Hello. This is my first blog.
After realizing that FSA considers only two types of rents, cash and share, I plan to rewrite my Right Rent article.
In practice, flex rents have included various features. I will define flex rent as being based on a share of the revenue.
In a flex rent, If the revenue is based on the farm’s actual crop produced, I think FSA will consider it as a share rent.
In a flex rent, If the lease includes a minimum rent, plus a share of the revenue which is not based on the farm’s actual production, I think FSA will consider it as a cash rent.
To me, a share lease is based on sharing the contribution margin (revenue minus variable costs), based on the farm’s actual production.
A share-like cash rent includes a minimum cash rent, plus a share of the contribution margin, as calculated using outside the farm gate values, not a farm’s actual values.
After the parties agree on the amount of a so-called tenant margin (contribution margin minus owner margin, the rent),I think any of the above leases can be updated, almost automatically, by the way I describe in the right rent paper. However, my 100-0, 50-50, and 0-100 tenant margin cash rent contracts are the easiest to update.
I am not an attorney, tax advisor, or FSA advisor. Contact your appropriate advisors before using any of this information.