Managing Downside Risk in Land Rent Agreements: Alfons Weersink


Land prices are at all time highs, and it’s uncertain as to when — if ever — those prices will level off or drop. That’s great if you own land or are about to retire, but it’s not so great for those looking to expand or for those dependent on renting a good portion of their land base. Rental rates of climbed right along side land prices.

See FCC’s JP Gervais’s comments on the drivers behind Ontario’s farmland values here.

Alfons Weersink, professor at the University of Guelph, has done significant work into foreign landowner levels, land prices, rental agreements, prices and the interactions between all these and landlord/renter relationships. It’s interesting to note that Weersink’s research suggests that while the relationship between land owners and renters does impact the type of land rental agreements struck, the actual price of land rents is consistent regardless of who the players are.

There are pluses and minuses to every type of rental agreement, and it’s not surprising that roughly 80% of rents are on a cash basis. But that leaves farmers with steep downside risk, while land owners need to consider the long-term value and management of their assets. As Weersink points out in the video below, building in communication and added aspects of a land rental agreement may mean the difference between short- to medium-term access to land or losing out to the highest bidder.

If you cannot see the embedded video below click here.

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