5 important points that mustn’t be overlooked in a rural lease

A rural lease is a legal agreement in which a landowner has the opportunity to make full use of a property he or she is renting, but may not be allowed to fully develop. An off the shelf standard lease form which has blanks left out for the landowner and lessee to fill out is not the ideal way to go about this important transaction. In fact, a poorly considered or inadequately written lease could result in damage or loss for one or either of the parties.

The Top Five Things That Must Not Be Overlooked

1. Top of the list is thoroughly checking the proposed terms of the lease. Both sides may amicably agree at the beginning of the lease, but that may change with time. It is important to look at the strict obligations in place and to carefully review what wiggle room there is to be had, if any.

2. Tenure should give the lessee total clarity about how long the lease will last, taking into consideration the length of the first term and the subsequent renewal. This will affect all manner of decisions that will be made about the use of the land and therefore, should be clearly stated.

3. Renewal clauses and renewal policies are often overlooked. It is worth checking if there is an escalation clause that would raise the rent in a few years as this will affect any financial planning.

4. Typically, the landowner‘s insurance does not cover the lessee so any lessee should check to know if they must set up their own insurance for their property against fires, theft, or water damage. Taking the time to check this could save the lessee money in the long run.

5. Know who is to pay for farm costs, land rates, and electricity.

A rural lease may seem like a simple document, but things can be easily missed. To avoid any harm, damage or disappointment, prudence dictates that one reads the lease before signing the dotted line.