Many landowners who have been contemplating the future of their farms may now be looking at leasing.
So, what are the steps to be followed? In my opinion, once the owner has decided to move forward with a lease, he or she needs to get a team in place to obtain proper advice and to ensure every box is ticked.
The first conversation should be with their family to explain the move and the reasons behind the decision.
The second conversation is with the owner’s accountant. This will determine the tax treatment of the income from the lease and the tax implications (if any) which could arise from the sale of stock, etc. Your accountant’s knowledge of your personal and farm financial and tax position is important.
The length of the lease can depend on the tax implications or family circumstance. For instance, a family member may return home to run the farm. Usually, the most common leases that my office assists with are 10-15 years long, as this gives the landowner a higher level of tax relief and it also allows the tenants to plan more long-term for their farming future.
The third conversation should be with the owner’s solicitor. This chat should be to discuss any legal questions that the owner might have about the process. The landowner should keep the solicitor in the loop as most leases are drawn up by a solicitor.
The next conversation should be with the auctioneer/land agent. Choose an agent that has experience with agricultural leases, that you can trust and who you feel comfortable with. They will work for you. Your agent will walk the farm with you and get into the details of the backbone of the lease – for example, payment dates, rent review, treatment of single farm payment, water supply, use of yards, etc.
We sometimes encounter a query like how to manage if a son/daughter might eventually want a site on the farm? Every lease can be customised to the farm in question and to the owner’s wishes.
Method of sale
Once the landowner and the team around him/her is happy with the plan, the agent can go to the market.
Most leases are arranged by private treaty, which means interested parties can express their interest to the agent and bid until the highest bid is achieved. This process can happen over a number of weeks which allows the landowner, agent and farmer time to assess all the elements of the price, lease and the plan.
Leases can also be arranged very successfully by public auction or by tender. Each method has its own advantages. We usually go for private treaty as it gives us time to thoroughly examine and research all potential tenants.
Most owners have thought about who and what they want for their farm. Usually, they want to deal locally, arrange a fair price and have the farm looked after well. They may even have someone in mind already.
In my experience trying “the parish” first is a wise move. It potentially can give the owner the security of already knowing the person who will be around the farm for the next few years. This can be especially important if the owner and family are continuing to live in the farm house.
Most agents will have a number of farmers who are looking for ground to lease. Sometimes the agent is already leasing them other land. It is essential that tenants are professional in their dealings with a farm and its owner as it is important to maintain a good clean reputation as a tenant.
Agents use numerous advertising methods to advertise the property: social media, text services, newspapers, websites and word of mouth. Maps of the property will then be provided to interested parties with a general overview of the terms of the lease.
Once the tenant has bid and is successful the agent can engage with the landowner’s team to draw up the lease, set up the payment plan and link the two agricultural advisers if entitlements are being transferred.
Some agents remain involved during the lease and will, for example, collect the rent on behalf of the landowner. This is obviously an important job with good communication essential. The agent can act as a buffer between the owner and the tenant and be a person to whom both parties can put questions or raise issues for clarifying. Coming from a farm myself I understand how farming works and I believe there is nothing that can’t be figured out.
Rental prices vary depending on quality of the land, its location and the demand in the area. What is more important than achieving a record once-off price is getting a tenant who will care for the property, respect the owner and ultimately add value to the farm.
Michael Barry specialises in land letting and land sales along with traditional auctioneering services. He is based in Callan, Co Kilkenny, and Rathdowney, Co Laois.