The number of long-term land leases has continued to slowly increase over the past decade, helping land mobility. In 2010 there were 3,230 leases in operation, according to data from Revenue. That more than doubled to 6,830 by 2015 and did so again, to 12,990, in 2021. That is the most recent year for which figures are available.

It’s likely the number of long-term leases rose further in 2022 and 2023. Auctioneers report good interest from among landowners and active farmers in agreeing new leases in 2024. On the one side are usually dairy farmers seeking land for higher numbers of dairy cows and tillage farmers trying to build scale. On the other side are usually older farmers seeking to reduce workload and boost household income. Interest was encouraged by the jump in leasing prices seen last year.

Lease concerns

Most leases are structured for five years, the minimum needed to qualify the landowner for relief on the rent from income tax, up to a ceiling on rental income of €18,000 per annum. Most landowners do not want to commit to longer lease terms. They may be waiting to see if a son or daughter will take over the farm when ready. They may have in mind to sell the land and do not want a sitting tenant in place when doing so.

Some dairy farmers have a problem at the moment in that they do not know what will happen to Ireland’s Nitrates derogation and therefore do not know if they will have to reduce stocking rate in the next 24 months. If the derogation goes, dairy farmers may not be able to stock land intensively enough to justify current lease rents.

Landowners who do commit to a longer lease can get relief from income tax on higher amounts of rental income. The maximum annual amount that can be relieved of income tax is €40,000 and this is available to farmers, who commit to leasing for 15 years or more. The way the relief is structured means that landowners with larger holdings are incentivised to commit to a longer lease term.

Meanwhile, there have been a number of new developments in the past 12 months on long-term leasing. Since the start of the year, a landowner letting out land can only qualify for tax relief on the lease payments if they owned the land for at least seven years. This has closed the door to investors buying land with the intention of leasing it out. A small number of farms and land parcels were bought by investors for leasing out in 2022 and 2023.

The seven year holding rule does not apply where a farm was acquired by inheritance or by gift, including where this arises from death of a spouse.

Over half of long term leases take into account entitlements to EU direct payment schemes that are held by the landowner. In most cases the agreement is that the lessee claims the EU direct payments and passes all or part of this back to the landowner, in the agreed rent.

CAO regime

The new CAO regime which began in 2023 introduced new direct payments, some of which are not tied to entitlements. This is being reflected in new long term leases agreed since the start of last year when the details of the new schemes became clear.

The active farmer will usually be able to claim the BISS element off the payment package. In most new leases the agreement is that lessee claims the payment and passes all or part of it to the landowner via the rent.

In most cases a lessee will not receive the CRISS payment which is front loaded to smaller farmers. This payment is therefore now lost by the landowner, too. Similarly, many lessees will not be in a position to claim Eco payments on the leased land, or could only do so at cost, and therefore this payment is lost to the landowner, too.

Meanwhile, some auctioneers who have traditionally been active in letting of annual con-acre are now encouraging their landowner clients to switch to a long term lease instead. They are explaining the benefits in terms of the higher lease payments that can be available and the relief from income tax.

Lease rents of up to €600/ac made headlines in 2023. However, after the weather and other difficulties of last summer, a number of auctioneers and farm advisers reported being asked to mediate in cases where a lessee was unable to pay the rent, leading to some renegotiation of terms.

There is no central reporting system for leasing rents. Reports from auctioneers around the country are that most leases agreed or renewed since last autumn, for good farmland in areas of mixed farming, fall within the range of €300/ac to €400/ac. However, in intensive dairy areas, where competition for land is keenest, lease rents of €400/ac to €600/ac have been agreed. Often this is for a relatively small block of land which is adjoining the lessee.

Areas seeing the highest rents include east and west Cork, parts of Kerry, Kilkenny, Waterford, Meath and Louth. Areas of marginal land quality are seeing rents of €100/ac to €200/ac on five-year leases.