Question: I am trying to renegotiate the terms of a lease and we are getting stuck on the entitlements aspect. Under the current lease, the entitlements have been leased to me.I draw them down and pay them back to the landowner.

However, as it is proposed that entitlements may be extinguished in the next CAP reform, I cannot commit to paying back something which I potentially will not have. Have you any advice?

Answer: I am inundated with queries of late on the repayment obligations in relation to entitlements that have been leased. It became very contentious when DAFM payments changed with the last round of CAP Reform. The next CAP is due to take effect sometime between 1 January 2028 and 1 January 2030 and under current proposals the budget is being slashed by 24% from the current ring-fenced CAP budget for Ireland. Furthermore, it is proposed that a new flat-rate Degressive Area-Based Income Support (DABIS) will be introduced, which acts as a successor to BISS, CRISS and YFCIS payments.

It is worth recapping on the individual payments and how to claim them.

How to claim

From 1 January 2023, BPS and Greening were replaced with BISS, CRISS and ECO schemes. BISS payment entitlement values changed with convergence. There is also a capping on the entitlements held, and there is no distinction whether owned, leased or rented. CRISS is paid on the first 30ha that the applicant is farming. The payment is not linked to entitlements held. Payment is set at between €40-43 per ha. One BISS entitlement is required to draw down CRISS.

The Eco Scheme is a voluntary scheme. An applicant can opt in or out on an annual basis. Applicants need to deliver two agricultural activities. It is based on costs incurred and income forgone. It is paid per hectare farmed – no maximum. The payment is not linked to entitlements held. Payment is between €60-€65 per ha.

Some leases make a distinction between payments related to land (e.g. BISS) which are earmarked for the landowner and payments related to activity (CRISS and ECO) which are earmarked for the farmer tenant.

Naturally, it depends on the wording of individual leases and you should seek advice in relation to the wording of your specific lease. However, many rely on the IFA master lease which provides the definition of entitlements as follows:

“Entitlements mean payments made under the Single Farm Payment Scheme and/or the Basic Payment Scheme and/or such other schemes that from time to time may be implemented as a successor to these schemes or any such other similar scheme arising from the activity of farming the lands.”

The Eco Scheme is a voluntary scheme. An applicant can opt in or out on an annual basis. Applicants need to deliver two agricultural activities. It is based on costs incurred and income forgone. It is paid per hectare farmed – no maximum. The payment is not linked to entitlements held. Payment is between €60-€65 per ha.

There are also covenants by the farmer tenant under the IFA Master lease:

  • To make any application to DAFM for the purposes of triggering entitlements. and to deal with all queries from DAFM.
  • To comply with GAEC and Cross Compliance and SMRs and to indemnify the owner against any loss for failure to comply with the requirements.
  • Owner agrees to apply to DAFM to transfer the entitlements for the benefit of the lease at commencement.

  • Farmer to sign all documentation required by DAFM to ensure that the entitlements are transferred back to the owner at the end of the lease.
  • On termination or expiration of the lease, the use to the entitlement will revert to the owner less any statutory deductions that may be made to the owner by DAFM or other appropriate authority without any entitlement for compensation for the entitlements.

    • Given the definition of entitlements as set out earlier, the tenant farmer is obliged to apply for all schemes arising from the activity of farming the lands and to pay these back to the landowner.

    Rent review

    My view is that given the uncertainty with entitlements, a rent should be negotiated based on the current scheme and provision should be made for a rent review once the new scheme kicks in.

    However, it is a good idea to agree in principle now what the outcome will be, whether there are entitlements or no entitlements, e.g. pay a higher rent and the farmer gets to keep the DAFM payments, if any; or alternatively, the farmer pays a lower rent and agrees to pay back whatever entitlements they can claim to the landowner.

    There is a useful tool on the IFA website (ifa.ie/cap) to calculate the potential cut to DAFM payments: “What would it mean for your farm?” based on the area farmed and the current annual direct payment, which will assist with the negotiations.

    Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors and Tax Consultants does not accept responsibility for errors or omissions howsoever arising. Email aisling@agrisolicitors.ie