We have for many years helped with the preparation of leases of farming properties sometimes for a short term, sometimes for a long term. Commonly farm leases include a right of first refusal to take a further lease term or to buy the farm if the owner decides to do either. Sometimes the Lease includes a contract to buy the farm or an option to buy or, to take a further lease term.
We also prepare sub-leases of pastoral leases and of other leasehold properties such as perpetual leases. Subleases need the consent of the relevant authority.
With farm leases it is vitally important for the owner of the farm to be clear on the essential terms of the lease.
One aspect of a lease which we find is sometimes not understood, because of the legal nature of a leasehold interest in land, the lessee has the right during the term of the lease, to the exclusive use and occupation of the whole of the property, the subject of the Lease. This is the legal estate conferred on a lessee by the lease unless the lease expressly provides otherwise.
If part of the farm is excluded from the lease or a right retained to access any part of the farm to undertake repairs or maintenance work, then this must be expressly provided in the lease and the right reserved to the owner, otherwise there is no right.
An owner of the farm before leasing it must consider carefully those matters which are essential for the good management and husbandry of the farm.
Such matters may include;
Control of prescribed weeds, the rate of application and the type of fertiliser to be applied to crops or different types of crop, the types of crop to be grown on the farm and also the rotation of types of crop and pasture. Thought should be given to the number of years any area of the farm can be planted successively to the same type of crop and what if any fallow years are required;
The stocking rate; how many dry sheep or dry sheep equivalent may be carried on the farm or per hectare of pasture;
Are any of the buildings or improvements to be excluded from the farm lease and if they are, they need to be sufficiently and accurately described as does the route over the farm to access them;
Is the rent to be fixed for the term of the lease or is it to be reviewed. With the farm leases the rent is usually fixed for the term of the lease. We suggest for longer term leases, the rent should be reviewed. The question then is; when is it to be reviewed and what is the method for review ie. market, CPI or expert determination?
Some owners have their farm adviser or consultant prepare a detailed and a prescriptive management program for the farm to be followed by the lessee for the term of the lease. Others are more concerned about the careful selection of a lessee they know from experience or reputation, to be good farmer and in whom they have confidence to take good care of the farm. Usually if the lessee has an ongoing interest in the farm i.e. a long term lease, then the lessee is more likely to have regard to the fertility bank in the soil and the ongoing control of weeds to ensure the yield in following years will be equal to or greater than the current year.
The matters we have referred to, are some of the things an owner needs to consider when giving instructions for the preparation of a farm lease and are matters which we are happy to discuss with you to help ensure that the lease entered into by you, best protects your farm and your investment.
Finally, the standard Agreement to take a lease prepared by a real estate agent commits you to a lease in the terms of the Agreement and there is only a limited right (if any) to insert additional terms, so you must not sign such an Agreement without first dealing with all those matters we have set out in this short note.
If you would like to discuss your requirements please contact our office or email Harry Formby directly Harry.Formby@formbyslawyers.com