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Lease of Agricultural Land: What to consider?
04 February 2014
 

Daniel is a young, innovative and successful farmer who wants to expand his agricultural operations and begin an apple plantation to produce apples for export purposes. The only problem is that he doesn’t own enough agricultural land to start this lengthy and expensive process. Daniel now considers entering into a long term lease agreement of 20 years whereby he will lease a certain portion of agricultural land (a portion of a farm registered in the Deeds Office) from a nearby farmer for this new farming operation. He wants to ensure that the lease agreement between himself (the “Lessee”) and the farmer who owns the land (the “Lessor”) is valid and complies with all the aspects of the law applicable because of the high input costs and big financial impact such an operation has.

The most important aspect Daniel needs to consider when entering into a long term lease agreement for a portion of agricultural land is the restrictions on the period of lease. According to Section 3(d) of the Subdivision of Agricultural Land Act 70 of 1970 (“the Act”) no lease shall be entered into, unless the Minister of Agriculture (“the Minister”) has consented in writing, in respect of a portion of agricultural land of which the period is:

  • 10 years or longer; or
  • is the natural life of the lessee or any other person mentioned in the lease; or
  • which is renewable from time to time at the will of the Lessee, either by the continuation of the original lease or by entering into a new lease, indefinitely or for periods which together with the first period of the leaseamount in all to not less than 10 years.

Importantly, any such lease agreement concluded without the consent of the Minister will be void.

The application for the consent of the Minister must be made by the Lessor (the owner) of the land concerned and be lodged in such place, in such form and be accompanied by such plans, documents and information as may be determined by the Minister.

The Minister may however in his discretion refuse, or on such conditions as he deems fit, including conditions as to the purpose for or manner in which the land in question may be used, grant any such application, and if the Minister is satisfied that the land in question is not to be used for agricultural purposes and after consultation with the Administrator of the province in which such land is situated, on such conditions as such Administrator may determine, grant any such application.

The Act determines further that the Registrar of Deeds shall only register a lease agreement with a period of 10 years or longer if the written consent of the Minister has been submitted to him. If such consent has been granted subject to a condition, such condition shall be endorsed on the title deed of the land concerned.

The essential purpose of the Act has been identified by our courts as a measure by which the legislature wanted, in the national interest, to prevent the division of agricultural land into small non-viable units. In order to achieve this purpose the legislature reduced the common-law right of landowners to subdivide their agricultural property.

Daniel therefore has to consider the period of the lease before entering into the lease agreement with the nearby farmer to ensure that the lease agreement is valid. Many farmers are entering into lease agreements on a daily basis without considering the financial impact and consequences it can have if a lease agreement doesn’t comply with the Act. It is very important for Daniel to consult with a lawyer for advice on this specific lease agreement for a portion of agricultural land because of the high cost of such an operation and the risks associated with an invalid lease. Importantly, Daniel will not be able to, without the consent of the Minister, lease a portion of agricultural land for a period of 10 years or longer, as it will be deemed a division of agricultural land.

 
 
Tags: Agri