How does the termination compensation of a farming lease agreement get calculated?

1. The fixed compensation 

Due to the extensive freedom under the Farming Lease Law, parties often used the scales established by provincial agricultural chambers to calculate the termination compensation or agreed that the termination allowance would be twice the farming lease price. This not only caused confusion and significant regional differences but also led to disputes between the parties.

For this reason, the Farming Lease Decree opted for a fixed compensation.

In the written farming lease agreement, a fixed compensation can be included, which may not be less than three times the maximum allowable farming lease price. The lessee whose farming lease ends then receives compensation from the lessor for the straw, manure, and turnips left behind upon departure, the buildings already realized, as well as for the improvement in the cleanliness of the lands.

If the farming lease agreement does not provide for a fixed compensation, the arrangement that already existed in the Farming Lease Law applies. The compensation then is equal to the current value at the end of the farming lease of the straw, manure, turnips, and the stock of realized buildings and improvement of the land, taking into account the destination of the leased property. However, the compensation may not exceed the amount of the costs incurred by the lessee.

If the lessee received straw, manure, turnips, or other provisions or benefits free of charge at the beginning of the farming lease and can prove this, an account will be made at the end of the lease regarding the value of the difference between the quantities at the time the lessee leaves the leased property.

2. Set-off

When the lessor incurs a loss due to a lack of cleanliness or maintenance of the leased property, or any other default by the lessee, the latter owes an amount that will be set off against the compensation the lessee is entitled to.

3. The additional compensation

In cases where the lessor can terminate the lease agreement at any time with a short notice period of three months, the lessee, upon leaving the leased property, is entitled to an additional compensation for the damage suffered, in addition to the termination compensation. The farming lease agreement may be terminated for one of the following reasons:

1. The leased lands are considered as building land;
2. The leased lands are located in an extraction area;
3. The leased lands are considered land with an industrial designation;
4. The leased land has been expropriated by a public authority or a public legal entity after the lease agreement was concluded;
5. The leased land will be used for afforestation or nature development;
6. The lessor wants to use a piece of land adjacent to his main residence for family use;
7. A permit has been issued for the leased land for (i) exploring or extracting hydrocarbons, (ii) exploring or storing carbon dioxide in the context of geological storage, or (iii) exploring or extracting geothermal energy;
8. The leased land will be used by the public lessor for specific public interest purposes.

The additional compensation is calculated based on the business loss suffered by the lessee regarding animals and equipment, taking into account (i) the area of the lands withdrawn from the agricultural business, (ii) the loss of enjoyment during the years before the expiration of the current lease period, but not less than two or more than four years, and (iii) the loss resulting from the depreciation of the remaining buildings and lands.

4. By Judicial Decision

If the lessee and lessor have not agreed on a fixed compensation or cannot reach an agreement on the extent of the compensation, the court will determine the extent of the compensation.

To this end, the court takes into account the compensation to which the lessee, whose lease is ending, is entitled and the benefits granted by the lessor to the lessee concerning the buildings he has constructed and the works he has carried out.

Pending the judicial decision and before the lessee leaves the property, he must receive a provisional compensation from the lessor equal to the amount of the number of years of the lease before the expiration of the farming lease agreement, which should not be less than four and not more than eight years.

5. Waiver of compensation

The lessee may waive the compensation to which he is entitled only after the termination of the farming lease agreement. This is only possible by authentic deed or by a declaration made by the lessee before the court.

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