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Crop share agreements are a leasing contract between a landowner and a tenant involving farm land. In this arrangement, the owner of the land usually leases out the land to the farmer and, in return, they receive a share of the profits the farmer earns from their business.
The arrangement also covers any expenses that are taken on by the owner of the land. The amount of expenses the landlord becomes responsible for also determines the division of profits. The more they contribute, the higher their return percentage is set at.
There’s no standard way to go about a crop share partnership. Generally, the parties to the contract will decide among themselves how the split will occur and who will be responsible for what.
This makes crop share agreements pretty unique from most contracts. Furthermore, they are not a typical lease agreement or a standard business agreement. They involve elements of both leasing and business production.
As a result, having a strong legal agreement in place is of utmost importance so there’s no confusion from either end.
What Is Agribusiness?
Agribusiness is a term that has been coined by putting together the words agriculture and business. Agribusiness describes activities and practices that are centred around or have to do with commercial farming.
The term encompasses a lot of different activities and isn’t necessarily limited to farming in the traditional sense. Agribusiness includes practices such as manufacturing farming equipment, producing oils and developing pesticides.
What Is Share Farming?
Share farming is another agribusiness arrangement similar to crop share arrangements.
Share farming occurs when the owner of a land leases that land out to a farmer. The farmer then works on the land along with the landlord, who is typically another farmer.
As the two farmers work on their respective crops, the agreement enables them to share the profits they have accumulated from farming on that land.
The expenses of the land are also shared, however, this isn’t necessarily a partnership. It is still more of a tenant/landlord agreement with the added element of sharing profits and expenses. Each farmer is still running their own, separate business.
Do I Need A Share Farm Lease Agreement?
Yes, it’s important to get your share farm lease agreement in writing. Even if you think the agreement between you and the other party is fairly simple, it’s best to get it in writing.
Whether you are the landlord or the tenant in this scenario, it’s difficult to enforce your legal rights or seek legal protection if you don’t have a legally binding contract in place.
A Share Farm Agreement can help protect you and your business – contact us about getting one written up today.
Do I Need A 50/50 Crop Share Agreement?
Your crop share agreement does not need to be split exactly 50/50 down the middle, although many partnerships may choose to go this route.
The division of profits in your agreement will be determined by which party is putting what into the business. For example, if the landlord is simply allowing the tenant to use the land and isn’t covering any of the expenditures related to the business, their share of the profits are unlikely to be 50%.
Whether your agreement is split 50/50, 60/40 or 70/30, it’s important to have it in writing and signed by all parties to the contract.
What Is Included In A Crop Share Agreement?
Crop share agreements can be catered to meet the needs of your specific arrangement. They typically cover:
- The parties to the contract
- A description of the land involved
- The amount of rent to be paid
- How the shares are split
- Any expenditures that will be divided
- The roles and responsibilities of each party
- The length of the agreement
- Dispute resolution
What Happens If A Dispute Arises?
When a dispute arises, it’s best to get the matter sorted out as quickly as possible so business can continue to operate smoothly. After all, a good relationship with your potential partner is key in having a well established business.
When you have a contract in place, disputes can be resolved far more efficiently. If a dispute arises and the matter has been covered in the written agreement, the contract can always be referred to.
If there is no contract, it can be hard to determine who said what. This can cause a long dispute and if it cannot be resolved by the parties to the contract then it needs to be resolved by legal means. This should really be a last resort option – this process can be financially, mentally and emotionally draining for those involved.
No matter how great of a relationship you may have with a potential business partner, disagreements and misunderstandings can always occur. This is why we always recommend getting any agreements in writing. It can even prevent a potential disagreement from escalating further.
Key Takeaways
Functions of agribusiness such as crop share or share farming are great ways to maximise the business potential of farming activities. However, it’s important to protect your businesses with the right legal agreements.
To summarise what we’ve discussed:
- Crop sharing occurs when a farmer rents out land from a landlord and they split the expenses and then divide the profits amongst each other
- This is a function of agribusiness, which refers to the commercial aspect of farming related activities
- Share farming is another business/lease type arrangement where the owner of the land and their tenant (another farmer) run their businesses separately and divide those profits
- It’s important to have a share farm lease agreement in order to protect your rights and your business
- Share crop agreements are also necessary to have in place, though they don’t have to be divided 50/50
- The agreement covers the most important terms of the arrangement, including share division, expenditures and agreement length
- Have a legal agreement in place is essential in case a dispute arises – you want it resolved as efficiently as possible
If you would like a consultation on a crop share arrangement or share farming legal documents, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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