Farm Ireland
Independent.ie

Tuesday 21 February 2017

Landowners at risk as unpaid rent not covered by lease terms

Martin Ryan

Published 23/03/2010 | 05:00

CRISIS: Land owners may be forced to initiate their own proceedings if leasees default.
CRISIS: Land owners may be forced to initiate their own proceedings if leasees default.

LAND OWNERS -- many of them elderly farmers and widows -- have been stunned to learn of the increased risk of being left 'high and dry' for their rental income under existing contracts with their auctioneers if a leasee defaults on payment.

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The country's two principal auctioneers associations, IPAV and IAVI, have confirmed that rental payment is not guaranteed to vendors in the event of a leasee defaulting on payment, and the obligation is on the land owner to legally pursue the payment of the rental income.

The revelation runs contrary to the belief by the vast majority of those who lease their land through the auctioneering system that their income is assured. And many will be shocked to learn of this weakness in the system.

The auctioneers representative bodies have explained that while farmers who sell livestock through marts are guaranteed payment by the mart, the same guarantee does not extend to the letting of land.

As income from livestock farmers came under increased pressure over the past year, the number of cases of default on rental income have increased. And Farming Independent has learned that land owners are now being forced to personally initiate legal proceedings for rental income outstanding, after being advised by their auctionneers that no guarantee of payment existed in their contract and it was a matter for the land owner to pursue the leasee for payment.

Fintan McNamara, CEO, Institute of Professional Auctioneers and Valuers (IPAV), said that his members operate as "agents" for the letting of the land, and there is no guarantee of payment or obligation for the collection of the rent unless there is a specific contract with the auctioneer to include liability for rent collection.

"It is up to the land owner to clarify what the terms of engagement with the auctioneer are under their contract. Unless there is a specific contract the auctioneer is not responsible for the rent," he said.

He added that a review of the arrangements may be necessary but, "If auctioneers are to be responsible for the rental guarantee there may have to be an additional fee charged to the land owner".

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Not liable

Alan Cooke, CEO, Irish Values and Auctioneers Association (IAVI), explained: "Where land is let by either lease or licence, the function of the auctioneer is to secure a tenant acceptable to the land owner at an agreeable rent.

"The land owner pays the auctioneer a commission for negotiating a successful lease. In all cases we do our utmost to collect the rent usually in two moieties, one in the spring and one in the autumn.

"The auctioneer is not liable to the landlord if the tenant defaults with the payment of rent. If the tenant refuses to pay rent, proceedings can only issue in the name of the land owner as the contract for the payment of rent is between the land owner and the tenant."

He added that where an agreement existed for liability for the auctioneer to collect the rent, a commission on the rent applied.

ICOS, which represents co-op marts, explained that the guarantee of payment which applies in the sale of livestock in the marts, does not extend to lettings of land by the mart groups.

The IFA said that in the case of long-term leasing, the liability depends on the terms of the lease and land owners letting land should review their requirements in their own interest.

Land owners who have been left without payment of rental income have told Farming Independent that they continued to let land through auctioneers because they felt more secure.

"I believed that it was peace of mind that I would get my money," said one land owner who is owed a large amount of rental income and says the prospects of recovering it are diminishing.

"It came as a shock to me when the auctioneer said that he was not responsible for my money -- I've been left penniless. My solicitor told me that the auctioneer was not responsible and I would have to take proceedings myself to get paid.

"Why should I bother going through an auctioneer anymore?"

Some sources believe that where land has been let for a number of years by the same auctioneer who always collected the rent due, precedent of responsibility may have been established, and the land owner may have been entitled to assume that there was responsibility.

However, this would be a matter for a court to decide, according to the auctioneers' representative bodies.

Irish Independent