However, I can say that in my 40 years advising farmers I have only encountered problems between landowners and tenants on three occasions and all three were where no formal lease or letting agreement was in place and the parties did not know each other prior to entering into the letting.
To those farmers who are considering renting out their farms I advise seeking the input of an advisor who is well experienced in dealing with landlords and tenants.
Ideally you should know your tenant or at least enquire from a number of sources about his/her character.
You should draw up a lease that includes any specific requirements that you may wish your tenant to observe and that deals comprehensively with such matters as your Basic Payment Entitlements.
The lease must be stamped with the Revenue Commissioners and Registered with the Property Services Regulatory Authority.
Tax Relief incentive
Arguably, the greatest incentive towards leasing land is the tax incentive. Tax savings of up to €16,000 can be made by an individual landowner in any one year.
A spouse or civil partner is also entitled to the relief so if the land happens to be in joint names or if the spouse/civil partner has land to lease separately, both parties are entitled to the relief.
Where the annual rent exceeds the allowable tax exemption limit, there may be a case for transferring the lands into joint names.
However, professional advice should be sought on how such a move might impact on one's State pension entitlements. Lease income relief refers to Income Tax only and not PRSI or Universal Social Charge so the rent has to be declared on your annual tax return.
Leases and eligible tenants
To qualify for the tax exemption, a qualifying lease does not have to be a formal legal lease but it must be evidenced in writing.
The document must contain the names and addresses of the lessor(s) and lessee(s), the acreage, address, location etc. of the land which is the subject of the lease, the terms of the lease, the duration of the lease which must be at least five years and is signed by the parties.
A formal lease should be drawn up in all cases, stamped with Revenue and registered with the Property Service Regulatory Authority.
This ensures that both the land owner's and tenant's rights are protected if something goes wrong.
There are very few conditions for qualifying as an eligible landowner (lessor). The landowner must have title to the land but does not necessarily have had to have farmed it previously. There are no age limits.
Leases and Farm Entitlements
Where Basic Payment Scheme entitlements are leased along with the land, the tax relief also covers that part of the rent that relates to the entitlements.
Farmers who are leasing their entitlements in 2017 should seek the advice of their agricultural advisor/consultant before entering into any agreement, as entitlements have to be transferred to the lessee and it is vital that this is properly done and before the time deadline, which is generally by the BPS filing date.
Leases and Farm Consolidation
Farmers who have out-farms that are some distance from the home farm could consider leasing out such farms and leasing in lands that are adjacent to the home farm where such lands become available.
Apart from assisting farm consolidation, this would have the added benefit of the rent which he/she receives being tax free and the rent he/she pays out as being tax deductible.
Assuming the land leased in is equal or greater in area to the land leased out, there should be no negative implications for the Basic Payment Scheme.
Martin O'Sullivan is the author of the ACA 'Farmers Handbook'. He is a partner in O'Sullivan Malone and Company, accountants and auditors. www.som.ie. Ph: 051 640397