Top 10 tips on leasing out land
Leasing land is a bit like renting out a house, according to Ivan Whitten. The Teagasc tillage advisor, based in Co. Kildare, spoke to AgriLand about some of the factors he takes into account when helping clients (both landowners and tenants) to draw up lease agreements.
1. Knowledge of the farm’s soil fertility status is vital
Ivan advises that a soil sample report of the farm is paramount from day one. This report is a vital part of the development road map for the farm. Issues such as soil pH can be addressed jointly.
It’s in both parties long-term interests to monitor and address soil fertility, he said.
Ivan also stressed that it’s important that the landowner continues to keep on with public liability insurance. This is important in case there’s an accident or, for example, a walker trips and falls.
3. Watercourses and hedges
Ivan recommends that it is the responsibility of both parties to make sure that watercourses and artificial drains are maintained on a regular basis. Where issues are identified, both should cover the cost.
The active farmer should be in charge of maintaining hedges. However, a lot of landowners take responsibility for the boundary hedges, for road safety, to make sure that they are actually cut.
Both parties should agree who is looking after what in the leasing agreement.
4. Electricity and water
If an electricity or water connection is being used, the payment of the bill should be agreed in the land leasing agreement.
5. Pay for good tax advice
There are many different options available to landowners these days, he said. Tillage share farming arrangements often lead to long-term leasing, as it is more tax beneficial for landowners. Contact your accountant to make sure you are entering into an agreement that suits your own situation.
6. Cash flow
Back to the house renting analogy; if you were renting a house, you wouldn’t be paid every six months or once a year. With this in mind, Ivan advises lessors to set up a direct debit. Even if this brings down the price per acre, he said, it ensures a regular cash flow and it allows both parties to plan and track the payments easily.
Where a yard is being leased with land, it will carry an additional cost. So, it’s imperative that it will pass a nitrates inspection from the get-go, he said.
“Remember, where the Basic Payment Scheme (BPS) is concerned, the landowner is entitled to their payment irrespective of whether you receive 100% of your BPS or not,” he added.
8. Third party
Ivan advises all people to involve a third party to go through the lease and to work with both the landowner and the active farmer.
This might be an agricultural consultant/advisor or a land mobility facilitator. When the lease is ready to go, both parties should consult with their respective solicitors.
9. Annual meeting
Sit down at the end of each year of the lease and balance the books; make sure there is no carry-over into the following year. Ivan advises people to “make good any monies due within seven days of the end of each year”.
Discuss and resolve any issues that may have arisen over the past 12 months.
“This forces both parties to sit down together. So, there is no carry-over. They balance the books at the end of each year,” he stated.
10. Know who you are dealing with
The last tip is the most important. The active farmer or owner should be someone that you will be able to get along with, who’s approachable and has a personality that you can work with.
It is also important to know that they can pay and are in “good financial standing”.
If you don’t check these things beforehand, arbitration can be a long and difficult road to follow