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February 25, 2026 - Negotiation is Key

Determining the best alternative or land lease arrangement for your farm.

There are a variety of possible agreements that may be negotiated between farmers to capitalize on potential returns from the agricultural use of land. When negotiations are concluded, both parties should achieve a benefit. If not, then the arrangement was likely unfairly negotiated. Inequitable arrangements usually end in feelings of anger and resentment that may last for generations.

Handshake agreements, though legally binding, fail because of misunderstandings due to a lack of clarity. This is most often because of the arrangement not having been written, specifically outlining details of the lease. Each of us sees the world differently because of our varied family backgrounds, cultural heritage, language and personal experience to name a few. As a result, verbal arrangements may be misconstrued. Putting an agreement in writing involves reading and discussion which further clarifies understanding. If both parties to an agreement understand each other then they can begin from a position of trust.

There are numerous potential benefits to land or crop leasing including the opportunity to expand production without having to finance land purchases. Inter-generational transfers allow for retirement income, increased flexibility in farm planning decisions, and the opportunity to retain farm income when disability or other circumstances intervene.

Essentially, there are three basic options available when it comes to land leases. A Crop Share Lease can be just that, with the tenant doing the farming and the harvest shared with the landlord based on a pre-arranged percentage, such as 50/50, or 60/40 and so on. Variations that affect the crop share may involve the landlord incurring some responsibility for the input costs of seed, chemicals or fertilizer. This can lead to having an influence in the cropping decisions and taking out crop insurance either jointly or separately. Depending on the nature of the lease, government payments and subsidies should be accounted for, as well as surface lease disturbances for access to mineral rights.

A Cash Lease involves the tenant paying a fixed cash payment to the landlord for the use of the land and possibly the facilities. The tenant then receives all the income and pays all the expenses. The landlord receives a guaranteed return and detailed records on the part of the tenant are not required. The rental amount can be determined using the income or crop share approach, or the “going rate” in the area. The lease agreement should indicate the details as to when the rent is due and payable, as well as the rights of the landlord to recover payment of the rent if in default, over and above the rights provided for in The Real Property Governance? Act.

In the Flexible Cash Lease, the rental payment varies each year with the price of the commodity grown. In this way the risk is shared, but the tenant has greater independence in decision making than in a crop share lease. Longer leases can be negotiated thus encouraging the use of better farming practices. Rent may be determined in a similar manner to the cash lease and the same details regarding payment and recovery outlined.

Custom Farming Arrangements are another option as an alternative to leasing, especially for those who wish to maintain their farming classification and tax designation. Custom arrangements can be done on a joint farming or partnership agreement.

It should be noted that land lease agreements may have tax implications as well as a potential loss of capital gain roll over to a child. Consultation with an accounting professional as well as a lawyer for appropriate wording and direction in the formulation of any agreement is advisable.

Once the best alternative or land lease arrangement is complete, and all benefits and responsibilities of the parties involved have been considered, the deal is locked. With both parties receiving a benefit, the agreement will likely succeed long term.

Clearwater County regularly gets requests and questions on how landowners should price their assets to be fair for all parties and reflect the current markets. Now is a great opportunity to take advantage of the Farm Rental Rates Survey, before it’s over on March 1, 2026. Have your say to help make the data more accurate for everyone. 

Data collected includes acres of crop and pastureland owned and rented, hay and annual crop share agreements, what annual crops are grown, cow/calf and yearling pasture rates, and custom farming operations. Once completed, the results will be shared online at www.clearwatercounty.ca and with the agriculture community to help producers and landlords better understand current conditions. Your feedback is greatly appreciated!