Agricultural Lease Agreements: Key Terms and Conditions
Key Aspects of Agricultural Lease Agreements
Lease Definition and Exclusions
An agricultural lease provides temporary rights for agricultural or forestry use in exchange for rent.
The following are not considered leases:
- Harvesting crops in exchange for a share of the products.
- The performance of individual agricultural labor.
Leases excluded from the LAR (Ley de Arrendamientos Rústicos) include:
- Those between relatives, partners, or spouses.
- Transfer of land use in exchange for services rendered.
- Leases shorter than the seasonal agricultural year.
- Arable land prepared by the owner and intended for public estates.
- Those with secondary pasture use.
- Leases on urban land or buildings ancillary to non-rustic destinations.
- Properties whose sales value exceeds double the average price for the growing area.
Parties’ Capacity and Contract Form
Capacity Requirements
To lease rural properties under the LAR, the lessor must have the capacity to alienate property. Tenants and subtenants must be agricultural professionals.
Form of Contract
Generally, there is freedom of form. However, standard contract types may exist for written agreements, and parties can compel each other to use them. Long-term leases are an exception and may require a specific form.
Lease Duration and Renewal
The minimum lease term is 5 years. The landlord may recover the property at the end of the term by notifying the tenant one year in advance. If no such notice is given, the lease shall be extended automatically for successive 3-year periods. The landlord retains the right to recover the property at the end of each extension period by providing one year’s notice.
Rent Determination and Adjustments
Rent (Renta) is determined freely by the parties. It is typically paid annually on the agreed date and at the agreed location (or the tenant’s residence if not specified). Rent may be proportionally reduced if impairment or deterioration of the property, not attributable to the tenant, reduces its productivity.
Expenditures and Improvements
Landlord Responsibilities
The landlord is responsible for works, improvements, and investments mandated by law or judicial decisions.
Tenant Responsibilities
The tenant is responsible for expenses typically imposed on an agricultural employer.
Improvements Presumption
Improvements made to the land are presumed to have been made by the lessee unless proven otherwise.
Necessary Expenses
Necessary expenses borne by the landlord do not entitle them to increased rent.
Notification of Reforms
Any reform undertaken by the landlord must be notified to the tenant.
Subletting, Assignment, and Subrogation
Subleases or assignments of the lessee’s rights are generally void and grounds for eviction unless the lessor consents, although some exceptions exist. Subrogation (transferring the lease upon the tenant’s death or retirement) is authorized to the tenant’s spouse or descendants, provided they meet the same professional agricultural status requirements.
Tenant Access and Landlord Restrictions
Tenant’s Right of Access
The tenant is recognized as having the right of access necessary for the purposes of the lease.
Restrictions on New Owners (Post-Acquisition)
If the property is acquired by a third party, the new owner may face limitations for up to six years from the date of acquisition, potentially restricting their ability to alienate, lease, or transfer the property into a partnership during that period.
Lease Termination and Extinction
Grounds for Resolution by Lessor
The lessor may seek resolution (termination) of the lease for reasons including:
- Non-payment of rent.
- Breaches of the obligation to improve or transform the farm.
- Failure to operate the farm or using it for purposes other than those agreed.
- Unauthorized subletting, assignment, or sublicensing.
- Causing serious damage to the property with intent.
- Failure by the tenant to comply with legal prohibitions (entitles the landlord to regain ownership).
Termination for Social Interest
The landlord may also terminate the lease for reasons deemed of social interest, such as:
- The tenant loses the status of a professional agriculturalist.
- Loss or dissolution of the tenant entity (if applicable).
- The tenant exceeds legally permitted landholding limits.
- Breaking rules related to required improvements or crops.
Lease Extinction Events
The lease contract is extinguished by:
- The expiration of the initial contract period (if proper notice was given).
- The expiration of a statutory extension period (if proper notice was given).
- The expiration of the period of tacit (automatic) renewal.
Succession
Rules regarding succession may apply upon the tenant’s death.
Expropriation
Expropriation of the property can lead to the termination of the lease.