We get this question a lot, and we are happy to say the answer is yes! Lease agreements for cultivating hemp land can be lucrative for landowners who sufficiently educate themselves before entering any agreement. Before you begin, check out this handy hemp lease template (right) and review it with your lawyer to ensure you understand the terms. Although we’ve seen a lot of interest in hemp leasing agreements lately, there are still many misconceptions regarding the legality of leasing land for this purpose. We’re here to clear up some common confusion around grow hemp lease agreements and discuss why they are an attractive option for landowners.
The profitability of leasing land for grow hemp depends on several factors:
To determine these factors, you’ll need to research comparable properties in the area. However, because there is currently a shortage of hemp seed available for new grows due to supply and demand, you may be able to command a premium price for your property. To find out what other landowners in the area are charging, contact local agricultural extension offices or university extension programs. They often have information about leasing rates for other types of crops.
Under current law, you may grow hemp on 15 acres, not including the land you own. If you are leasing your land for more than one year, your lease must be for one-year minimum, with the option to renew at the end of the contract term. There is no limit to the amount of crop acreage under lease in California. With some exceptions, all leased property for growing hemp must be used exclusively for growing hemp (not other crops). You can also grow marijuana or any derivative thereof (including hashish and cannabis oils) on land leased for hemp cultivation, as long as you do not process it on-site (e.g. crush, dry, or wax it).
Landowners should take into consideration the following factors when negotiating lease agreements: The current value of your property; What type of soil it is (is it pH neutral, high in nitrogen, etc.). The kind of climate you have in your area. Whether there are environmental concerns (like lead or pesticides from previous tenants) that may be an issue down the line. And How much income you can expect to make off it every year–remember to consider all costs associated with owning/managing property like taxes, utilities, and land improvements.
The grow hemp season in California runs from December through May; however, growing hemp can be done year-round using greenhouses. For a 1/2 acre of hemp, you could earn between $3000–$5000 per year, depending on your area and other property ownership costs (taxes, utilities, etc.). If you lease more acreage than the limit set by law, you could earn more. You may lease your land to one or multiple growers. You only need to report your income to the IRS if it exceeds $600 per grower per year.
No. You can lease your land to anyone so long as the parties involved follow the contract terms. However, if you are leasing your property, you should be very explicit about what constitutes using ‘the land’ in your lease agreement. It’s wise to include both the intended use of the land and the activities that will directly benefit from it (i.e., growing hemp).
As with any real estate investment, there are some issues that landowners should consider before entering into a grow hemp lease agreement. For example, some manufacturers will still have difficulty obtaining permits for hemp cultivation even with an approved license. It is rumoured that Los Angeles County has the policy to prohibit cannabis growing on industrial and commercial properties (so even if you have the necessary zoning, they may say no). In addition to this, it may not be easy to sell the property at a profit.
We hear from many people who either want to buy or sell property that has hemp in it. The major hang-up for them is that having hemp on the land causes some banks to decline to make a loan on that property. Because of this, we recommend talking to your attorney about an appropriate way to structure your agreement so you can minimize these risks.
Leasing your land to grow hemp can be a lucrative business opportunity, especially if you research the market and find a good long-term tenant. Make sure you know about the farming process and the plant itself before entering into any agreement. You can make thousands off your acre of land each year, but it could also be an expensive investment if you don’t handle it correctly!
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