How to mobilise resources into productive agriculture is a major challenge.
One of the major challenges facing Irish farming is how best to mobilise resources into productive agriculture.
These resources include land, labour and capital.
Access to land is a critical constraint on many progressive farms.
Access to skilled labour, and work/life balance, also become constraints, as scale increases.
However, collaborative farming arrangements offer a potential route to gain access to a broad range of resources such as land, facilities, skills, labour efficiency, superior lifestyle, companionship, economies of scale, and the potential for higher profits.
Here, we consider cow leasing.
Cow leasing is an arrangement where a farmer who has cows surplus to his or her requirements leases those cows to another farmer.
Cow leases are business relationships that require a significant level of trust.
The two farmers involved in the agreement must work towards building up a good working relationship.
Cow-leasing agreements should be written contracts clearly identifying all the agreed terms. The document should set out the responsibilities and obligations of each party. A properly written lease also protects both parties in the event of the death of either party, and encourages detailed thought and joint decision-making.
Giving instructions for the preparation of the lease serves as a reminder of the terms agreed, and successors will find the agreement invaluable in determining the nature of the relationship.
The lessor is the owner of the cows. The lessee is the person who leases the cows from the lessor.
Provisions that should be inserted into the agreement include:
* Personal details of the parties, including their names, addresses and tax reference numbers;
* Commencement date of the agreement;
* Duration of the agreement — the lease can be short-term, one to two years for example, or for a longer term of, perhaps, four to five years.
* In general, cows on a short-term arrangement will return to the owner, whereas those on a long term lease generally will not.
The criteria for replacement of animals must be set out and agreed at the start of the arrangement.
These include lactation number, age, disease status, etc.
Cows leased out for four to five years are generally replaced with an equivalent group of cows at the end of the agreement.
The profile of the leased cows should be noted at the start of the agreement, and the group of cows that are returned must be, at a minimum, equivalent in terms of age, lactation, and disease status, and superior in terms of economic breeding index (EBI) status.
These criteria should be agreed between the parties at the beginning of the agreement and noted in writing.
Calves born out of the leased cows are the property of the lessee, which allows him or her to build up replacements for the herd, and also to cover the return of the cows, as part of the lease agreement.
* A detailed payment schedule and method of payment should be agreed and documented in the agreement.
The parties should agree an average value per cow at the outset, and this should be included in writing.
They must also arrive at a leasing cost that is fair to both parties, and an agreed method of payment should included in the written agreement.
* Animal identity and value clauses should be inserted. The identity of the animals to be leased is clearly a critical part of the agreement. The bovine tuberculosis eradication (BTE) tag numbers can be entered into the tables provided in the standard agreement.
* Facilitation clauses must be inserted. The document becomes a written record of what is agreed between the parties before the start of the lease period.
In the event of any difficulties arising, the agreement may be viewed by the parties to resolve the issue and, in cases where a disagreement cannot be resolved, there is a facilitation process to resolve disputes.
In advance of entering into a cow-leasing arrangement, it is vitally important that both parties consult their veterinary surgeons regarding how best to deal with any potential disease risk.
The lease must also include a signed undertaking by both parties that the cows will not be moved into, or out of, either party’s holding, unless they have passed tuberculosis/brucellosis tests in accordance with the animal health regulations in force at the time.
The fully completed form and lease must be presented to the local district veterinary office for noting, in advance of the start date of the arrangement.
Only cow-lease arrangements which meet all of the conditions set out above are deemed acceptable to the Department of Agriculture.
A copy of the Animal Health and Movement (AIM) Certificate of Compliance, which de facto confirms the disease status of the herds, must be presented to the lessee’s milk purchaser in advance, and the milk purchaser must notify the Department of Agriculture of the arrangement, so that an inspection may be carried out.
For further information, see the www.teagasc.ie website, which contains some more detailed guidelines, including a specimen cow leasing agreement and information on the tax treatment of cow leasing arrangements.
Karen Walsh, from a farming background at Grenagh, Co Cork, is a solicitor practicing in Walsh & Partners, Solicitors and Commissioners for Oaths, 17, South Mall, Cork.
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.
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