about farm transitions and beginning farmers who have tion, produces publications, develops and offers innova- “made it,” and a list of links for beginning farmers. tive farmer-guided programs, and advocates for policies www.agriculture.com/ag/category.jhtml?categoryid=/ that encourage sustainable small-scale agriculture. templatedata/ag/category/data/agfuturechannel.xml 275 Jackson St., Belchertown, MA 01007 413-323-4531; 413-323-9594 (fax) A Farmers’ Guide to Securing Land, by California info@smallfarm.org; www.smallfarm.org FarmLink, 2008, provides tools and examples to help landowners, farmers and service providers keep farmland The Intervale Center of Burlington, VT supports in viable agriculture. The book includes an overview financially viable and environmentally sustainable agri- of farmland tenure in the U.S.—who owns and oper- culture. Its mission is to develop farm- and land-based ates American farmland—and some of the challenges enterprises that generate economic and social opportu- to keeping land in the hands of farmers. Each chapter nity while protecting natural resources. The Intervale describes a land tenure “model” such as lease, partner- Farms Program creates opportunities for new farmers ship or ownership. These are explained by real case stud- by leasing land and facilities to small organic enterprises. ies collected by California FarmLink staff and associ- The program provides technical support and network- ates. The book includes a CD-ROM that contains many ing among other more experienced farmers. The Suc- of the actual lease, partnership or purchase documents cess on Farms Program works one on one with farmers used in these examples. www.californiafarmlink.org throughout Vermont to help strengthen their businesses through increased revenues, more effective marketing, Holding Ground: A Guide to Northeast Farmland consideration of processing value-added products at the Tenure and Stewardship. Kathy Ruhf, Annette Higby, farm, and other strategies. Andrea Woloschuk and others. 2004. Belchertown, Mass. 180 Intervale Road, Burlington, VT 05401 The New England Small Farm Institute and Intervale 802-660-0440; www.intervale.org Foundation (see “Organizations” section for more infor- mation on each of these). This publication addresses Land For Good’s mission is to keep New England’s farmland access, transfer, affordability and stewardship. productive land cared for and in active use for the ben- It focuses on “non-ownership” tenure options and con- efit of the owners, the land and the community. This tains sample lease provisions with explanations, sample New England nonprofit helps families and organiza- stewardship standards, worksheets, and case studies. tions plan for, manage and pass on working lands. The $30.00; 162 pages, paperback. group fosters professional and community networks, public awareness and policies to keep New England’s Minority Landowner is a monthly periodical featuring working lands working. Land For Good offers assis- articles and information specifically targeting minor- tance with farm transfer planning, leases and other ity landowners in the southeastern United States and land use agreements, farm design and land planning, addressing the issues they face. Contact Victor L. Harris and conservation development. at 919-215-1632 or ccpublishing@earthlink.net 29 Center Street, Keene, NH 03431 National Farm Transition Network supports programs 603-357-1600 that foster the next generation of farmers and ranchers. info@landforgood.org; www.landforgood.org Below is a list of linking programs, which work with the American Society of Farm Managers and Rural NFTN. Value-Added and Alternative Agriculture Tool Appraisers is a nationwide organization for profession- Kit, from the NCSU College of Agriculture and Life als who provide management, valuation, and consulting Sciences, provides an overview and on-line references. services on agricultural and rural assets. The California www.ncvalueadded.org/business-management.html Chapter publishes Trends in Agricultural Land and Lease www.attra.ncat.org ATTRA Page 11
  • 12. Values, an excellent guide to farm-land values. The Soci- with advocacy at the national level, as well as support for ety was formed in 1929. the local Black farming community. 950 South Cherry Street, Suite 508 P.O Box 61, Tillery, NC 27887 Denver, CO 80246-2664 252-826-2800 303-758-0190 info@bfaa-us.org; www.bfaa-us.org info@asfmra.org; www.asfmra.com Agriculture and Land-Based Training Association USDA Farm Service Agency (FSA) offers two financ- (ALBA) provides educational and business opportunities ing programs for land purchase which especially ben- for farmworkers and aspiring farmers to grow and sell efit beginning and socially disadvantaged farmers. The crops grown on two organic farms in Monterey County, new Farm Bill provides for the Land Contract Guar- California. ALBA provides educational and economic antee Program and the Direct Farm Ownership Loan opportunities for limited-resource, aspiring and immi- Program. Because traditional methods of farm entry grant farmers. and farm succession are no longer adequate to meet P.O. Box 6264, Salinas, California 93912 current challenges, the agency also offers the Begin- 831-758-1469, 831-758-3665 fax ning Farmer and Rancher Land Contract Guarantee www.albafarmers.org Pilot Program. This pilot program will explore whether land contract sales are a viable alternative for facili- Land Loss Prevention Project is dedicated to land tating land transfers to beginning farmers and ranch- retention and environmental justice by providing train- ers. The pilot program will be available in Indiana, ing and legal support. The organization is dedicated to North Dakota, Oregon, Pennsylvania, Wisconsin, and the preservation of the family farm. The project was Iowa. Contact the local Farm Service Agency office. founded in 1982 by the North Carolina Association of www.fsa.usda.gov Black Lawyers to curtail epidemic losses of Black-owned land in North Carolina. The organization broadened its American Farmland Trust, founded in 1980 by a group mission in 1993 to provide legal support and assistance of farmers and conservationists concerned about the to all financially distressed and limited-resource farmers rapid loss of the nation’s farmland to development, is a and landowners in North Carolina. nonprofit membership organization dedicated to protect- P.O. Box 179, Durham, NC 27702 ing our nation’s strategic agricultural resources. The trust 919-682-5969 provides legislative updates, conferences and e-news. www.landloss.org 1200 18th Street, NW, Suite 800 Washington, D.C. 20036 Appalachian Sustainable Agriculture Project sup- 202-659-8339 ports farmers and rural communities in the mountains info@farmland.org; www.farmland.org of Western North Carolina and the Southern Appala- chians by providing education, mentoring, promotion, Equity Trust is a small, national nonprofit organiza- web resources, and community and policy development. tion committed to changing the spirit and character of 729 Haywood Rd. #3 our material relationships. The Trust helps communi- Asheville, NC 28806 ties gain ownership interests in their food, land, and 828-236-1282 housing. The group works with people to make eco- nomic changes that balance the needs of individuals FarmLASTS Project seeks to improve how farm and with the needs of the community, the earth, and future ranch land is acquired, stewarded, and passed on. Team generations. Equity Trust offers land tenure counseling, members are drawn from organizations across the U.S. financing, and land stewardship services. The project’s working groups conduct research and edu- PO Box 746 , Turners Falls, MA 01376 cation on farmland access, farm succession, and the Phone: 413-863-9038 impact of these arrangements on land use and the envi- Fax: 413-863-9082 ronment. In June 2009 the project convened a national conference in Colorado to address these issues. The info@equitytrust.org; www.equitytrust.org USDA/CSREES-funded project is directed by staff at Black Farmers and Agriculturalists Association was the University of Vermont and Land for Good. created to respond to the issues and concerns of Black Contact Kathy Ruhf, kzruhf@verizon.net; farmers in the U.S. and abroad. The group is concerned www.farmlasts.org Page 12 ATTRA Finding Land to Farm
  • 13. Land Linking Programs Ag Link Fax: 517.323.6604 Iowa State University Contact: Matthew Smego, National Farm www.extension.iastate.edu/bfc/Aglink msmego@mail.michfb.com Transition Network Iowa State also has links to some www.michiganfarmbureau.com/ very good on-line presentations by benefits/farmlink.php The goal of the network is to sup- port programs that foster the next previous Ag Link presenters: www. generation of farmers and ranchers. extension.iastate.edu/bfc/pubs.html Minnesota Farm linking organizations develop Land Stewardship Project Maine Farm Beginnings new transition and tenure strategies for the entry of the next generation Maine Farmlink P.O. Box 130 and the exit of the existing farmer. 97 Main Street Lewiston, MN 55952 Below is a list of linking programs Belfast, ME 04915 Office: 507.523.3366 that work with the Network. Office: 207.338.6575 Contact: Karen Stettler, Beginning Farmer Center Fax: 207.338.6024 stettler@landstewardshipproject.org 10861 Douglas Ave., Suite B Contact: Esther LaCognata, www.landstewardshipproject.org Urbandale, Iowa 50322 esther@mainefarmlink.org jrbaker@iastate.edu; www.mainefarmlink.org Montana www.farmtransition.org New England Land Link Land Link Montana P.O. Box 608 Community Food & California Belchertown, MA 01007 Agriculture Coalition California FarmLink Office: 413.323.4531 127 N. Higgins Ave., Suite 305 P.O. Box 2224 Fax: 413.323.9594 Missoula, MT 59802 Sebastopol, CA 95473 Contact: Eric Toensmeier Phone: 406.543.0542 Office: 707.829.1691 E-mail: landlink@smallfarm.org Contact: Paul Hubbard, Fax: 707.829.1693 www.smallfarm.org pfhubbard@gmail.com Contact: Steve Schwartz www.landlinkmontana.org E-mail: info@californiafarmlink.org Maryland www.californiafarmlink.org Eastern Shore Land Conservancy Nebraska P.O. Box 169 Land Link Connecticut Queenstown, MD 21658 Center for Rural Affairs New England Land Link Office: 410.827.9756 145 Main St. P.O. Box 608 www.eslc.org PO Box 136 Belchertown, MA 01007 Lyons, NE 68038 Massachusetts Office: 402.687.2100 Office: 413.323.4531 Fax: 413.323.9594 New England Land Link Fax: 402.687.2200 Contact: Eric Toensmeier P.O. Box 608 Contact: Michael Holton E-mail: landlink@smallfarm.org Belchertown, MA 01007 E-mail: info@cfra.org www.smallfarm.org Office: 413.323.4531 www.cfra.org/issues/become.htm Fax: 413.323.9594 Beginning Farmer Program Contact: Eric Toensmeier Iowa Nebraska Dep’t of Agriculture E-mail: landlink@smallfarm.org Farm On – Beginning Farmer P.O. Box 94947 www.smallfarm.org Center Lincoln, NE 68509-4947 Iowa State University Extension Office: 402.471.6890 Michigan Toll-free: 800.446.4071 10861 Douglas Avenue, Suite B Urbandale, IA 50322 FarmLink Fax: 402.471.2525 Office: 877.BFC.1999 Michigan Farm Bureau Contact: Marian Beethe, Fax: 515.252.7829 7373 W Saginaw Hwy. mbeethe@agr.ne.gov Contact: John Baker Lansing, MI 48917 www.agr.ne.gov — click on E-mail: jrbaker@iastate.edu Office: 517.323.7000 “Beginning Farmer” www.extension.iastate.edu/bfc Toll-free: 888.805.4864 www.attra.ncat.org ATTRA Page 13
  • 14. New Hampshire programs, educational opportuni- Virginia ties and financial resources. New England Land Link Virginia FarmLink P.O. Box 1286 P.O. Box 608 Virginia Department of Agriculture Molalla, OR, 97038 Belchertown, MA 01007 and Consumer Services info@friendsoffamilyfarmers.org Office: 413.323.4531 P.O. Box 1163 www.ifarmoregon.org Fax: 413.323.9594 Richmond, VA 23218 Contact: Eric Toensmeier Office: 804.786.3501 E-mail: landlink@smallfarm.org Pennsylvania Fax: 804.371.2945 www.smallfarm.org Pennsylvania Farm Link, Inc. Contact: William P. Dickinson, Jr., PA Dept. of Agriculture wdickinson@vdacs.state.va.us New Jersey 2301 N. Cameron Street, Rm 311 www.savefarms.com/farmlink_ Harrisburg, PA 17110-9408 about.htm Ag Development Committee Office: 717.705.2121 State of New Jersey Virginia Farm Bureau Federation Fax: 717.787.5643 PO Box 330 P.O. Box 27552 E-mail: mail@pafarmlink.org Trenton, NJ 08625-0330 Richmond, Virginia 23261-7552 www.pafarmlink.org Office: 609.984.2504 Office: 804.290.1017 Fax: 609.633.2004 Center for Farm Transitions Fax: 804.290.1099 Contact: David Kimmel, Pennsylvania Dept. of Agriculture Contact: Brock Herzberg, david.kimmel@ag.state.nj.us 2301 North Cameron Street brock.herzberg@vafb.com www.state.nj.us/agriculture/sadc/ Harrisburg, PA 17110-9408 www.vafb.com farmlink.htm Toll-free: 877-475-2686 and www.savefarms.com Contact: D. Robert Davidson New York Email: ddavidso@state.pa.us Washington NY FarmLink www.iplantofarm.com Washington FarmLink c/o NY FarmNet Cascade Harvest Coalition 415 Warren Hall Rhode Island 4649 Sunnyside Avenue North, Ithaca, NY 14853 New England Land Link Room 123 800-547-FARM P.O. Box 608 Seattle, WA 98103 E-mail: info@farmlink.org Belchertown, MA 01007 Office: 206.632.0606 www.nyfarmlink.org Office: 413.323.4531 Fax: 206.632.1080 Fax: 413.323.9594 Contact: Mary Embleton Ohio Contact: Eric Toensmeier E-mail: mary@oz.net The Farmland Center, a program E-mail: landlink@smallfarm.org www.cascadeharvest.org/programs/ of the Countryside Conservancy www.smallfarm.org washington-farmlink 2179 Everett Road and www.cascadeharvest.org Peninsula, Ohio 44264 Vermont 330.657.2538 Land Link Vermont Wisconsin beth@thefarmlandcenter.org Center for Sustainable Agriculture Wisconsin Farm Center www.thefarmlandcenter.org Office: 802.656.0233 Office: 800.942.2474 or www.cvcountryside.org Fax: 802.656.8874 608.224.5049 Contact: Deb Heleba Fax: 608.224.5107 Oregon www.uvm.edu/landlinkvt Contact: Roger James, Friends of Family Farmers man- New England Land Link Roger.James@datcp.state.wi.us ages ifarmoregon.org, an online P.O. Box 608 www.datcp.state.wi.us/mktg/ database that allows the user to Belchertown, MA 01007 agriculture/farm-center/ search for agricultural services, 413.323.4531; Fax: 413.323.9594 transfers/index.jspvvvv land for sale, land wanted, unique Contact: Eric Toensmeier leasing arrangements, partnership E-mail: landlink@smallfarm.org options, mentoring and internship www.smallfarm.org Page 14 ATTRA Finding Land to Farm
  • 15. Elements of a Good Lease This list is from California FarmLink 7. Use restrictions or requirements www.californiafarmlink.org How is the land to be used? Are there prohibitions or limitations on its 1. Contact information use, such as types of crops or production Be sure to include information for methods, for example? both landowner and tenant 8. Compliance with law 2. Description of leased property Most leases reiterate that the tenant must Include a map if possible. comply with all appropriate laws. 3. Length of term 9. Initial condition of premises How long is lease valid? Is the property okay as-is? Can it be renewed? Are improvements or upgrades required before or during the lease? 4. Rental amount and how it is to be paid What is the amount per term? 10. Alterations Is it as cash or share rent? Are there restrictions or allowances When is it payable? concerning changes to the property? Are there periodic increases? What changes or improvements are allowed, with and without specific permission? 5. Maintenance and repairs Who is responsible? 11. Subletting What are the monetary limits? Are there any restrictions or allowances? Is tenant allowed to lease to a third party? 6. Liability insurance and indemnification Is the tenant required to have liability 12. Dispute resolution insurance? California FarmLink suggests specifying Most landowners want to specify that that disputes should be resolved first by they’re not liable for tenant’s operation. mediation, then through binding arbitration. Kinds of Consultants You May Need 1. Real estate agents 2. Real estate attorneys 3. Cooperative extension and other agricultural business consultants 4. Accountants and CPAs 5. Lenders such as Farm Service Agency (FSA), Farm Credit System, banks, Community Development Financial Institutions (CDFIs), Small Business Development Corporations (SBDCs) www.attra.ncat.org ATTRA Page 15
  • 16. Finding Land to Farm: Six Ways to Secure Farmland By Kendra Johnson, California FarmLink Rex Dufour and Marisa Alcorta, NCAT © 2009 National Center for Appropriate Technology— NCAT Robert Armstrong, Illustrations Karen Van Epen, Production This publication is available on the Web at: www.attra.ncat.org/attra-pub/PDF/finding.pdf IP349, Slot 347 Version 070209 Page 16 ATTRA