FOR ASPIRING FARMERS
When does lease to buy work, and when doesn't it?
By Sam Marwood
Lease to buy means you lease the farm, and you hold a right to buy it at the end, at a price agreed at the start. Until you exercise that right you're a tenant, and the title stays with the owner.
It works when a lease is the easier thing for the owner to agree to. It doesn't work when you want to buy now and the owner is drifting toward a lease. It also fails when you can't see yourself affording the purchase, or when the option isn't really an option.
When it works
The lease is the easier ask. Asking someone to lease you a block is a far smaller thing to say, and to hear, than asking to buy their farm.
Plenty of ownership conversations start as a lease conversation, and some owners offer terms unprompted once they've watched you farm the place for 1 year.
The land goes to the person already on it. Where you farm, find out whether a farmer who wants out leases first. Then find out whether the land is sold to the leaseholder before the district knows it was available.
If that's how properties move, becoming the leaseholder is how you get the farm.
The owner can't sell. A property that's sat unsold for 1 year has an owner who has learned something, so ask the agent whether the vendor would consider it.
The owner has more than one property. An owner of several properties has more flexibility than an owner of one farm. They may well prefer a capable tenant over a slow sale.
The owner wants to stay. A right to stay in the homestead can be written in, so a retiring farmer stays put while you build equity in the business around them. You own none of the land until you exercise the option.
Whether the right to stay should be a life estate, a lease or a right to occupy is a question for your solicitor. So is whether the tax, duty and pension treatment differs in your case.
When it doesn't
You want to buy now. If you want ownership and the seller is drifting toward a lease, get a clear yes or no on selling before you agree to anything.
A lease with a vague option can be a soft exit for a hesitant owner. You can give them 3 quiet years while your own chance to fund a purchase runs out. Asking the hard question early is cheaper than finding out in year 3.
You can't see yourself affording the purchase. You'll spend the lease term improving someone else's land on the strength of a price you've already committed to. If you reach the end and can't fund it, you've paid for improvements you don't own.
The option isn't really an option. A right of first refusal only gives you the chance to match someone else's offer. It doesn't fix a price and it doesn't stop the farm going to market, so it isn't the same deal as a purchase right. Check which one is written down.
Read more: Lease to buy a farm, or vendor finance: two ways to own one and What kills a lease to buy?.
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.