Ohio State University Extension Fact Sheet
Agricultural, Environmental, and Development Economics
2120 Fyffe Road, Columbus, Ohio 43210
Managing Landlord-Tenant Relationships: A Strategic Perspective
LeeAnn E. Moss, Assistant Professor
Bernie Erven, Professor
Many farmers depend on leased farmland to have a business of adequate size
and income. This makes long-term, positive relationships with landlords one
of the keys to their success. Good production management and marketing do not
overcome insensitivity to their landlords' values, objectives, and frustrations.
On the other hand, many landlords depend on their lease income for financial
security. They also seek stable and hassle free relations with their tenants.
Landlords often have emotional ties to the land they are leasing. They likely
assume that others, especially tenants, will be sensitive to the history, the
sense of accomplishment, the sacrifice, and the pride embodied in the land.
Just as certain principles and practices guide borrower-lender, employer-employee,
husband-wife, and parent-offspring relations, some important principles can
guide landlord-tenant relations.
The Landlord-Tenant Relationship
While the percentage of leased farmland has remained relatively constant in
the U.S. over the past century, the characteristics of lessees, lessors, and
the nature of the contractual arrangements between them have changed. About
65 percent of landlords are more than 60 years of age. Most are not actively
engaged in farming. Over half live within 25 miles of the rented acreage. Women
are a significant factor; while 31 percent of landlords are men, 40 percent
are women, and another 29 percent are joint male and female (Rogers). Moreover,
the significance of female landlords is expected to increase as the overall
farm population ages.
The proportion of rented land is generally higher in states, Ohio for example,
where land is more highly valued. In fact, in 1997 approximately 47 percent
of land in farms in Ohio was leased (1997 Census). Though share leasing has
historically dominated in the Midwest, results from the most recent Ohio Farmland
Lease and Precision Agriculture Survey indicate that over 75 percent of leased
land is now cash leased, and that crop-share terms vary significantly. Additionally,
a 1998 survey of professional farm managers in Illinois reported that 93.2 percent
had experienced a modest to significant increase in the level of cash leasing
in their market area (Barry, Sotomayor, and Moss).
A recent study indicated that lease preferences are influenced less by risk
aversion than by the characteristics of the leasing relationship namely the
threat of opportunism from the landlord and the potential returns to the producer's
management ability (Moss). Moreover, Bierlen and Parsch found that social capital
is important in determining the terms of trade between lessee and lessor. For
example, a tenant is less likely to pay higher cash rents when the landlord
is a relative. In other words, the nature and extent of the relationship between
landlord and tenant can have a significant influence on lease type and terms,
which in turn can impact the profitability and competitiveness of Ohio farmers.
Guidelines for Tenants
Following some straightforward guidelines can help tenants ensure that their
farm businesses remain profitable. The guidelines can also reduce the costs
of day-to-day relationship problems. Dunaway and Dunteman remind us that the
old adage of keeping the landlord happyis no different from an
effective public-relations strategy in any business. For example, they reduce
a strategy for farmers, with the end goal of retaining control over rented land
or other real estate, to six key points: (i) communicating with landlords, (ii)
educating lessors about agriculture, (iii) explaining farm costs and their changes
over time, (iv) providing regular crop reports during the growing season, (v)
maintaining the appearance of the property, and (vi) treating landlords like
A successful strategy for managing relationships with your landlord should
include the following:
- Have a written lease: Lease agreements for farmland or other real
property assets should be in writing. Many landlord-tenant relationships in
Ohio have traditionally been governed by oral leases. However, keep in mind
that oral, informal, and incomplete arrangements can foster misunderstanding
and provide little guidance or protection to parties when disagreements occur.
(Please refer to the Legal and Management Aspects of Ohio Farmland Leases
fact sheet in this series.)
- Provide a résumé: Provide landlords with a detailed
résumé of your farming operation. Include specifics
regarding business objectives and philosophies, history of your business,
education, tillage practices, equipment, land tenure, financial strength,
- Provide information about objectives: Inform your landlords of the
objectives for your farming operation. Remain responsive to changing landlord
needs and communicate this responsiveness. Particularly when goals change,
dialogue among the parties may foster a continued relationship, though the
lease type or terms may evolve. Anecdotal evidence suggests that poor communication
in this regard is a common reason for tenant termination. For example, a crop-share
landlord may no longer wish to share in production and price risk. If she
and her tenant have not communicated over time, assumptions may be made that
result in the lease being awarded to another farmer.
- Agree on a cropping plan: Agree upon a cropping plan early in each
crop year. Include specifics regarding input use and field operations.
- Provide regular updates: Regularly update landlords regarding crop
conditions and commodity markets during the growing season. Include photographs
where possible. Anticipate the landlord's interest in how the weather is influencing
crops, when planting or harvesting will begin, and reasons for any delays
in planting or harvesting.
- Inform and educate: Particularly for absentee or non-farm landlords,
you should provide information regarding agriculture and farming. Regular
mailings of print media articles, newsletters, etc. both serve to educate
landlords and demonstrate attentiveness. Consider
developing a web site for informing not only absentee landlords, but their
heirs who may inherit the property. Over informing may be the best strategy,
particularly early in a new landlord-tenant relationship.
- Provide cost information: Landlords should be regularly updated regarding
the costs of farming. Alerting the landlord to anticipated changes in costs
can prevent irritation when the bill arrives.
- Alert the lessor to problems: Immediately alert your lessor when
on-farm problems occur. If urgent, a phone call may be the most appropriate
channel of communication.
- Document in writing: If decisions are made regarding items outside
the scope of those provided for in your lease, be sure to document them in
writing, e.g., a letter summarizing the agreed-upon action.
- Improve appearance: Producers should strive to improve the appearance
of fields, driveways, roadways, and accompanying buildings. Landlords and
neighbors who are potential landlords often correlate the appearance of the
farm with farmers' abilities as tenants.
- Acknowledge life events: Acknowledging major events in the lives
of your landlords can be effective. Holiday, birthday, and sympathy cards,
for example, can assist in building relationships. Lease terms are influenced
by kinship, or by relationships that approach kinship.
- Encourage face time: Encourage landlords to visit their
farms at least once during each growing season.
- Pay explicit attention to the next generation of owners: Attentiveness
to your current landlords is critical, but may not ensure your continued tenure
when their heirs inherit the farm. Where possible, strive to inform, educate,
and visit with the next generation as well.
Guidelines for Landlords
Landlords can help accomplish the objectives for the farm and build positive
relationships with their tenants. A successful strategy should include the following:
- Have a written lease: This is even more important for the landlord
than for the tenants. The nature and terms of your tenant's leasehold interest
can influence the value of your property. As such, it is important that these
terms be specified precisely in writing, and it is in your best interest to
have legal counsel involved.
- Ask questions: Strive to fully understand your tenant's activities,
production practices, and decisions relating to your farm.
- Provide information about objectives: Landlords should keep tenants
informed regarding their investment (or other) goals for the farm.
- Stay informed: Staying informed about the economics of farming, land
values, and rental markets is important. In particular, this will prepare
you to respond to situations when your tenant may seek lower rents. Network
with other landlords in your state or region. Finally, spend time studying
each report prepared by your tenant during the growing season.
- Schedule yearly meetings: Schedule annual sit-down meetings with
each of your farm tenants to discuss the property and leasing relationship,
and provide each tenant with a written summary of any important points of
- Be rational: Be wary of farmers who promise what seem to be unbelievable,
too good to be true improvements over your current tenant. Moreover, avoid
reaching critical judgements about your current tenant until you have collected
the facts and provided him an opportunity to present his side.
A Landlord-Tenant Relationship Checklist
The type of information communicated between landlord and tenant can be as
important as the amount of communication. Existing relationships may be strengthened,
or new ones solidified, if the leasing parties ask appropriate questions. The
following checklist of questions can guide communication. Landlords and tenants
can use the same checklist.
- Goals: What are your investment (for landlords) or business (for
- Risk: How would you describe your level of risk aversion? What is
your perspective on sharing risk? How much production and price risk do you
wish to incur?
- Lease preferences: Do you have any pre-existing preferences for or
objections toward certain lease types? Determine the foundation of any objections
or biases. Biases can either be overcome or will dictate the lease type through
which the relationship is governed.
- Communication preferences: Ask the other party about their expectations
regarding the type and extent of communication that they desire over time,
and be prepared to adapt accordingly.
- Attitude toward change: Are the parties to the lease willing to consider
new options as opportunities or challenges present themselves?
- Constraints: Does either party have any taxation, business, financial,
or other constraints that may influence the nature of the lease or the relationship?
- Win/win: Are both the landlord and tenant willing to seek win/win
solutions to problems?
These guidelines may have three potential applications. They can be used to
guide communication during: (i) the first in-depth landlord-tenant discussion
prior to leasing the acreage, (ii) annual meetings between the parties to the
lease, and (iii) the first in-depth discussion following a life-changing event
(e.g., death of the landlord's spouse, death of a landlord followed by assumption
of lessor responsibilities by an heir).
CommunicationA Critical Skill
A successful relationship strategy depends on effective communication. Removing
barriers is an effective way of improving communication, and requires an understanding
of the communication model. The model consists of sender, message, receiver,
channels, feedback, and effect. The sender sends a message through appropriate
channels, either verbal or nonverbal, to a receiver. A response is provided
to the sender of the message via feedback from the receiver. Feedback need not
be sent through the same channel as the message (e.g., it may be a nonverbal
cue such as body language). Through interpretation of this feedback, the sender
can determine if the original message was received in its intended form. Effect
on the receiver completes the communication process.
Problems in any one of the components of the communication model can result
in barriers to communication, such as:
- Unclear messages: The receiver remains unclear about the intent of
the sender. The sender can interpret feedback to determine if the message
is clear or unclear.
- Stereotyping: Stereotyping involves either the sender or receiver
developing a subjective impression that the other conforms to a certain mental
model. This can be a barrier to communication when it substitutes for analysis
of and responsiveness.
- Incorrect channels: Use of the correct channel assists the receiver
to understand the nature and importance of the message. Choice of channel
is dictated by the urgency, complexity, and formality of the message, as well
as the knowledge, skills, and abilities of the receiver. Tenants should keep
in mind that landlords sometimes want more than a written report.
- Language: The sender's words combine with the receiver's perceptions
of them. The relationship between perception and reality can be determined
through interpreting feedback. Progressive, younger tenants should be cognizant
of using appropriate language. Technical or complex terminology may leave
certain landlords confused and suspicious.
- Lack of feedback: Feedback mirrors the sender's original message,
and may indicate a perception problem. It may occur in the form of questions,
or nonverbal cues such as a frown or puzzled appearance. Prompt feedback,
in which both parties play active roles, should be encouraged. Asking the
receiver to repeat the message in his own words is often effective.
- Poor listening skills: Poor listening skills are pervasive. Good
listening skills are fostered by: (i) being prepared to listen, (ii) avoiding
interrupting the speaker, and (iii) being an active listener, which includes
providing feedback. Listening is a particular challenge for tenants, who may
have less time for friendly chatter than landlords. However, this
type of interaction may provide important hints of landlord concerns that
don't emerge in more formal discussions. Busy farmers should remember that
lonely landlords will appreciate both time and lease payments from their tenants.
- Interruptions and physical distractions: Communicate in an atmosphere
that is comfortable, private, and non-distracting for both parties. Find the
right time to meet with landlords.
Relationships between tenants and landlords can be enhanced if the parties
improve their communication skills, make communication goal oriented, approach
communication with a positive and creative attitude, and work to reduce barriers.
Relationships are an important and often under appreciated source of risk for
Ohio farmers and their landlords. For the landowner, an effective relationship
management strategy helps ensure that her investment (or other) goals for the
farmland are reached. For the producer, it is fundamentally important to his
security of tenure. For both parties, it prevents or mitigates the costs
of conflict and disagreement. Finally, in an environment characterized by strong
competition for leased acreage, superior relationships provide farmers with
a potential source of sustainable competitive advantage.
Barry, P.J., N.L. Sotomayor, and L.E. Moss. Professional Farm Managers
Views on Leasing Contracts and Land Control: An Illinois Perspective.
Journal of the ASFMRA 62 (199899): 1519.
Bierlen, R. and L.D. Parsch. Tenant Satisfaction with Land Leases.
Review of Agricultural Economics. 18 (1996): 505513.
Dunaway, R.M. and D.L. Dunteman. Farm and Ranch Lease Guide. Bushnell,
IL: Ag Executive, Inc., 1995.
Moss, L.E. A Transaction Cost Economics and Property Rights Theory Approach
to Farmland Lease Preferences. Ph.D. thesis, University of Illinois at
Rogers, D. Leasing Farmland in the US. Resources and Technology Division,
ERS, USDA AGES-9159, 1995.
USDA. 1997 Census of Agriculture, Vol. 1 Part 13. Geographic Area Series, Ohio.
This series of fact sheets is produced under the Acker Professional Improvement
Program, Department of Agricultural, Environmental, and Development Economics,
The Ohio State University. Peer reviewed by Robert D. Fleming and Donald Breece
of the Department of Agricultural, Environmental, and Development Economics,
The Ohio State University.
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