Resume Wizard - Colorado FFA
Junior and Senior level Ag Bus. | |Colorado Agriscience Curriculum
|Section: |Advanced Agribusiness |
|Unit: |Ag Law |
|Lesson Title: |Legal Aspects—Leasing and Property Rights |
|Colorado Ag Education Standards| |
|and Competencies |AGB11/12.03 - The student will be able to formulate and analyze financial records and use the information for|
| |evaluation and planning. |
| | |
| |Understand property deeds. |
| | |
| |Describe the property rights of landowners. |
| | |
| |Understand leases. |
| | |
|Colorado Model Content |English Standard 1: Students read and understand a variety of materials. |
|Standard(s): | |
| |English Standard 4: Students apply thinking skills to their reading, writing, speaking, listening, and |
| |viewing |
| | |
| |English Standard 5: Students read to locate, select, and make use of relevant information from a variety of |
| |media, reference, and technological sources. |
|Student Learning Objectives: |Upon completion of this unit the student will be able to: |
| |Identify the types of farmland leases that are available. |
| |List the advantages and disadvantages of crop share leases. |
| |List the advantages and disadvantages of fixed cash leases. |
| |List the advantages and disadvantages of flexible cash leases |
|Time: |2 – 50 minute classes |
|Resource(s): |Agriculture and Business Management, Cooperative extension, CSU bulletins: |
| |Section 4 No. 4.7 |
| |Section 4 No. 4.8 |
| |Section 4 No. 4.6 |
| |Farm and Ranch Management, John Deere FBM10105NC |
|Instructions, Tools, Equipment,|Italicized words are instructions to the teacher, normal style text is suggested script. |
|and Supplies: |Notebooks |
| |Pens |
| |Projector |
| |Whiteboard |
| |Use lease agreement in pdf. File for an example |
|Interest Approach: |There are many ways that farmland may be leased for agricultural production. You may want to use some of the|
| |experiences of the community as examples of leases. |
| |You can also use the Production agreement to help understand the process of determining a lease. |
| |Today you are going to be a landlord and I am going to try to lease a greenhouse from you. I am handing each|
| |of you an agreement sheet to help with the development of the lease agreement. I am going to divide you into|
| |three groups of landlords and will see which one I would like to lease my greenhouse from. Count off in |
| |three’s starting in the front left. One, two, three, one,… When I say go the 1’s go to the back, two’s to the|
| |middle, three’s to the front. Go. |
| |Each of you have a agreement as a suggestion, take 10 minutes and develop an agreement to present to me for |
| |the lease of the greenhouse. Everyone now develop the agreement. |
| |After 10 minutes of discussion and walking around to help the groups. |
| |Group 1 please present the lease agreement you have developed. Thank you group 1. Group 2 –Please present |
| |your lease agreement. Thank you Group 2. Group 3 – Please present your lease agreement. Thank you group 3.|
| |As the groups give their specifics on their agreement put them on the board or on and overhead to compare. |
| |Which lease agreement would you rather have as a tenant? Why? Allow the students to discuss why they would|
| |rather have one or the other and what provisions they like or dislike. Where there major differences in |
| |them? What are some other leases you have heard about? |
|Objective 1: |Students will identify the types of farmland leases that are available. |
| |Now let’s create a list of rules for farmland leases! Who would like to volunteer? Thank you _________! |
| |Let’s generate a list of rules that your think should be part of every farm lease. |
| |[Slide 1 and 2] Lease agreements should be working document between the parties involved. Some basic |
| |guidelines of agricultural leases are: |
| |Should be equitable for each party |
| |Specific language and clear provisions in the lease are essential |
| |Leases can be bought or made by the individuals |
| |Leases should be made for a specific contract between parties and only cover the needed provisions of the |
| |lease |
| |Cooperation is the most important part |
| |[Slide 3] There are 3 main types of agriculture leases available in our area. They are: |
| |Crop share lease agreements |
| |Fixed-Cash lease agreements |
| |Flexible-Cash lease agreements |
|Objective 2: |[Slide 4] Crop share lease agreements |
| |A lease is basically an agreement which gives the use of an asset to a lessee for a specific period of time |
| |at a specified rate. |
| | |
| |A lease does not transfer title of ownership nor an equity interest in the asset. |
| | |
| |A Crop share lease agreement provides for a specified percentage of the crop to go to the landlord and |
| |tenant. The basic premise is that each party receive income from the crop in proportion to what each party |
| |contributes to production. |
| | |
| |In a typical crop share lease agreement, the landowner contributes land and improvements, associated property|
| |expenses, and a specified amount of the variable expenses. |
| | |
| |A tenant usually contributes labor and machinery, associated equipment expenses, and a specified amount of |
| |the variable expenses. |
| | |
| |[Slide 5] Advantages of crop share leases: |
| | |
| |Less operating money may be tied up by the tenant due to landowner sharing of the variable expenses. |
| |Management may be shared between and experiences landowner and tenant resulting in more financially rewarding|
| |and effective decisions. |
| |Crop sales and input purchases may be timed for improved tax management. |
| |Risk of low yield and prices are shared between two parties. Profits and higher yields are also shared. |
| |Landowner material participation may be more easily proved for use of government programs, estate planning, |
| |building social security bases, and income tax purposes. |
| | |
| |[Slide 6] Disadvantages of crop share leases: |
| | |
| |Landowner income will be variable because of yield and price variations as well as changes in costs of shared|
| |inputs to production |
| |Accounting for shared expenses must be maintained |
| |The landowner must make marketing decisions |
| |Landowner and tenant must discuss the cropping practices and other management decisions |
| |As prices change, the lease should be reviewed for fairness. Sharing agreements may also need changed. |
|Objective 3: |[Slide 7- 10] Fixed Cash Lease |
| |A fixed cash lease is rental agreement in which the landowner receives a predetermined cash fee from the |
| |tenant irrespective of crop yields or the product prices. The tenant produces crop on the land and makes |
| |management decisions as if the tenant owned the land. |
| |Advantages of Fixed Cash Leases: |
| |The landowner has less managerial input than with other lease agreements reducing the possibility of friction|
| |between landowner and tenant |
| |There is little conflict over the division of crop, expenses, and marketing |
| |The tenant has great freedom in crop production, marketing, and participation in government programs |
| |Cash rents will less likely to be considered a “participating landlord” when calculating social security |
| |payments. |
| |Disadvantages of Fixed Cash Leases: |
| |It may be difficult to determine a cash rent acceptable to both the landowner and the tenant |
| |Cash rents are likely to be too low in times of high yields and prices, and too low I times of low yields and|
| |prices. |
| |The tenant may tend to “mine” the land or not replace nutrients, therefore reducing the productivity over |
| |time. |
| |Cash rents become fixed costs for the tenant |
| |Four methods of developing a fair fixed cash rent- |
| |Cash rent market approach—you must know the cash rents being paid in an area and adjust according to the |
| |productivity of the land, use of the improvements, and other factors about the land |
| |Landowner’s Cost or Desired return approach—This method requires calculating the landowner’s ownership costs(|
| |depreciation, interest, repair, taxes, and insurance) or establish the desired return the landowner wishes to|
| |receive on investment. |
| |Landowner’s Adjusted Net Share Rent Approach—This approach presumes the cash lease should be related to share|
| |rents. Normally fixed cash rents would be lower than share leases because the landowner shifts the risk of |
| |price and weather over to the tenant. |
| |Tennant’s Ability to Pay Approach—This approach determines fixed cash rents on the tenant’s projected return |
| |over the cost of production, using anticipated yields and prices. Subtracting out all costs and figuring in |
| |a return for labor and management from gross income leaves an approximate maximum return the tenant could |
| |afford to pay. |
|Objective 4: |[Slide 11 – 13] Flexible Cash Lease Agreements: |
| |A flexible cash lease agreement is a rental arrangement in which the landowner receives a predetermined cash |
| |fee from the tenant that is adjusted for the change in yield and price. The tenant produces crops on the |
| |land and makes management decisions as if the land were owned by the tenant. |
| |Advantages of the flexible cash lease agreements: |
| |The landlord has opportunities to share in unexpected increases of crop yield or increase in price |
| |The tenant has less risk because of lower than expected yields or prices. |
| |Disadvantages of flexible cash lease agreements: |
| |Flexible cash leases increase risk for both landlord and tenant |
| |The tenant may give up some benefits of higher yields due to the tenant’s management input, thus reducing the|
| |incentive for the tenant to do the best possible job |
| |Flexible cash leases are much harder to calculate that fixed rate leases |
| |Flexible cash lease = Base rent x current years price |
| |Base price |
| |I need two volunteers. We are going to do a party host moment! Take these three students away from the |
| |other students. Have them choose what type of lease they would like to act out. |
| |Alright let’s see what _________ (Your student’s name) lease agreement is. Excellent Job! Give _____________|
| |a hand. Let’s try another! ____________ let’s see what your agreement is. Great Work! |
|Review/Summary: | |
| |[pic] |
| | |
| |[pic] |
| | |
| |[pic] |
|Application--Extended Classroom|Compare cash lease agreements that would be common in your area with crop share lease agreements. There are |
|Activity: |advantages to both. At what point are each equitable. |
| |Develop a hybrid lease that could include provisions should disasters happen that might lessen the risk on |
| |both sides. |
|Application--FFA Activity: |The students might use property rights as an Ag Issues topic and develop the forum on property owner’s |
| |rights. |
| |A debate on the needs and wishes of property owners or landlords vs. the needs and wishes of the tenant. |
|Application--SAE Activity: |This is a good time to look at the production agreement of the students and see if the agreements they have |
| |are what they should be. |
| |Students with larger SAE’s may want to try to develop a lease agreement that would be suitable for their own |
| |operation. They can use the attached agreement as a guide. |
| |A pseudo farm could be used to calculate the differences in the types of leases using the provided |
| |worksheets. |
|Evaluation: | Leasing |
| | |
| |What are the 3 main types of leases available in leasing agricultural land? |
| |1 |
| |2 |
| |3 |
| | |
| |What are the 4 main things a tenant usually supplies in crop share leasing land? |
| |1. |
| |2. |
| |3. |
| |4. |
| |Who supplies the production management in a fixed cash lease? |
| | |
| | |
| |What is the suggested formula used in calculating the flexible cash lease? |
| | |
| | |
| |How is risk factored into each of the leases? |
|Evaluation Answer Key: |Crop share lease—fixed cash lease – flexible cash lease |
| |Labor, machinery, machinery repair, and variable production costs |
| |Tennant |
| |4. Flexible cash lease = Base rent x current years price |
| |Base price |
| |5. Crop share and flexible cash leases have a shared responsibility from the tenant and landowner, but the |
| |fixed cash lease has the tenant taking all the risk. |
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