Farm lease agreement

About this Farm Lease Agreement

While leasing spare agricultural land generates income for a land owner, without a formal lease agreement in place it can be difficult to ensure that the tenant (the 'lessee') uses the land and farm property as intended, and perhaps more importantly, loses the right to stay at the end of the leasing arrangement.

This farm tenancy contract provides a lease that is fair to the lessee, reflecting the hard work required to keep the land or irrigated land in good condition, but which protects the property and land resources of the landlord (the 'lessor').

It does so by including positive obligations and restrictions on the lessee. We provide a large number of choices to make editing easy. Of course, if some are not applicable to your arrangement you can remove them.

The duration of an agricultural lease can be short term or long term in nature. The rental period could be between six months and 60 years. We have written the opportunity for the landlord to carry out regular rent reviews.

The law in this Farm Lease Agreement

This lease agreement complies with current property law and farming business in each of the states for which we provide a version.

If the use of the property is for non-agricultural business use, such as tractor repair and storage or feed merchanting, we suggest that using an agricultural lease for private grazing or non-agricultural business use is more suitable.

When to use this farm land lease agreement?

This agreement should be used if:

• All or part of the land is farmed for trade or business throughout the term
• The circumstances of occupation suggest that the character of the tenancy is primarily agricultural

Agricultural refers to using all or part of the property to grow plants (crops) or rear animals with a view to sale. The scale of the business is not important: the same laws apply whether the property is a commercial dairy farm with hundreds of acres of pasture, or 10 metres of poly-tunnel under which a prize garden plant is cultivated.

Farming encompasses all sorts of businesses, from those growing crops in fields (including grass, hay or silage), to those where the crops are grown in an orchard or under glass (e.g. tomatoes or mushrooms), to those where the 'crop' is an animal (e.g. lamb farming) or a product derived from animals (e.g. milk). Keeping animals (e.g. grazing horses on the land) in itself is not an agricultural business but horse breeding is. A garden centre is not an agricultural business, but plant growing is.

Change of use may be anticipated and will not necessarily disqualify the agreement, if notice has been served. The law does not make clear how far diversification may go. However, it has now become clear that peripheral or additional business operations will not prevent a tenancy from being a farm tenancy, for example, operation of a farm shop or a camp site. In any case, any diversification of use other than farming is likely to require the consent of the landlord.

Who should use this farm lease contract?

It is usually the lessor who prepares the lease agreement because their land is an expensive resource and they have the greater interests in protecting their legal rights over it. However, the tenant might also propose lease terms, perhaps as part of negotiations between the parties involved, perhaps to be able to start farming the land sooner.

Examples of the type of lessee for this farm lease contract include:

• a wheat farmer expanding crop growing operations onto adjacent field
• a dairy farmer renting land and outbuildings (perhaps specialist buildings such as a large milking station)
• a specialist rare breed farmer grazing animals on the land
• someone running a horse stud as a 'hobby'
• an operator of renewable energy farms, such as wind farms
• a brewer who grows apples on the rented land (an orchard) and makes the cider in an outbuilding
• a plant grower who sells their plants from a building on the site
• a mushroom grower using one of the outbuildings to cultivate a new variation under special conditions for commercial sale

Agreement features and contents

Although farmland leases usually follow a basic, standard form (so that both parties understand the key terms) they can vary in their coverage of matters relating to the type of property and how it should be managed.

Of course, this farm land lease covers the standard terms that you would expect such an agreement to cover, such as the term of the lease, payment of the rent (lease fee), tenant's obligations and arrangements after the land lease ends.

Although this is a cash-rent lease, where the rent paid is a monetary sum, it could be adapted to different types of farm leases such as a crop-rent lease or a hybrid lease.

Where it differs from many other farm lease agreements is that it provides a large menu of over 62 options to empower or restrict the tenant. The land leasing terms have been carefully considered to protect the landlord's interests while remaining fair to the other party.

The agreement has 23 sections and 3 schedules, which include:

• Establishment of the farm lease
• Lease term - short or long term
• Rent amount (lease fee) and other payments: including further payments and interest on late payments
• Rent review
• Tenant's responsibilities, obligations and restrictions, such as for land stewardship and maintenance of fences, gates, walls, tanks, dams and wells
• Entitlements
• Assignment: tenant may not assign the lease or sublet the property without the landowners permission
• Tenant's fixtures
• Landowner's obligations
• Insurance: choice for the landowner to be responsible, or for the tenant to be responsible
• Property access for the landowner
• Indemnity: tenant indemnifies the lessor
• Termination: including notice period, and events at and after termination
• Forfeiture
• Guarantor: essential if the occupier is a company
• Other matters, including use of mediation as a conflict resolution process
• Schedule 1: rights reserved
• Schedule 2: redundant buildings: not required to be maintained
• Schedule 3: tenant's incoming fixtures

What is the Budgeting Method?

This budgeting method is based on the idea that fair farm rent should reflect a share of the potential farm income typically around 25% of the forecasted gross margin from cropping, combined with a long-term agistment rate for livestock enterprises.

How to calculate a fair lease fee in Australia?

A fair farm lease fee in Australia is usually based on a percentage of the expected income from the land. For cropping, it’s often 20–30% of the forecasted gross margin per hectare, while for grazing, it may reflect local agistment rates based on the number of animals and grazing period. The final amount can also be influenced by land quality, water access, infrastructure, and lease length. Comparing similar local leases is a practical way to check if the rent is fair.

Is GST or Stamp Duty applicable on Farm Lease?

GST may apply to rent on commercial farm leases if the landowner is GST-registered. In some states, stamp duty may also apply, typically for long-term or high-value leases. Both parties should get advice to confirm their tax obligations.

Biosecurity Obligations

Landowners and tenants must meet state biosecurity laws, including managing pests, diseases, and weeds. The lease should clearly state who is responsible for weed control, animal health, and responding to government notices.

Is the registration of this lease agreement required?

In some states or for longer lease terms, you’ll need to register the lease with the local land titles office.