Common use of Flexible Cash Lease Clause in Contracts

Flexible Cash Lease. In a flexible cash lease, the rental payment varies each year with the price of grain, thus the risk of any change in grain prices is shared with the landowner. Compared to cash leases, these agreements do not require periodic renegotiation when grain prices change. Considerations: The tenant has greater independence in decision making than a crop share lease. The risk of changes in grain prices is shared with the landlord. The results of a tenant's superior farming skills are not shared with the landlord. The landlord's rent is guaranteed in relation to quantity, but not to the price of grain. Leases with longer terms can be negotiated, thus encouraging the use of better farming practices. The tenant assumes all risks in crop production. The landlord has less influence on the tenant's management. Amount of Rent It is important to keep the procedure for calculating flexible cash rent simple. The landlord's share of crop production can be calculated using the crop share approach. The average production for a commonly grown crop will be used as an estimate. This estimate is then adjusted for an allowance for crop failure, and the landlord's share is determined. The method for selecting the prices of the commonly grown crops will also be included in the lease, to determine the actual amount of rent due. The rental payment can be made by delivering an agreed quantity of grain to market in the landlord's name or by paying the equivalent cash price. Considerations in Establishing Prices An average grain price for 30 days prior to the rent payment could be applied. Alternatively, the price of a specified type and grade of grain on the day payment is made can be used. Flexible Cash Lease Terms The flexible cash lease should specify the date(s) on which the rent is due and payable; the delivery point at which prices are to be determined or the point at which the landlord's quantity of grains are to be delivered; and the rights of the landlord to recover the payment of rent (seizure of crop and grain).

Flexible Cash Lease. In a flexible cash lease, the rental payment varies each year with the price of grain, thus the risk of any change in grain prices is shared with the landowner. Compared to cash leases, these agreements do not require periodic renegotiation when grain prices change. Considerations: The tenant has greater independence in decision making than a crop share lease. The risk of changes in grain prices is shared with the landlord. The results of a tenant's superior farming skills are not shared with the landlord. The landlord's rent is guaranteed in relation to quantity, but not to the price of grain. Leases with longer terms can be negotiated, thus encouraging the use of better farming practices. The tenant assumes all risks in crop production. The landlord has less influence on the tenant's management. Amount of Rent It is important to keep the procedure for calculating flexible cash rent simple. The landlord's share of crop production can be calculated using the crop share approach. The average production for a commonly grown crop will be used as an estimate. This estimate is then adjusted for an allowance for crop failure, and the landlord's share is determined. The method for selecting the prices of the commonly grown crops will also be included in the lease, to determine the actual amount of rent due. The rental payment can be made by delivering an agreed quantity of grain to market in the landlord's name or by paying the equivalent cash price. Considerations in Establishing Prices An average grain price for 30 days prior to the rent payment could be applied. Alternatively, the price of a specified type and grade of grain on the day payment is made can be used. Flexible Cash Lease Terms The flexible cash lease should specify the date(s) on which the rent is due and payable; the delivery point at which prices are to be determined or the point at to which the landlord's quantity of grains are to be delivered; and the rights of the landlord to recover the payment of rent (seizure of crop and grain).