farmgate: Farm Leasing #3: Landowner and Operator Relationships.
The operator who leases a farm becomes the steward and caretaker of that property on behalf of the landowner. The landowner’s family may have obtained the property from a land patent in the 1830’s, homesteading in the l880’s or it may have been purchased at auction last week. Nevertheless, the operator has two responsibilities, to himself and to the landowner, and in this series on farm leases; the landlord-tenant relationship is prime.
While the owner is supplying the money-making asset, it is up to the operator to generate the cash that will feed his own family and provide a return on the owner’s investment. So, the operator has two objectives, and both can be achieved simultaneously, say Ohio State economists LeeAnn Moss and Bernie Erven, who compare the relationship to borrower-lender, employer-employee, and husband and wife.
While farm operator demographics change slightly, for the most part increasing in average age, the landowner demographics are primarily senior citizens who live some distance from the farm and don’t have the energy and ability to manage it. Farm managers are periodically involved, but where they are not, the farm operator must ensure the landowner has an adequate comfort level that the farm is in good hands. The greater the comfort level, the stronger the relationship, and the longer the tenure the operator may have on the land. In the bulk of cases where that suddenly changes, it is the result of the death of the elderly landowner, the inheritance of the land by a younger non-farm-familiar generation who wants to put out the land for auction to get the top dollar.
In a stable relationship, Moss and Erven say the nature and extent of the relationship can have a significant influence on the type and terms of the lease. “Keeping the landlord happy” is an exercise in good public relations, which involves: regular communications, information updates on trends, costs, and crop conditions, and keeping the property in good condition while welcoming the landowner like part of the family.
Moss and Erven suggest a multi-point strategy to establish a good relationship and build on that bond over time:
1) A written lease establishes a business relationship that leaves little to uncertainty.
2) A resume will show your past accomplishments, future goals, and your farming philosophy.
3) A periodic report on your objectives will tell the landowner what is planned to eliminate any surprises on the part of the operator.
4) Provide detailed information through written reports or even a website focused on the farm with pictures, verbal reports, markets and crop conditions, and a private page for confidential landowner information.
5) Improve the appearance of the property with removal of older trees and brush, removal or updating of buildings, removal or repair of fence, to make them think you know how their parents kept up the farm.
6) Acknowledge holidays, birthdays, or losses in the family. Create social opportunities when convenient that incorporates the owner into your own family.
7) Educate and schmooze the next generation about the farm, to establish their trust of an operator as an authority and the best possible operator for their economic interests.
Building a relationship between operators and landowners may also involve numerous issues that should be discussed at the outset, with continual updates to ensure both sides are thinking along the same lines. Those include common goals, level of risk aversion, leasing preferences, the sophistication of communication methods, attitudes toward change, any types of financial constraints, and how far each is willing to go to solve problems. When each party understands the thinking of the other, then the chance for a long term relationship is improved.
Similarly, there are issues that can quickly destroy a relationship. Those factors that should be avoided include: unclear communication, stereotyping, using the wrong method of communication, and the wrong language, not providing feedback, not being a good listener, and other impediments to clear understanding of each other.
Summary:
While the relationship between a farm operator and the landowner is primarily a financial and business relationship, its tenure and success will be enhanced by a good understanding of each other, the needs of each individual, and knowing what the other party’s priorities are. Just as in a marriage, communication is an integral part to hold the relationship together.
Posted by Stu Ellis on November 19, 2008 12:14 AM to farmgate