Leasing agricultural land - Food and Agriculture Organization

1 ISSN 1812-3163 Leasing agricultural landLeasing agricultural landFOOD AND Agriculture Organization OF THE UNITED NATIONSRome, 2004 All rights reserved. Reproduction and dissemination of material in this informationproduct for educational or other non-commercial purposes are authorized withoutany prior written permission from the copyright holders provided the source is fullyacknowledged. Reproduction of material in this information product for resale orother commercial purposes is prohibited without written permission of the copyrightholders. Applications for such permission should be addressed to the Chief,Publishing Management Service, Information Division, FAO, Viale delle Terme diCaracalla, 00100 Rome, Italy or by e-mail to FAO 2004 The designations employed and the presentation of material in thisinformation product do not imply the expression of any opinionwhatsoever on the part of the Food and Agriculture Organization ofthe United Nations concerning the legal or development status ofany country, territory, city or area or of its authorities, or concerningthe delimitation of its frontiers or 92-2-105167-4 FAO s land Tenure Notes provide information on land tenurein a format that can be used by grassroots organizations thatwork with small farmers and others in rural secure access to land by the rural poor is essential inorder to reduce poverty and hunger and to promote sustainablerural development.

2 Improving people s knowledge of theirrights to land is an important part of making rights real, therebyallowing them to improve their livelihoods. Fair and secure Leasing arrangements that balance theinterests of the tenant and the land owner can lead toimprovements in access to land for farming, better agriculturalproduction and improved access to food. This guide is intendedprimarily to support those who work with small farmers byproviding information on good practices for Leasing land , andadvice on how this information could be adapted to fit localconditions. In addition, some farmers, whether tenants or landowners, may find this guide useful even without its information in this guide is based on FAO s land TenureStudies Number 2: Good practice guidelines for agriculturalleasing arrangements . This document is available at: information on the land Tenure Studies, and on FAO swork in land tenure, is available at: Leasing agricultural landPreface1 Leasing agricultural land 2 This guide focuses on technical factors related to leasingarrangements that can benefit both land owners andtenants.

3 It is aimed at non-governmental organizations (NGOs)and others who work with farmers. Starting on page 4, theguide provides information on Leasing which NGOs can sharewith order to understand how Leasing arrangements work, itis necessary to consider a number of contextual factors. At thecore of effective Leasing arrangements is a relationship betweenland owners and tenants, which is in some way guaranteed orsupported by the state. In an effective relationship, each partyhas certain rights and obligations to fulfil; the role of the Stateand of the law is to ensure that these rights and obligationsare respected. In some cases, the relationship between land owners, tenantsand the State may not be clear or not directly helpful toestablishing fair and secure Leasing arrangements. Leasing oftentakes place in situations where social relationships are one party is much more powerful than the other, enteringinto formal Leasing contracts is not an easy thing to do.

4 Andshould contracting arrangements not be protected under therule of law, a signed lease is not likely to be mutually , there are many cases where both the tenant andland owner can benefit from having a clear Leasing guide aims to help people when there is joint willingnessto enter in a win-win relationship with regard to land tenurearrangements. The guide supports the preparation of mutuallybeneficial lease contracts by identifying key features that makesuch contracts effective for both the owner and the word to those who work with small farmers and land Leasing agricultural landA Leasing contract never exists in isolation. It is prepared andenforced within a specific policy, legal and social key areas below will need to be considered beforeconducting any training, to ensure that the information sharedwith tenants and land owners is as relevant as ENVIRONMENT"Are there legal or customary regulations controlling leases?

5 Ifso, are the institutional structures strong enough to enforcethem, or is there a disparity between policy and practice, evenwhen Leasing arrangements are officially sanctioned?"Are there disparities between legislation and customary lawthat need to be considered?"Are there any existing laws that may affect a lease agreementby supplementing, regulating or altering the terms of theagreement itself ( rent control laws, land registrationlegislation)?"Are there reliable, fair and accessible mechanisms (state andnon-state) for resolving disputes and for providing remedieswhen promises are broken?"Are there any local conditions which might affect the termsand conditions of leases (for example, environmentalconditions or social conditions)?OTHER CONSIDERATIONS"What is the literacy level of the participants? If it is low, whatkinds of illustrative material should be prepared to supplementthe presentation?"Should the guide, or key points in the guide, be translatedinto the local language before the training?

6 "Are there model leases available to distribute during thetraining? If so, how complex or effective are they? 3 Leasing agricultural land land is one of the most important assets of a farmer, providingfood for the family while surplus yields can be used to earnextra income. For many farmers, Leasing of land is a fact of those with no land or insufficient land for their needs,acquiring land through Leasing goes a long way to determiningtheir future security. For land owners, extra income or producecan be acquired by Leasing land to others in exchange for cashor a portion of the the core of most of these land - Leasing arrangements arethree issues shared by tenant and land owner alike: risk, securityand trust. The success of the land owner-tenant relationshipdepends on the level of trust that can be established betweenthem. And a proper agreement can lay the groundwork for suchtrust through flexibility for the land owner and security for thetenant.

7 In this way, many potential problems or disputes can beavoided. Introduction4 Leasing agricultural land """What are leases? """When should they be used? """What needs to be done to create a lease? """What information should be included in a lease?"""This guide attempts to answer these questions in a simpleand straightforward way. It assumes that arrangementscan be made that balance the interests of the tenant and theland owner, leading to improved access to farms, betteragricultural production and greater food security. 5 Leasing agricultural land When drawing up a lease, three factors play a key role:"The length of the lease term, together with the securityprovided by the tenancy;"The degree of freedom and control given to the tenant; and"The flexibility and financial implications of this combination oflength of the lease, security, freedom and that are strongly regulated and protective of the tenantcan be unacceptable to land owners, who may feel that theirpower and flexibility are being too restricted.

8 At the same time,a lease that is highly informal or under-regulated is not in the bestinterest of tenants as it may deny them a reasonable level ofsecurity. The key is to finda balance that is suitableto both land owners andtenants. Before preparing the lease6 Leasing agricultural landThe following elements should be included in a tenancyagreement. Although it may not be necessary for alease to include all of these elements, it is advisable not toomit too many of them. Otherwise the security of the leasingagreement could be compromised."Names of the parties"Commencement and duration of the agreement"Description of the property"Rent "Rights to possession and use"Upkeep of the land "Condition of the land on return"Making improvements or changes of use"Arrangements for compensation"Responsibility for paying taxes and other charges "Dispute resolution"Record of the agreement. The elements of a tenancy agreement7 Leasing agricultural land "Names of the partiesThe names of the parties are at the core of the provide a level of protection and a basis for buildingtrust for those involved.

9 An agreement between a single tenantand a single land owner is simple. However, if there is more than one land owner, the questionshould be asked: Do they own the whole farm jointly (thusallowing the use of a single agreement) or do they each ownpart (suggesting the need to use separate complementaryagreements)? If there is more than one tenant, the agreement may be toensure that the tenancy continues in the event that one of thetenants dies. This could bedone by having the leaseinclude the names of allmembers of the family whowill work together on theland to be leased. Often themale head of the householdis the only person listed onthe lease, but should he die,his family members could bedeprived of the land that theyare farming. 8 Leasing agricultural land "Commencement date and duration of the agreementThe commencement date specifies when the responsibilityfor the property transfers from the land owner to thetenant.

10 The duration of the agreement will vary of course, andcan take different forms. It can be a fixed term (for example,one year) with or without an option to renew; or it can beperiodic (for example, monthly or yearly continuing until oneof the parties gives the required notice), often subject to aminimum initial term. Some agreements also allow for a hold-over . This means that at the end of the lease, thetenant can stay on the land for a specified amount of is important for the tenant to try to match the durationof the lease with the desired results. This could be in relationto the type of crops that will be grown. For example, thecycle for some vegetables is only several months, whereasfor others (such as coconut trees) the cycle can be 50 years. Both the land owner and tenant may want to considermatching the duration of the lease to any family requirementsthat may exist. Forexample, a land ownermay wish to lease theland only until thenextgeneration is oldenough to farm it.