Around this time of year many farmers will be entering into new farm leases. 

It is crucial to ensure that any agreement is documented well in case a dispute arises. 

At O’Brien & Smith Lawyers we frequently assist clients in relation to farmland disputes. 

These disputes often end up costing our clients thousands in legal fees when often they could have been avoided if the appropriate paperwork was used to record the agreement. 

In this article, I will detail some of the important considerations when drafting a lease agreement.

The first step in drafting a lease agreement is to correctly identify the parties. 

Is the lessee, or tenant, going to be entering the lease in their personal name or through a trust or company?

If a company is to be the lessee, the lessor may require an individual to also enter the agreement as a guarantor. 

This provides protection for the lessor if the company goes insolvent as the lessor will be able to enforce the lease against the guarantor.

Identifying the land accurately and specifically is also important. 

Where the land cannot be identified simply by its certificate of title, volume and folio identifier, a map may be included in a schedule to the lease.

What is and is not permitted on the land by the lessor should be documented carefully.

For example, some lessors will only want certain crops grown, others will only allow certain breeds of sheep to graze on the land. 

How fertiliser and pesticides are to be used by the lessee may also be documented.

Who pays for expenses such as insurance premiums, electricity, water rates and council rates should be documented in the lease. Similarly, who is responsible for the maintenance of shedding and fencing on the land should be documented.

The term of the lease including the length of the lease needs to be set out clearly including when it starts and ends, and the details of any renewal terms offered. 

How rent is to be reviewed during the lease or prior to the renewal should also be set out clearly.

Some lessors might wish to have the lessee pay a security bond to provide security against defaults, such as non-payment of rent. 

If so, this should be documented in the loan agreement.

Any important agreements, including farm leases, should be carefully drafted and executed correctly to ensure that what was agreed can be easily reviewed, and if required, proved in court.

• Patrick Smith is the principal of O’Brien & Smith Lawyers. This article is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. Neither Patrick nor O’Brien & Smith Lawyers accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your lawyer.

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