Leasing Land approach involves negotiated agreements between landowners and tenants that define responsibilities, lease terms, and conditions to ensure both parties meet their objectives and minimize conflicts.

Benefits of Leasing Land

•     Improved Cash Flows: Leasing can enhance liquidity and financial stability for growers.
•     Increased Scale and Efficiency: Access to more land enables greater production capabilities.
•     Profit Maximization: Utilizing leased land can lead to higher profits compared to owning and operating land without leasing.
•     Reduced Debt Risk: Growers can expand operations without incurring high debts typically associated with purchasing land.

Responsibilities

    Landowner Responsibilities:

•         Ensure financial returns on the leased asset.
•         Maintain land and infrastructure in good condition.
•         Responsible for paying rates, rents, and necessary insurance.

    Tenant Responsibilities:

•         Cover operating costs and ensure the land remains in a stable condition.
•         Focus on short-term profitability while conducting operations.

Lease Agreement Components

•     Land Definition: Clearly identify the leased area and any exclusions.
•     Included Items: Specify additional resources, facilities, or equipment provided for tenant use.
•     Lease Duration: Outline the lease term, renewal options, and penalties for early termination.
•     Termination Penalties: Define financial penalties for premature lease discontinuation by either party.
•     Commencement Date: Agree on a specific start date for the lease.
•     Payment Terms: Establish the lease payment amount and schedule.
•     Maintenance Responsibilities: Generally, tenants maintain facilities in their current condition, with recommendations for joint inspections.
•     Cropping Intensity: Guidelines on crop types, intensity, and area to be farmed should be specified.
•     Water Access: Agreements must detail water access for irrigation needs.
•     Capital Improvements: Clarification that tenants typically do not make capital improvements.
•     Conflict Resolution: Include a procedure for resolving disputes, such as appointing arbitrators.

Determining Lease Value

    Various methods can assess lease value:

•         A percentage of the capital value of the land.
•         A percentage of expected gross income or gross margin.
•         Current market rental rates, ideally validated by rural real estate experts.

    The appropriate lease rate may vary based on the profitability of the crops grown and the farm’s financial capacity.

Readers should consult professional advice before making business decisions, considering this document’s recommendations. The information comes from the Tasmanian Institute of Agriculture, a collaborative venture between the University of Tasmania and the Tasmanian Government.