Document Type

Other

Publication Date

1-1-2007

Keywords

fair lease arrangement, south dakota, agricultural rental agreements

Extension Number

ExEx 5061

Department

Economics

Description

Both tenants and landlords agree that a fair lease is equitable or fair to both parties. However, in practice, it is much easier to talk about an equitable agreement than to actually negotiate one. The problem is that what one party may see as equitable may differ considerably from what the other party sees as equitable. It comes down to this: History and tradition have more to do with leasing arrangements than do economics or fairness. According to economics theory, the cash rental rate should be the rate that equates the amount of land that landlords would be willing to rent and the amount of land that tenants are willing to rent, for that given price. While landlords secretly hope to receive the highest possible rate, and tenants secretly hope to pay the lowest possible rate, both parties are willing to negotiate to determine a rate that is fair to both.

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