Adjusting Pasture and Hay Ground Leases for 2019
Where there is significant damage from flooding to pastures, hayland, or alfalfa, should the rental rate be adjusted for 2019? The answer lies in the characteristics of the individual situation. This article provides guidance on adjusting rental rates for flood-damaged forage and pastureland if needed.
How Bad Is The Damage And Who Is Going To Fix It?
Flood damage can be categorized into two distinct types. One is the ‘hard’ work and the other is the ‘heavy’ work:
The ‘hard’ work will usually include quite a bit of hand labor and light work with equipment to remove branches, corn stalks, trash debris and other obstacles deposited on the field. In addition, there might need to be is re-seeding for either compete loss of plants, or for weak or partial stands.In the case of pastures, other hard work may include fixing the livestock infrastructure (fence, water tank, windmill tower, etc.) In some cases, these fixes will be relatively easy, however in many cases, a completely new infrastructure may need to be installed. If so, depending on what needs to be done, this could easily move into the category of ‘heavy’ work.
Other ‘heavy’ work may not need to be done at all but, if it does, this would involve heavy equipment like bulldozers, scrapers or graders to take care of major problems. It might include one or all of the following: moving topsoil, removal of sandbars, and fixing holes, gullies, and ruts from the flooding.
In both cases, ‘hard’ work and ‘heavy’ work, the party primarily responsible for completing it is the landlord. The landlord bears the responsibility for providing the tenant with the land ready to utilize. Desiring a positive long-term landlord/tenant relationship and knowing the work needs to be done in a timely fashion, many tenants are probably going to provide most if not all, of the ‘hard’ work described above. When that happens, is it appropriate for the landlord to acknowledge that effort? Most would say yes.
Document, Document, Document!
No matter what the damage is, good documentation is needed as per before and after pictures and logging the work done. Keep track of supplies used, hours of labor, record equipment used, and a log of all expenses. Emergency conservation program monies may be available in your area and having good documentation will be key. Contact the FSA for rules and information about that program.
Remedy The Situation
If there is a water well on the pasture, and it was flooded, it needs to be checked to be sure that the water is still safe to be used. Contact your local Extension Office for water testing kits. Check with the owner’s insurance on the well to see if the damage to the well is covered.
If re-seeding needs to be completed - who bears that cost? Most people would suggest that this is ultimately the landlord's cost. The landlord and tenant should also discuss the possibility of weed pressure on pasture ground where the native grass has been disturbed and is now a nonexistent or thin stand. Who will be responsible for spraying?
Adjusting The Rent?
Pastures in Nebraska are usually rented by the month, or by the cow/calf pair. The typical pasture rental season is 5 months. The amount of damage to the flooded pasture will likely determine if the rental rate should be adjusted. There is a real possibility that this year’s grazing will be shortened. If it is, the rental rate paid/received might be adjusted by the percent of the grazing season that was utilized. For instance, if the grazing season is 4 months instead of 5 months, the rental rate would be adjusted by 20%, which is the amount of the grazing season not utilized.
If only part of the pasture is damaged, temporary cross fencing should be considered to keep grazing pressure off the part being renovated. The stocking rate should be adjusted. The rent paid would be adjusted to reflect the acres utilized.
Hay and Alfalfa Rent
It turns out that most hay rent in Nebraska is done on a share basis. The adjustment for hay rent in this situation will be straightforward. The landlord’s rent will be reflected directly by the amount of hay or alfalfa that is produced.
If the hay or alfalfa ground is rented on a per acre (cash rent) method, one recommended procedure would be to reduce the payment by the reduction in actual production. If there is 20 percent less hay this year, then the rent would be reduced by 20 percent.
It is imperative that the landlord and tenant talk about any remedies to the lease prior to the start of the grazing season. This discussion also needs to cover what should happen if we end up running out of pasture before the normal length of the lease is up. Both landlord and tenant should be willing to start the communications. The sooner the better. Good communications between landlord and tenant is probably the only sure way that both parties are satisfied with the results of the lease.
If you are modifying your rental agreement for 2019, get it in writing. Stress may be high, you will want to make sure both parties are fully aware of what they are agreeing to. In summary, 2019 may be the year that both parties need to share the pain of the March flooding.