Farm Legal Advice: How can I lease out my land?
If considering leasing land, you need to consider other tax implications, such as the effect of the Capital Gains Tax in the event of future disposal.
Dear Reader,
Generous amounts of rental income on the leasing of farmland are now exempt from income tax. If you are not farming yourself, it is now an attractive option to let your lands.
Before you think about leasing land or entering into a lease, it is critical that a written lease is drawn up. To avail of the tax relief and exemptions, it is essential that the lease is in writing.Â
The thresholds for exemption where qualifying leases taken out on or after January 1, 2015, are as follows:Â
- €40,000 where all the qualifying leases are for 15 years or more;Â
- €30,000 where all the qualifying leases are for 10 but less than 15 years;
- €22,500 where all the qualifying leases are for seven but less than 10 years; andÂ
- €18,000 where all the qualifying leases are for five or six years.
The conditions to avail of the income tax relief are as follows:Â
The farmland must be in the State, a qualifying lease is a lease of farmland which is in writing or evidenced in writing; it is a definite term of five years or more and it is made on an arm’s length basis between one or more qualifying lessors and one or more qualifying lessees. Leases therefore between close relatives do not qualify.Â
The lease cannot operate to create a loss, and the relevant exemption limit applies irrespective of the number of qualifying leases held.
If considering leasing land, you need to consider other tax implications, such as the effect of the Capital Gains Tax in the event of future disposal. This should be discussed with your advisor before entering into any lease. While legal advice is often sought when a dispute arises, it is very helpful to have a document in place setting out the terms and conditions on which you have agreed to let your land.
Important clauses to consider and insert would be that the lessee must carry his or her own insurance and must indemnify you for all claims or liabilities arising from their use of the property. The upkeep of the lands should be covered in the lease. The manner and time in which notice of termination by either party must be given also and is extremely important.
The lands to be leased, whilst it may seem obvious, should be very specifically identified in the lease, with reference to maps and folio numbers, and will avoid ambiguities in the future.
You also need to consider whether or not you wish to give a site to a child in time, and whether or not you will need to exclude this site from the lease in due course.
Are you leasing the entitlements? This should be documented in the lease and appropriate clauses inserted to protect your position as much as possible.
The tenant should only be using the land for farming purposes. A tenant should not have a right to sublet the land without your prior written consent. Having a detailed lease agreement in place, especially for a long-term letting, will go a long way to avoiding any bumps in the road, especially between neighbours.
Karen Walsh, from a farming background, is a solicitor practicing in Walsh & Partners, Solicitors, 17, South Mall, Cork (021-4270200), and author of ‘Farming and the Law’. Walsh & Partners also specialises in personal injury claims, conveyancing, probate and family law.
- Email: info@walshandpartners.ie - Web: www.walshandpartners.ieÂ
While every care is taken to ensure accuracy of information contained in this article, solicitor Karen Walsh does not accept responsibility for errors or omissions howsoever arising, and you should seek legal advice in relation to your particular circumstances at the earliest possible time.
