Crop Share Lease
Farmers and Landowners have many options when choosing a
lease agreement. The crop share lease (also known as a
sharecropping lease) is a common choice, though they tend to
be used predominantly with commodity crops. There are both
benefits and challenges to this type of agreement, and it’s
important to understand these before selecting which type of
lease to pursue.
What to consider:
● Landowner and Tenant share the risk of the farm business.
● Landowner and Tenant must work closely together.
● Both parties share incentive for the success of the farm:
○ Landowner shares in the profit of the farm.
○ If the farmer does not make a profit, no rent is due.
○ Landowner has incentive to invest in the success of the farm, including investing
in infrastructure and even production costs.
● The Landowner often earns more over time than with a cash lease.
● Tenant needs less start-up capital.
● Both sides must have a reasonable expectation of revenues.
● Requires a high level of trust between parties.
● Tenant must keep extensive and clear records and be comfortable sharing them with the
Landowner.
Types of Crop Share Agreements:
Share of Gross Profit:
● Tenant pays Landowner an agreed-upon percentage of total sales receipts.
● Requires a trusting relationship and careful record keeping.
Share of Net Profit:
● Percentage of annual net profit, after expenses shared by both parties.
● Requires careful record-keeping, a trusting relationship and agreement of acceptable
expenses.
● Costs are tax-deductible by the Landowner.
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