Are you a farmer looking for land to rent or lease in Ireland? Or are you a landowner who wants to let your land to a farmer for agricultural purposes? If so, you may be interested in learning more about farm business tenancies, which are a type of legal agreement that governs the relationship between landlords and tenants of agricultural land.
In this article, we will explain what a farm business tenancy is, why it is important to have a written agreement, what are the benefits of leasing land in Ireland, what are the types and terms of farm business tenancies, and how to resolve any disputes that may arise between landlords and tenants. By the end of this article, you will have a better understanding of farm business tenancies and how they can help you achieve your farming goals.
Contents
Farm Business Tenancy in Ireland
What is a farm business tenancy?
Why is it important to have a written agreement?
What are the benefits of leasing land in Ireland?
Types of farm business tenancies
Terms and conditions of farm business tenancies
Benefits and drawbacks of farm business tenancies
What is a farm business tenancy?
A farm business tenancy is a type of tenancy agreement that allows a farmer to rent or lease land from a landowner for agricultural purposes. A farm business tenancy can be created verbally or in writing, but it is always advisable to have a written agreement that clearly sets out the terms and conditions of the tenancy, such as the rent, the duration, the rights and obligations of both parties, and the procedure for terminating the tenancy.
A farm business tenancy can be used for various types of farming activities, such as crop production, livestock rearing, horticulture, forestry, or Agri-tourism. A farm business tenancy can also include buildings, fixtures, machinery, or equipment that are necessary for farming operations.
Why is it important to have a written agreement?
Having a written agreement for your farm business tenancy is important for several reasons. First, it provides clarity and certainty for both parties about their roles and responsibilities. Second, it helps to avoid misunderstandings or conflicts that may arise during the tenancy. Third, it protects the interests and rights of both parties in case of any disputes or legal issues. Fourth, it enables both parties to benefit from tax relief on farm leases (see below).
A written agreement for your farm business tenancy should be drafted by a professional solicitor or an agricultural consultant who has experience and expertise in this area of law. You should also consult with your accountant or tax adviser before signing any agreement to ensure that you comply with the relevant tax rules and regulations.
What are the benefits of leasing land in Ireland?
Leasing land in Ireland can offer many benefits for both landlords and tenants. For landlords, leasing land can provide a steady income stream without having to manage or maintain the land themselves. Leasing land can also reduce their exposure to market risks or price fluctuations that may affect their farming income. Leasing land can also allow them to retain ownership of their land while transferring some or all their farming rights to another party.
For tenants, leasing land can give them access to more land without having to buy or inherit it. Leasing land can also enable them to expand or diversify their farming activities without having to invest in capital assets or infrastructure. Leasing land can also allow them to benefit from economies of scale or synergies with other farmers who lease nearby land.
Another benefit of leasing land in Ireland is that both landlords and tenants can qualify for tax relief on farm leases under certain conditions. The tax relief scheme was introduced by the Irish government in 2015 to encourage more long-term leasing of agricultural land and to improve the structure and efficiency of the farming sector. The tax relief scheme allows landlords to claim an income tax exemption on the rent they receive from farm leases, up to a certain limit depending on the duration of the lease. The tax relief scheme also allows tenants to claim a deduction for the rent they pay for farm leases, up to a certain limit depending on their income. The tax relief scheme applies to leases of at least five years and up to 25 years, and to leases of at least 10 hectares of land.
To qualify for the tax relief scheme, both landlords and tenants must meet certain criteria, such as being individuals (not companies or trusts), being resident in Ireland, having a valid PPS number, and filing a tax return. The lease must also be in writing and registered with the Revenue Commissioners. For more information on the tax relief scheme, you can visit the Revenue website or consult with your accountant or tax adviser.
Types of farm business tenancies
There are different types of farm business tenancies that can suit diverse needs jand preferences of landlords and tenants. The main types of farm business tenancies are:
- Fixed-term tenancies: These are tenancies that have a definite start and end date, and that cannot be terminated before the end date unless both parties agree or there is a breach of contract. Fixed-term tenancies can provide security and stability for both parties, as they know how long the tenancy will last and what the rent will be. Fixed-term tenancies can also allow both parties to plan and budget accordingly. Fixed-term tenancies can range from five years to 25 years, depending on the agreement between the parties.
- Periodic tenancies: These are tenancies that have no fixed end date, and that continue indefinitely until either party gives notice to terminate. Periodic tenancies can provide flexibility and convenience for both parties, as they can adjust the terms and conditions of the tenancy as circumstances change. Periodic tenancies can also allow both parties to terminate the tenancy at any time, subject to giving sufficient notice. Periodic tenancies can be weekly, monthly, quarterly, or yearly, depending on the agreement between the parties.
- Part 4 tenancies: These are tenancies that are governed by the Residential Tenancies Act 2004, which applies to residential properties that are rented for agricultural purposes. Part 4 tenancies give tenants certain rights and protections, such as security of tenure, rent reviews, repairs and maintenance, dispute resolution, and termination. Part 4 tenancies can be created by default if a tenant occupies a residential property for at least six months without a written agreement or with an agreement that does not exclude Part 4 rights. Part 4 tenancies can last for four or six years, depending on when they were created.
Terms and conditions of farm business tenancies
The terms and conditions of farm business tenancies can vary depending on the type of tenancy, the agreement between the parties, and the applicable laws and regulations. However, some of the common terms and conditions that should be included in any farm business tenancy agreement are:
- Rent and rent reviews: The rent is the amount of money that the tenant pays to the landlord for the use of the land and any other facilities or services provided by the landlord. The rent should be agreed between the parties before the start of the tenancy and should be fair and reasonable in relation to the market value of the land. The rent should also be paid on time and in full by the tenant unless there is a valid reason for delay or reduction. The rent can be reviewed periodically by either party, subject to giving notice and following a procedure agreed between the parties or prescribed by law. The rent review should consider factors such as inflation, changes in market conditions, improvements or deterioration of the land, or changes in farming practices.
Repairs and maintenance: The repairs and maintenance are the actions that are necessary to keep the land and any other facilities or services provided by the landlord in good condition and working order. The responsibility for repairs and maintenance should be allocated between the parties according to the nature and extent of the repairs and maintenance required, and the agreement between the parties or the law. Generally, the landlord is responsible for structural repairs and maintenance, such as fences, drains, buildings, or machinery, while the tenant is responsible for non-structural repairs and maintenance, such as weed control, fertilization, or pest management. The parties should also agree on who will pay for the costs of repairs and maintenance, and how they will notify each other of any repairs and maintenance needed or done.
- Improvements and compensation: The improvements are the actions that enhance the value or productivity of the land, or any other facilities or services provided by the landlord. The compensation is the amount of money that the tenant may claim from the landlord for any improvements made by the tenant during the tenancy. The rights and obligations of both parties regarding improvements and compensation should be agreed between the parties before the start of the tenancy and should be fair and reasonable in relation to the benefits and costs of the improvements. Generally, the tenant needs the consent of the landlord before making any improvements, unless they are minor or necessary for farming operations. The tenant may also be entitled to compensation for any improvements that are not fully exhausted or depreciated at the end of the tenancy, subject to certain conditions and limitations.
- Rights and obligations of landlords and tenants: The rights and obligations of landlords and tenants are the duties and entitlements that both parties have towards each other and towards the land during the tenancy. The rights and obligations of both parties should be specified in the farm business tenancy agreement and should be consistent with the law and good farming practice. Some of the common rights and obligations of landlords and tenants are:
- The right to quiet enjoyment: This means that the landlord should not interfere with or disturb the tenant’s use and occupation of the land, unless there is a valid reason or permission to do so.
- The obligation to pay rates and taxes: This means that both parties should pay their respective share of any rates or taxes that apply to the land or their activities on it, such as property tax, income tax, or VAT.
- The right to assign or sublet: This means that either party may transfer their interest or part of their interest in the farm business tenancy to another person, subject to obtaining the consent of the other party or complying with certain conditions.
- The obligation to insure: This means that both parties should take out adequate insurance cover for any risks or liabilities that may arise from their use or occupation of the land, such as fire, theft, injury, or damage.
- The right to inspect: This means that either party may enter and inspect the land, or any other facilities or services provided by the landlord at reasonable times and with reasonable notice, for purposes such as rent review, repairs and maintenance, improvements and compensation, or dispute resolution.
- The obligation to comply with laws and regulations: This means that both parties should abide by any laws or regulations that apply to their use or occupation of the land, such as environmental protection, animal welfare, food safety, or planning permission.
- Termination and notice periods: The termination is the end of the farm business tenancy, either by expiry of the fixed term, by mutual agreement, by notice, or by breach of contract. The notice periods are the minimum amount of time that either party must give to the other party before terminating the tenancy. The terms and conditions of termination and notice periods should be agreed between the parties before the start of the tenancy and should be fair and reasonable in relation to the type and duration of the tenancy. It is the practice that, the longer the tenancy, the longer the notice period required. The notice should also be given in writing and delivered in a proper manner.
Benefits and drawbacks of farm business tenancies
Farm business tenancies can have countless benefits and drawbacks for both landlords and tenants, depending on their circumstances and objectives. Some of the possible benefits and drawbacks are:
- Benefits for landlords:
- Increased income: Landlords can earn a steady and reliable income from renting out their land to tenants, especially if they can negotiate a favourable rent and rent review clause.
- Reduced costs: Landlords can save on the costs of managing and maintaining their land, as these are usually borne by the tenants or shared between the parties.
- Tax relief: Landlords can benefit from tax relief on their rental income, as well as on any capital gains or inheritance tax that may arise from selling or transferring their land.
- Diversification: Landlords can diversify their income sources and reduce their exposure to market fluctuations, by renting out part or all of their land to different types of tenants or for different purposes.
- Flexibility: Landlords can choose the type and duration of farm business tenancies that suit their needs and preferences, as well as terminate or renew them as they wish.
- Drawbacks for landlords:
- Loss of control: Landlords may lose some control over their land and how it is used or managed by the tenants, especially if they grant long-term or periodic tenancies with limited rights to inspect or intervene.
- Risk of damage: Landlords may face the risk of damage or deterioration of their land, or any other facilities or services provided by them, due to negligence, misuse, or natural causes by the tenants or third parties.
- Liability: Landlords may be liable for any injuries or losses that may occur on their land or due to their actions or omissions, such as breach of contract, negligence, nuisance, or trespass.
- Disputes: Landlords may encounter disputes with their tenants over various issues, such as rent, repairs, improvements, termination, or compensation, which may require legal action or arbitration to resolve.
- Benefits for tenants:
- Access to land: Tenants can gain access to land that they may not be able to buy or own, due to financial, legal, or personal reasons.
- Reduced capital: Tenants can save on the capital costs of buying or owning land and use it for other purposes such as investing in their farming business or diversifying their activities.
- Tax relief: Tenants can benefit from tax relief on their rental expenses, as well as on any improvements they make on the land during the tenancy.
- Security and stability: Tenants can enjoy security and stability in their farming operations, especially if they have long-term or fixed-term tenancies with clear terms and conditions.
- Flexibility and convenience: Tenants can adjust their farming operations according to changing market conditions or personal preferences, especially if they have periodic or short-term tenancies with easy termination clauses.
- Drawbacks for tenants:
Rent and rent reviews: Tenants may have to pay a high rent for using the land, especially if the demand for land is high or the supply is low. Tenants may also face rent increases during the tenancy, depending on the rent review clause and the market conditions.
- Repairs and maintenance: Tenants may have to bear the costs and responsibilities of repairing and maintaining the land or any other facilities or services provided by the landlord, which may be substantial or unexpected.
- Improvements and compensation: Tenants may have to obtain the consent of the landlord before making any improvements on the land, which may be difficult or denied. Tenants may also not receive adequate compensation for any improvements they make on the land, which may reduce their return on investment or incentive to improve.
- Rights and obligations: Tenants may have limited rights and obligations regarding their use and occupation of the land, such as subletting, insuring, or complying with laws and regulations, which may restrict their freedom or expose them to risks or liabilities.
- Termination and notice periods: Tenants may face the risk of termination of their tenancy before they are ready or willing to leave, either by expiry of the fixed term, by notice, or by breach of contract. Tenants may also have to give a long notice period before terminating their tenancy, which may affect their planning or opportunities.
Conclusion
Farm business tenancies are a common and popular way of renting out or using agricultural land in Ireland. They can offer diverse benefits and drawbacks for both landlords and tenants, depending on their circumstances and objectives. Therefore, it is important for both parties to understand the types, terms, and conditions of farm business tenancies, as well as their rights and obligations under them. It is also advisable for both parties to seek professional advice and assistance before entering into any farm business tenancy agreement, to ensure that they are well informed and protected.
FAQs
- What is the difference between a farm business tenancy and a conacre?
A farm business tenancy is a long-term lease of agricultural land, usually for more than five years, which gives the tenant farmer security of tenure and tax relief on the lease payments. A conacre is a short-term rental of land, usually for one year or less, that allows the landowner to take a single crop or grazing from the land without creating a landlord-tenant relationship[i]
- How can I find land to lease in Ireland?
There are several ways to find land to lease in Ireland, such as:
- Contacting local landowners or farmers who may be interested in leasing their land.
- Searching online platforms or websites that advertise land for lease, such as Landdirect.ie, Daft.ie, or Donedeal.ie
- Consulting with agricultural advisors, solicitors, accountants, or auctioneers who may have knowledge of land availability and lease terms.
- Joining a land mobility service or a land matching scheme that connects landowners and potential tenants, such as the Land Mobility Programme or the Macra na Feirme Land Mobility Service
- How can I qualify for tax relief on farm leases?
To qualify for tax relief on farm leases, you need to meet the following conditions:
- You must be a qualifying lessor, which means you are an individual who is not a company or a trust, and you are not farming the land yourself or through a connected person.
- You must lease the land to a qualifying lessee, which means a person who is actively farming the land and is not connected to you.
- You must lease the land under a qualifying lease, which means a written lease that is registered with Revenue and has a term of at least five years and not more than 25 years.
- You must not receive any other income from the land, such as conacre payments, Basic Payment Scheme entitlements, or agri-environmental payments.
The amount of tax relief you can claim depends on the duration of the lease and the number of acres leased. The table below shows the annual tax exemption limits for different lease periods:
| Lease Period | Tax Exemption Limit |
| 5-7 years | €18,000 |
| 7-10 years | €22,500 |
| 10-15 years | €30,000 |
| 15+ years | €40,000 |
- How can I protect my security of tenure as a tenant farmer?
To protect your security of tenure as a tenant farmer, you should:
- Ensure that you have a written lease agreement that clearly states the terms and conditions of the lease, such as the duration, rent, maintenance, repairs, improvements, termination, and dispute resolution.
- Register your lease with Revenue to avail of tax relief and with the Property Registration Authority to record your interest in the land.
- Comply with the obligations and responsibilities of the lease and pay your rent on time.
- Maintain excellent communication and relationship with your landlord and notify them of any issues or changes that may affect the lease.
- Seek legal advice before signing or renewing a lease or if you encounter any problems or disputes with your landlord.
- How can I avoid disputes with my landlord or tenant?
To avoid disputes with your landlord or tenant, you should:
- Have a clear and comprehensive written lease agreement that covers all aspects of the lease and minimizes ambiguity or misunderstanding.
- Review and update the lease agreement regularly to reflect any changes in circumstances or legislation.
- Communicate openly and respectfully with your landlord or tenant and address any concerns or queries promptly.
- Keep records of all payments, receipts, correspondence, inspections, repairs, improvements, notices, and agreements related to the lease.
- Seek mediation or arbitration as an alternative to litigation if a dispute arises and try to resolve it amicably and fairly.
