Long Term Leasing

LM Weanlings

Long Term Leasing can have many benefits

Long term leasing is proving to be a very effective land use collaboration providing certainty and security to both parties. Recent budgets have provided a significant stimulus for long term leasing.

From the land owners perspective

1.      Long term leasing is extremely tax efficient, the rental income that is annually exempt from Income Tax for qualifying leases taken out on or after 1 January 2015 is

·         €18,000 on leases for 5 or 6 years

·         €22,500 on leases for 7, 8 or 9 years

·         €30,000 on leases for 10 to 15 years

·         €40,000 on leases for 15 years or more

Alternatively under con acre all income is exposed to income tax. In addition long term leasing can still allow land owners qualify for Capital Gains and Capital Acquisition Tax reliefs, con acre leaves land owners exposed to such taxes.

2.      As with all arrangements it is important to select the right person. With a correct choice, long term leasing provides income security and certainty, and it will also result in the land and facilities being properly maintained or enhanced.

3.      Long term leasing agreements tend to be clean and simple.

4.      Land owners wishing to step back can opt to lease part of their farm and continue to farm the remainder themselves.

5.      Leasing does not suit all land owners as they may not be ready to retire or might want to stay involved, for what ever reason, in which case they may look at other options such as share farming or contract rearing.

From the farm operators perspective

1.      Long term leasing delivers access to land for a definite period at a known cost, this provides certainty allowing an operator develop his/her farm business. A sustainable farm business can not be developed around con acre.

2.      Where, in order to make the best use of leased ground, investment is required; be that on your own or the leased farm it is important that the lease duration is sufficiently long to justify same. In reality 5 years is too short in most cases.

3.      Long term leasing agreements tend to be clean and simple.

4.      The principal reason why leases break down is when the rent is not realistic (either way), before finalising a price it is important that you do your budgets and know your cost of production.

5.      When looking to extend leases or enter new leases your record in land and infrastructure care and how you honoured previous agreements is very important, your reputation will follow you.

6.      Young farmers, new entrants and small operators can find themselves at a disadvantage when considering a significant lease. Established operators tend to be best positioned to have the finance required to cover stock, investments, inputs and the rent.