The special nature and use of a farmland, whether it be for livestock or cropping purposes, means that a generic commercial lease between parties is often not appropriate to provide adequate protection for and set out the specific obligations of both tenants and landlords alike.
Our team of lawyers have extensive experience in negotiating and preparing agricultural leases. We can assist you to ensure that you understand your rights and obligations and are adequately protected.
We understand the importance of ensuring the process of preparing the lease agreement, negotiating any amendments and having the document executed is simple and straightforward for both parties, with as little hassle as possible.
A family member currently farms some property I own under an informal agreement. We have never had any disputes, do I really need a formal lease in place?
It is important that leases of property are formally documented by way of a lease agreement to provide protection for both parties, and to properly document the activities taking place on a property.
We understand that in many cases, the tenant and landlord know each other and may even be related parties and this may have resulted in an informal arrangement being put in place across the years. The relationship between the parties may make a formal lease agreement seem unnecessary, or you may feel that you might be “rocking the boat” if you ask for a formal lease agreement to be put in place.
However, having a formal lease agreement in place can have a number of benefits for parties.
The first is that the arrangement between the parties is properly documented, including provisions which set out how dispute resolution can take place, and how either party can terminate the lease. This ensures that the parties understand their obligations as they are set out in writing.
While your relationship is good at this time, we always encourage our clients to formalise arrangements, in case the relationship sours down the track. If there is a dispute down the track, having a formal lease agreement in place may assist the parties to resolve the dispute without a breakdown of the relationship, or at the very least can assist in setting the parameters of the dispute. A formal lease agreement can also help lessen the cost of litigation of any disagreement as it can narrow the issues in dispute in some circumstances.
For landlords, where the property is exempt from land tax for primary production purposes, should the State Revenue Office conduct an investigation, having a formal lease agreement in place means you have clear evidence of meeting the requirements for the exemption.
Where there is no lease in place you will be required to provide other evidence that primary production is taking place on the property, including statutory declarations, which can make the process of responding to any SRO query more costly and time intensive.
What sort of matters should an agricultural lease cover?
Leases of agricultural properties used for broadly primary productions activities (ie cropping and livestock) are not covered by either the provisions of the Residential Tenancies Act 1997 (Vic) or the Retail Leases Act 2003 (Vic). In addition, due to the nature of the use of the property, the provisions of a lease for farm land are very different to that of a commercial or residential property.
As such, it is important that any lease entered into in respect of agricultural land sets out specific rights and obligations on landlords and tenants of farming land, to ensure that the relationship is properly documented from the start.
In addition to the usual matters covered by a lease, an agricultural lease should cover matters including:
- the use of the land – namely whether it be for livestock or cropping, or a mixture, and whether there are any restrictions to the use of the land;
- the tenant’s obligations, including for example to:
- maintain buildings, fences, gates, dams, tanks, wells, walls and other fixtures;
- keep down rabbits, other vermin and noxious plants;
- prevent soil erosion and damage using best practice techniques;
- take certain fire prevention measures to protect the property;
- ensure any substances used on the property do not pollute or contaminate the environment; and
- at the termination of the lease, to sow areas used for cropping back to basic pasture;
- any right of entry or inspection by the landlord or their agents; and
- any other matters which the parties may come to agreement on, for example:
- the parties may by agreement wish to exclude specific fixtures on the land from the lease, for example a dam or grain silos; or
- conditions about the use of chemicals on the land ie the use of off label chemicals by the tenant.
A lease over Crown land grants an exclusive right to occupy a defined area of land.
Crown land broadly refers to all land that has not been “alienated” from the Crown (that is, separated from the Crown). Victorian Crown land can be either unreserved or reserved and is managed to provide environmental, social, cultural and economic benefits to the people of Victoria. Reserved Crown land is that land set aside for specific public purposes, while unreserved Crown land has not been set aside for a particular public purpose.
Crown land is typically leased by the responsible minister, a delegate of the responsible minister, the Council or a delegated land manager. Who leases the land, for how long and under what terms depends on the relevant legislation and context.
Where land is leased by a delegated land manager, these leases are subject to approval by the responsible Minister or delegate of the responsible Minister.
The objective of the leasing policy for Victorian Crown land from 2018 is to provide a consistent framework for the leasing of Crown land by formalising “Crown Land Leasing Principles” at a State level. These principles guide land managers, existing tenants and prospective tenants, help inform decision making around leasing and improve community awareness of government policy for the leasing of Crown land.
Self-managed superannuation funds and leases
Many of our clients own farming land which is held in the name of their self-managed superannuation fund (“SMSF”) and which is leased out to a third party.
It is particularly important that a SMSF formally documents any lease agreements in relation to farming property held in its name, to ensure they are compliant with their relevant obligations at all times.
Importantly, when arranging a lease of farming land held in a SMSF the rental amount in the lease must be an amount which is at or above market rate for the property. This shall ensure that when your fund is audited you will be able to show that the SMSF is complying with its obligations.
Prior to entering into a lease you should obtain a valuation or appraisal from a licensed real estate agent which sets out the market rate of rent for the property. This valuation or appraisal should be up to date and have been prepared around the time the lease is prepared.
The lease itself should make provision for the rent to be reviewed to market rate at the end of each term and any further terms of the lease. This shall ensure that the SMSF stays compliant with its obligations across the term of the lease.
How can Coulter Roache help?
As stated above, it is important that leases of farming property are formally documented by way of a lease agreement.
Coulter Roache can assist you by preparing a document which reflects the agreement between the parties and contains appropriate protections for both parties to support your objectives.
Government and natural resource contracts
Wind farm leases, gas pipelines, mining royalties and phone towers
Renewable and Green energy is driving new opportunities for Victoria and farmers more than ever are being encouraged to lease their land for renewable energy farms.
Wind farm leases
In Victoria, the Victorian Renewable Energy Target will see 25% of electricity generated in the state be supplied for renewable sources, rising to 50% by 2030. In Victoria, as at 2018, there were 25 wind farms that produce 9% of the state’s generated electricity, with a number more in construction or at planning approval stage. This number is only expected to grow.
Most of these windfarms are built along the south coast, and around Horsham, Ballarat and Ararat and have been constructed on established and operational farms, under long term lease agreements with the property owners.
If you are considering hosting a wind farm on your property, there are many things you need to consider prior to entering into an arrangement.
What is the process to go through if I want to explore hosting a windfarm on my property?
Ordinarily it is a wind farm developers that will approach a landowner or landowners about the opportunity to situate a windfarm on their property, on the basis that the location and conditions of the property indicate that a windfarm could be successful.
Often agreements reached between landholders and developers will provide for a short term lease or licence to the developer to come onto the site and set up feasibility studies, as well as providing them with the time required to seek the required planning permission (which may take up to three (3) years to be granted.
If these initial feasibility studies are successful and the development is approved, the developer and landowner will then enter into a lease arrangement for the developer to construct and operate the windfarm on the site. Often these agreements will be of a period of thirty years or more with an opportunity to renew. This period of time takes into account the construction of the windfarm, its operation period and any decommissioning period.
What are some of the impacts a windfarm could have on my farming operations, or my neighbours?
There are a number of impacts, or perceived impacts that wind farms and turbines can have on an operational farm, its neighbours or community.
Many of these impacts will be dealt with or explored as part of the initial planning process by the developer, however you will need to consider them as part of your own planning / decision making process.
Things to consider include:
1. The effect of the wind farm on your farming operations.
There is likely to be little impact on a farm’s operations which come about as a result of the windfarm hosting. Windfarm turbines take up relatively little area of land on a farm and the rent a landholders earns from the windfarm hosting can often more than adequately compensate a landowner for any impact on farm operations.
The construction phase is likely to be where the main impacts will be to the farm operations, where there may be multiple turbines, roads and substations being constructed on the land.
In addition, if you have your crop aerially fertilised, some pilots may be unwilling to operate in the area that wind turbines are operating.
2. The effects of the windfarm on the community.
There is often community concern around the construction of windfarms, particularly where there are no windfarms within the community already. Concerns about windfarms range from noise, to visual and shadow flicker and health impacts.
While much of these concerns will be addressed by the developer through the planning process, it is important that landowners take an opportunity to consider the concerns of neighbours and the community. This is particularly important where a landowner may not want to impact their relationships in the community and may wish to develop strategies to address the concerns of other community members.
How can Coulter Roache assist?
Hosting a windfarm is a long term project for a landowner, with a number of stages, and there is a great deal to think about. It is not just the landowner who may be affected, positively or negatively by hosting a windfarm, but neighbours and the community as a whole.
It is important to seek legal advice early on in the process, to assist you to identify matter which you must turn your mind to, and to review any documentation or agreements provided by the windfarm developers.
A legal advisor will help you understand the process, and your rights and obligations, so that you can make an informed decision at each stage of the process and have your interests protected throughout the process.
Mining leases and licences
Australia has the world’s largest resources of gold, iron ore, lead, rutile, tantalum, uranium, zinc and zircon and the second largest resources of bauxite, brown coal, cobalt, copper, ilmenite, lithium, nickel, and tungsten.
Generally, mineral rights in Australia are reserved to the Crown. It is state governments who, pursuant to legislation, grant leases, licences or permits in relation to the exploration or mining of minerals.
A mineral license gives the licence holder the sole right to mine for specific minerals in the specified area.
The legislative framework
The Mineral Resources (Sustainable Development) Act 1990 (Vic) (the Act) and the Mineral Industries Regulations 2019 (the Regulations) governs and regulates the exploration and mining of minerals in Victoria.
The Act covers a broad range of matters related to exploration and mining of minerals, including but not limited to:
- Facilitating the exploration and mining of minerals in Victoria;
- Establishing a system of royalties, rentals, fees and charges related to mineral exploration and extraction;
- Just compensation of the use of private land for exploration or mining;
- Rehabilitation of land which has been mined;
- Enforcement of the legislative framework; and
- Recognition that the exploration and extraction of mineral resources must be carried out in a way that is not inconsistent with the Native Title Act 1993.
What is a mining royalty?
Under the Act, there is a requirement for any holder of a mining lease or licence to pay royalties to the state, which is calculated on the amount and market value of the mineral produced by the mine under the relevant licence.
The current Mineral Industries Regulations set the royalty at 2.75% of the net market value of the mineral, being the amount the mineral would be sold for in an arm’s length commercial transaction.
Previously gold was exempt from these requirements, however since 1 January 2020, the royalty is also now payable for gold produced under a mining licence in Victoria, but not including the first 2,500 ounces (approx 70kg) produced.
What type of licence should I obtain?
There are a number of different licences available under the Act, and it depends on what your intended outcome is and the stage of progress as to what licence should be applied for:
1. Exploration licence
This gives you the exclusive right to explore an area of land to determine whether it holds specific minerals. No mining activities can be undertaken on an exploration licence.
2. A retention licence
If you have located specified minerals in an area, but they are not commercial viable at that time, you can obtain a retention licence, to secure tenure over the mineral in that specified area. The mineral can then be developed for the purpose of mining at a later time.
3. Mining licence
This licence entitled the holder to explore for minerals, construct mining facilities and mine in the specific area covered by the licence. To obtain a mining licence, amongst other things you must identify the mineral resource to be mined.
4. Prospecting licence
This allows a prospector or a small scale miner to explore or mine an area which is less than 5 hectares. If a mineral resource is identified, the holder has the right to then apply for a mining or retention licence.
5. Miner’s Right
This is granted to hobby prospectors and fossickers to search for minerals and to remove and keep any minerals discovered on Crown Land, your own property or another person’s property (where they have given permission).
In using a Miner’s Right, you can only use hand tools, such as picks, shovels, sieves, pans and metal detectors and cannot use explosives or any mechanical equipment or tools for excavation.
How can Coulter Roache assist?
Where you think you may have minerals to be mined on your property, or are otherwise seeking to obtain a licence to either explore or mine, our team of lawyers can assist you to:
- determine the steps you need to take;
- ascertain your rights and obligations under the Act and Regulations; and
- prepare and submit any relevant applications to obtain the relevant lease or licence.
Gas, oil and petroleum pipelines
Victoria has a network of over 5,400km of pipelines which transport and distribute gas, petroleum and other industrial products.
The Pipelines Act 2005 (Vic) and the Pipelines Regulations 2017 (Vic) govern the management and regulation of “high transmission” pipelines in Victoria, while “low transmission” pipelines are managed and regulated under the Gas Safety Act 1997 (Vic) and the Gas Industry Act 2001 (Vic).
Pipelines are owned by private corporations and are constructed and operated under a licence issued by the Victorian government under the relevant legislation.
Construction of pipelines under private property
Where a pipeline runs under private or crown land it is most often located within an easement, to allow continued access to the pipeline for maintenance and other works.
An easement does not alter the rights of the owner of the property, except that they must permit the easement holder to exercise its rights and you cannot do anything on that part of your property which interferes with those rights. This includes for example, constructing a structure or building over the easement.
There are two methods by which a company which has a licence under the relevant legislation may obtain an easement over private property for the purposes of the construction and operation of a pipeline:
- by negotiating directly with a landowner to enter into agreement to purchase an easement; or
- by applying directly to the Minister for consent to compulsorily acquire an easement over private land for the purposes of constructing and operating the pipeline.
Compulsory acquisition means that the company can acquire the land for an easement (for just compensation), despite the fact that the landowner may not consent to the acquisition.
As such, if you are approached by a company looking to enter an agreement to purchase an easement over your property to construct and operate a pipeline, you should immediately seek legal advice to assist you to review any offer made, understand your rights and obligations, and to negotiate any agreement between yourself and the company, including any compensation to be paid.
The risk in refusing any offer by a company to purchase an easement over your property is that the company will commence the compulsory acquisition process, which provides you with far less opportunity to negotiate the terms of the arrangement directly with the company, or to negotiate any compensation payable.
How can Coulter Roache assist?
If you have been approached by a company looking to create an easement for the construction of pipelines on your property, or otherwise have been notified that a company has made application to compulsory acquire an easement over your property, our team of lawyers can advise you on your rights, and assist you to negotiate the terms of any agreement or compensation payable.