It is important to discuss in the lease agreement and specify who is responsible for the delivery and sale of the crop and how this sale should take place. Often, the tenant is responsible for the delivery of the crop to a specific delivery point, where the agreed percentage is either allocated to the owner or the owner receives the net price of the bar after deducting the handling and transportation costs. The tax impact of entering into a lease must be carefully considered. The distribution of a crop may depend on a number of factors, including local land market prices and the bargaining ability and expectations of both the tenant and the landlord. A long-term lease agreement (not to be confused with a sales and leasing contract) can be used as an instrument for succession planning. Landowners and potential successors to the farm, who are considering alternatives to traditional financing opportunities, may consider a long-term lease. Lease agreements may include land, buildings and/or equipment. Owners and successors may have multiple leases or one inclusive lease. Leasing contracts in Ontario may have any duration, but leases over 21 years of age must be approved by the municipality to be valid.
Ownership Transfer – It is important for the landlord and tenant to discuss their expectations in the event that the owner sells the farm property to a new owner for the duration of the lease. A fair agreement will attempt to limit a balance between the lessor`s desire, his ability to sell the farm and the tenant`s desire to pursue the lease agreement. The assessment approach uses the estimated costs or contributions of the tenant and lessor to determine the rate of harvest share. The basic principle is that the parties participate in the overall performance in the same proportion as their contributions. The tenant or lessor can use this approach separately or collectively to determine a reasonable harvest ratio. This can then become a starting point for further negotiations. Leasing and leasing land is a common practice in rural Ontario. The types of rental arrangements for farmland are very different in the provinces, as are the relationships between landlords and tenants.
What is desirable or fair for a certain owner-tenant relationship is not acceptable to others. Insurance – Landowners may consider applying for proof of crop insurance, especially if the rent has not been paid in advance. Tenants and landlords should also talk about insurance against possible environmental damage. If the tenant plans to store harvested crops on the landowner`s property, there should also be insurance guarantees for protection against theft or damage. Knowing your costs is important if you set a fair rental price and develop a rental agreement. Your own records are the best source of this information, but if it is not available, it is important to use realistic estimates. The following resources can help: Tenants usually need written permission from the landlord before making major improvements. It is also important to outline how the value of the improvements will be determined and when compensation will be paid. An example of some form of compensation to the tenant for improvement is that the lessor exploits the tenant free of charge for a given period of time that must be agreed between the parties (in writing) at the time of the landowner`s agreement.