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Contributor

Who should own what?

Have an offer from the operator to buy a center pivot, if will give him six-year guarantee rental agreement. Old one needs replacing. After six years, he owns the pivot, of course. Pros and cons of this kind of deal, looking at it from both sides?

He's the best sort of fellow, and I'd like something that's fair for him, and for our family, too.

Would it be simpler if I just buy the thing, and have a handshake with him on longer-term agreement. Also, wonder if it's wise to have the renter owning something on your ground. Any experiences or advice with managing assets like this? Thanks. - Rob
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7 Replies
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Advisor

Re: Who should own what?

You own it. It's easier for you to get away from him if he's in financial problems, and it's easier for him to get away if your in Trouble.

You got to realize that cap expenditures got to be long term things... Trying to take thIs thing down and sell it would cost too much.

Just make sure you have an exit strategy prepared if you ever need to go different ways.
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Honored Advisor

Re: Who should own what?

Just thinking that his debt on such an asset may encumber your use of the land. Such a lease arrangement, being longer than three years, would be recooded on the deed book in our state, just for starters.
It almost sounds like letting someone else build a house on your lot. You need to get legal advice.
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Senior Advisor

Re: Who should own what?

Handshakes can be fine as long as things stay the same and everyone is alive, but as soon as things go bad they have a tendency to get reinterpreted by the party hurting and if one party dies then the heirs get involved and there is no handshake with them.

 

If an agreement is good enough to shake on maybe it's good enough to sign on, for everyone's sake.

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Honored Advisor

Re: Who should own what?

Rob SC NE,

 

We have a lot of irrigation rent land in our area.  We have some owners who own sprinklers and get higher cash rent or higher than average crop share.  But the vast majority own the land, well and pump.  The tennant owns the equipment above ground --- motor, gearhead, and sprinklers.

 

Question ----- Who owns the old sprinkler? 

 

What it sounds like is the tennant is asking you to finance the sprinkler for him and he is going to purchase it from you on time payments.  I know of no one who does this.  You are renting your land to him and that should not include providing banking services.

 

What does happen is the tennant  may ask for a lease that is 7 years long to give the tennant a committment of time for him to pay for the sprinkler debt he is incurring.  Then the lease can go back to a year to year -------- or whatever the two parties agree to.

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Honored Advisor

Re: Who should own what?

I will just say this and then leave it alone: Be very wary of how long you tie your land up for someone else. My father signed a 20- year minig lease in 1989. I MAY get those people off that ruined place this year, at long last. Things are a lot easier to get into, than they are to get out of down the road. Land doesn't always come back to your control the wsy it left it. Be careful.
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Senior Contributor

Re: Who should own what?

That is kind of what I do with tile on leased land. I spend about a thousand dollars per acre, which I know will pay off durring a ten year lease. Then at the end if the lease the land owner has much better ground and I still get the opportunity to release or rent year to year. Some of my leases are pretty complicated with soil nutrient, waterway Management, cover crop garuntees and early termination agreements. My point is; get everything you can amagine becoming an issue in writing.
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Senior Contributor

Re: Who should own what?

I know of an instance, where the renter has a 5 year lease, and is leasing the center pivot over 5 years, with a lease-to-own type of plan.

At the end of the 5 years, the land owner has first chance at the pivot buyout,

the renter has second chance, after the land owner.

 

The other way I have seen it done, would be the rent would be increased by about 10% of the purchase cost of the pivot.

 

If you are in NE, you should know all about who pays the property tax on the pivot, which may not be a big deal, but something to keep in mind of.

 

 

If I had ground to rent, I would not like someone else owning a semi-permanent structure on it, like a pivot.   It gets you over a barrell, when the rental agreement comes due again.   If the pivot owner doesn't get it, what will you do?   Who will have to cover the cost of moving it out?   It sounds like it has too much potential to get complicated.

The only way I would consider letting the renter pay towards it, would be the lease, with purchase option, if the landowner got first chance to purchase.

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