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Lease and tenant management

Maximising the investment performance of a leased agricultural property requires careful selection of tenants, astute negotiation of lease terms and diligent tenant oversight. As long as these elements are correctly dealt with, lease defaults are extremely rare and once a lease agreement has been negotiated with a quality tenant, rental income is secure to the point of being almost guaranteed. Best practice with regard to land husbandry will also be assured, thus maintaining and enhancing the value of the farm asset.

Land Commodities is able to handle all of the aspects of lease management and administration for clients, including (but not necessarily limited to) the following:

  1. Post-acquisition expenditure – Provide advice and cost-benefit analysis relating to post-acquisition expenditures that may be required or advisable to optimise income from lessees. Implementation thereof.
  2. Tenant procurement – Source premium lessees best suited to the type of farm, optimal enterprise mix and your investment objectives and risk profile.
  3. Tenant due diligence – Undertaking due diligence with respect to potential tenants, including reputation, prior management performance and financial status to ensure that the tenant is sufficiently capitalised to cover rental payments even in a bad season.
  4. Lease negotiation – Negotiate the best lease arrangement for your farm considering your investment objectives and risk profile. In addition to the expected provisions, leases would include conditions relating to the following:
    1. Stipulations with respect to sustainable farm management and land husbandry, including crop selection / rotation, stocking rates, tillage practices, weeding and pest control, fertilizer and nutrient usage.
    2. Compliance with environmental legislation and commonly accepted sustainable farming practices.
    3. Reporting obligations and information rights including mandatory soil testing and full disclosure of cropping, fertiliser, production and financial data.
    4. Although we are not always able to achieve this, the majority of our leases include automatic upward only CPI linked rent reviews (in addition to the periodic discretionary reviews) to ensure that rental income always keeps pace with inflation.
  5. Arrange for the collection of rent from tenants.
  6. Property inspections – Perform periodic and timely physical inspection of agricultural property to include:
    1. Ensuring that the landlord’s farm ownership objectives are being met.
    2. Verifying compliance with the conditions of the lease, including maintenance of the integrity of the farmland, infrastructure and other fixed assets belonging to the landlord, conduct of operations in line with stipulated agronomic practice.
    3. Verify compliance with environmental and other legislation.
  7. Manage service providers and landlord outgoings – Negotiate and implement any insurance policies required, pay taxes and rates.
  8. Maximise supplementary income – Apply for any available landlord-side grant aid schemes / government assistance programs, oversee share-farming leases and other supplementary revenue sources (e.g. timber, energy generation, carbon capture etc).
  9. Maintenance – Manage and maintain homes, buildings and other improvements, implement required capital expenditure.
  10. Lease enforcement – Advise the farm owner on options for legal recourse in the event of default or non-compliance with lease terms. Engage a solicitor and liaise between the solicitor, the tenant and the landlord in the event of any enforcement actions. Oversee any enforcement actions.
  11. Trust account – Operate an account on behalf of the landlord for the collection of rent and payment of landlord’s outgoings.
  12. Accounting – Produce quarterly and annual trust statements for accounting and tax purposes.
  13. Annual report – Produce an annual property report to include:
    1. Comment on lease compliance, the condition of the farmland, infrastructure and other assets.
    2. Budget for any anticipated capital expenditure, maintenance or repair that may be required or desirable.
    3. Verification that the tenant is maintaining appropriate insurance policies and fulfilling any other tenant-side payment obligations.
    4. Analysis and commentary on tenant’s financial performance and financial status and implications for future payment of rent.
    5. Analysis and commentary on reporting information provided by the tenant (e.g. soil tests and rotation, stocking, fertilizer and production records etc).
  14. Valuation updates – Where required by the landlord, arrange for periodic valuation reviews of the property.
  15. Tenant replacement – Assist with the procurement of a replacement tenant for the agricultural property in the event of termination of the original lease.

Farm owners are kept up-to-date, informed of decisions made and are asked for approval when necessary. The level of involvement in the decision making process is at the farm owner’s discretion.٥杶+e{86Eحy[ܛ%!לz{^xӃhZ.׫׫uoz{^w/i