On 1 November 2023, a new Farming Lease Decree came into force. This Decree integrates both the provisions regarding farming leases as contained in the Farming Lease Law and the Law of 4 November 1969 on the limitation of farming lease prices.
It also contains several innovations aimed at providing owners with more flexibility and ensuring the rights of lessees. The new Decree is also intended to offer more opportunities for young lessees.
Below, we outline the key changes that the new Farming Lease Decree brings.
1. A written farming lease agreement is mandatory
This obligation has been in place since 1969. However, no sanctions were provided, which led to many farming lease agreements being orally entered into to this day.
The new Farming Lease Decree elaborates the requirement to have a written lease agreement in several ways. This is achieved by incorporating into the Decree the mandatory provisions to be included in the farming lease agreement and, on the other hand, by enabling the court to enforce the entry into a written farming lease agreement. This applies to both existing and new farming lease agreements.
The Decree also provides for a sanction that can be inflicted on the unwilling party. If the lessee refuses to cooperate, the court can terminate the lease. If the lessor does not cooperate, the court can renew the lease in favor of the lessee.
The description of fixtures at entry is no longer optional and is now a mandatory part of the farming lease agreement.
The possibility to pay the lease in kind or through services is explicitly excluded.
2. Duration of the agreement
The new Farming Lease Decree still provides for terms of 9 years, but it makes longer leases more appealing by allowing the farming lease agreement to stipulate in writing that after a term of 18 years, the owner can sell the land free of a farming lease, and this can be done for each subsequent nine-year period. This is in contrast to the old Farming Lease Law, where this was only possible once at the end of the initial 27-year lease period. If no termination notice is given, the agreement is automatically extended for nine years.
The pre-emptive right of the lessee is maintained in the new Decree.
3. Farming lease price
The Law of 4 November 1969, on the limitation of farming lease prices, which determines the maximum permitted prices for the lease of agricultural land and leased agricultural buildings, remains in effect but is integrated into the new Farming Lease Decree thus creating a coherent and comprehensive legal framework. The lease price remains linked to agricultural profitability and is no longer related to the speculative value that sometimes may be attributed to agricultural land.
The maximum farming lease price corresponds to the non-indexed cadastral income of the leased property, multiplied by the farming lease price coefficient, which is determined every three years by the Flemish Lease Price Committee for each province and agricultural region.
The lease price committees will now be constituted in accordance with the provisions set forth in the Lease Decree.
The Flemish Lease Observatory is a new platform intended to facilitate discussions between the organizations of lessors and lessees regarding the determination of farming lease prices. It is also tasked with preparing decisions of the Lease Price Committee, monitoring changes in land prices, and discussing the application of farming lease legislation.
4. The prudent buyer
The new Farming Lease Decree introduces the legal concept of a "prudent buyer." This was created to grant the owner more authority over its land.
In accordance with the old Farming Lease Law, the lessee can exercise its pre-emption right, but the lessee could transfer his right to a third party, without the possibility for the lessor to object.
However, with the new concept of a "prudent buyer", the Farming Lease Decree provides an exception, namely on the condition that the lessor has a prospective buyer who, in writing, declares to the lessee that:
- the lessee can continue the lease under the same terms and conditions, and
- the buyer will not claim the leased property for at least 18 years.
In such a case, the lessee is entitled to a farming lease renewal. The pre-emptive right of the lessee remains unaffected.
5. Additional termination options
The Flemish Farming Lease Decree codifies additional termination options for farming lease agreements, specifically for afforestation and nature realization, as well as for lessees reaching the statutory retirement age.
5.1 Termination for afforestation and nature realization
The new Farming Lease Decree expands the termination possibilities for afforestation in green areas. It provides the option for both individuals and governments to terminate the lease "at any time" in green destinations and habitat directive areas to establish forests or natural areas. Governments already had this option under the old Farming Lease Law, based on the existing termination possibility for the general interest, albeit "at the end of each lease period”. Furthermore, an additional termination option is introduced for municipalities to terminate "at any time" for the purpose of forest and nature realization.
To offset this, the "liveability test" is introduced to protect the lessee. The court must reject the validity of the termination if it would seriously disrupt the liveability of the lessee's existing business operations.
5.2 The lessee reaches the statutory retirement age
Under the former Farming Lease Law, the lease could also be terminated when a retired lessee had no successor. This was done with the intention of self-exploitation or with the aim of re-leasing or sale to a viable agricultural business. An additional condition is that the lessee has not only reached the retirement age but is also receiving an actual retirement pension.
Under the new Farming Lease Decree, there is a rebuttable presumption regarding the receipt of a pension. The "presumed retired" lessee then has a period of 60 days to prove it is still actively engaged in agricultural activities, that it does not receive a pension, or that it has designated a privileged family member as its successor. If it cannot provide this proof, the lessee is deemed to be receiving a pension, and termination is possible. In this situation, the lessee also loses its pre-emption right.
6. Transparency for the Landowner
The new Decree creates an online portal where landowners, in future, will be able to ascertain who has declared their property in a single and joined request.
Until now, it was not always clear for landowners who was cultivating their land, as subleasing or seasonal leasing was done under certain conditions.
7. Death of the lessor
With the implementation of the new Lease Decree, an obligation is also introduced to notify the lessee of the lessor's death. While this may seem obvious, in practice, it often happened that the lessee was not aware of the lessor's death and continued to pay the lease to a deceased lessor, or a situation arose where the lease could no longer be paid.
According to the new Decree, the lessee can operate its land through its own company. Furthermore, married and cohabiting individuals are treated equally, and the text has been made gender-neutral.
The Decree comes into effect on 1 November 2023. The Decree applies to agreements made both before and after the date of its implementation.
If you wish to obtain more information or seek assistance from the specialists at Seeds of Law, please do not hesitate to contact us at +32 (0)2 747 40 07 or via firstname.lastname@example.org.
For more information, you can also attend the webinar that will be held on 5 December 2023 by Mr Koen de Puydt and Ms Ulrike Beuselinck in collaboration with Legal Learning. You can register via this link.