FOR ASPIRING FARMERS
What to ask your solicitor and accountant before you lease a farm
By Sam Marwood
Before you ask either adviser anything, establish who the landlord actually is. It could be a private retiring farmer, an absentee owner, a family company, a public body, a conservation organisation or a land trust.
Each has completely different motives, different decision making, and different flexibility. What can be negotiated depends heavily on which one is in front of you, so know that before the first proposal.
Put these questions to your solicitor and your accountant before you sign.
For your solicitor
- Which state's law applies here, and what does it give me that the lease doesn't say?
- Is this lease long enough, and does it need to be registered to protect me?
- What am I entitled to for improvements if the lease ends, and is that statutory or only what the document says?
- What notice does either of us have to give, and can that be shortened by agreement?
- If the owner sells the land during my term, what happens to me?
- Can I sublease or assign this if my circumstances change?
For your accountant
- How is the profit share component treated for each of us, and is that different from the base rent?
- What can I depreciate or deduct on improvements to land I don't own?
- How should we define the profit figure so it means the same thing to both of us and to the tax office?
- What are the GST implications of a rent that varies, and is rent on the homestead treated differently from rent on the paddocks?
One to work through with the owner before you sign
Run the rent formula across three seasons: a good one, an average one, and a genuinely bad one. Both of you look at all three numbers.
If the owner can't live with the bad year, or the tenant can't live with the good one, the formula is wrong and it's much cheaper to find that out now.
Read more: What has to be in a flexible farm lease? and What kills a flexible farm lease?.
This is general information, not legal or tax advice.
The full guide, You Can Own a Farm, is free at cultivatefarms.com/resources.
You can build your own plan at cultivatefarms.com/plan.