Extension of scope to short leaseholds (“erfpacht” / “droit d’emphytéose”)
The scope of the federal Farm Lease Act was limited to the lease of real estate used in the lessee’s agricultural business and to the occupation of such property by the establishment of usufruct among the living by the will of man and for a definite duration. The Flemish Farm Lease Decree also applies if such property is made available to be used in the leaseholder’s agricultural business by establishing a leasehold right (“erfpachtrecht” / “droit d’emphytéose”) for a term of less than 27 years.
A written farm lease as standard
Under the federal Farm Lease Act, there was already an obligation to put the farm lease agreement in writing. However, no sanction was provided in case this obligation was not complied with. The Flemish Farm Lease Decree now introduces the possibility of going to court if a party refused to draw up a farm lease agreement. In addition, the decree provides a sanction mechanism for the party refusing to cooperate. If the lessor refuses and the lessee’s claim is granted, the lease is renewed in favour of the lessee (provided this was specified in the notice of default sent by the lessee). If the lessee does not cooperate, the lessor can claim dissolution of the contract (provided this was in the notice of default sent by the lessor). Finally, the decree lists a number of details that must at least be included in the written agreement.
Farm lease agreement with a “small owner”
As for the duration of a farm lease, the principle is that it is concluded for at least 9 years. If no notice is given in accordance with the statutory conditions, the farm lease is automatically renewed for successive periods of 9 years, even if the first period of use exceeded 9 years.
As an exception to this principle, the Flemish Farm Lease Decree allows owners of small land to lease such land on a one-off (non-renewable) basis for a fixed term of 9 years or more, if a number of conditions are met. This means that the agreement ends by operation of law at the end of this one-off period. A “small owner” is defined as an individual who, at the time the agreement is concluded, is the holder of any right in rem to one or more as yet unleased cultivated land that collectively has a surface not exceeding 1.5 hectares. The farm lease agreement must be entered into in writing.
Extension of termination options for afforestation or nature realisation
Under the federal Farm Lease Act, it was already possible for a public administration or legal entity under public law to terminate a farm lease with a view to the realisation of forest or nature as part of the termination possibility for purposes of general interest and this at the expiry of each lease period. The Flemish Farm Lease Decree now introduces two further termination options for the lessor specifically for afforestation or nature realisation. These termination options allow the farm lease to be terminated at any time.
The first termination option can also be used by private individuals but is limited to land located in “green destinations”. The second termination option is only open to municipalities but applies in all destinations. The decree sets out a number of conditions for each of the termination options.
The notice period shall be at least 3 months and shall be extended as appropriate to harvest crops.
However, these termination options are subject to the “liveability test” (“leefbaarheidstoets”). This means that the court will limit the validation of the termination to certain plots of land or to a certain area, or even refuse it, if the liveability of the lessee’s existing operations is seriously affected. In a number of cases, enumerated in the decree, there is an irrefutable presumption that the liveability is seriously impaired.
Additional termination option for the lessor after 18 years
The Flemish Farm Lease Decree also provides for an additional termination option for the lessor after a period of 18 years in order to dispose of all or part of the leased property. However, this termination option must be explicitly included in the written lease agreement. Specifically, notice of termination in order to alienate can be given starting from the second lease period and by the end of that period. However, if the first lease period has a duration of at least 18 years, the agreement can already be terminated by the end of the first lease period. Also, by the end of each subsequent nine-year period, the lessor can terminate the agreement in order to alienate. The notice period is not less than 2 years and not more than 4 years. If no notice of termination is given, there is a tacit renewal for 9 years.
Termination of a farm lease agreement with a retired lessee
The federal Farm Lease Act already allowed the lessor to terminate the lease agreement with a retired lessee without a successor. In doing so, the lessor must have the intention to operate the leased property himself or to transfer the operation of the property to one or more of the family members stipulated in the law or to a viable agricultural enterprise. However, the condition that the lessee receives a retirement or survivor’s pension constituted an obstacle. Indeed, the owner could not know whether the lessee was effectively receiving a pension.
The Flemish Farm Lease Decree therefore introduces a rebuttable presumption with regard to receiving a pension from the legal retirement age. Thus, the burden of proof is reversed. From the moment the lessee has reached the legal retirement age, the lessor can ask him whether he receives a retirement or survivor’s pension. If, within 60 days of that question, the lessee has not established that he is still in business and is not receiving a retirement or survivor’s pension, or if, as the case may be, he does not designate one or more privileged family members to continue operation, he will be deemed to be receiving a retirement or survivor’s pension, provided that that requirement is also expressly stated in the lessor’s above mentioned question to the lessee.
If a successor is appointed by the retired lessee, this successor must continue the operation within a year of the appointment. If not, the lessor can still terminate the agreement. However, the court can declare the termination invalid in specific circumstances.
The notice period shall be not less than one year and not more than 4 years.
The safe buyer (“de veilige koper”)
When the leased property is sold, the lessee has a right of first refusal for himself or one or more privileged family members who actually participate in the operation of that property.
A novelty under the Flemish Farm Lease Decree is the introduction of the concept of a “safe buyer” (“de veilige koper”). This is a buyer-individual person who, in the sale-purchase agreement (or at the allocation in case of a physical public sale or a dematerialised sale), declares in writing to the lessee that the lessee may continue to lease under the same conditions for 18 years. When the leased property is sold to a safe buyer, the lessee cannot transfer his right of first refusal to a third party from then on. In that case, the lessee gets a lease renewal.
New exceptions to the lessee’s right of first refusal
The Flemish Farm Lease Decree adds a number of cases where there is no right of first refusal for the lessee.
- The lessee loses his right of first refusal in case of sale for afforestation or inclusion in a nature management plan within 3 years by a government. There is, however, an exception if the liveability of the lessee’s agricultural enterprise is seriously disrupted by the non-offering of the right of first refusal.
- The lessee no longer has a right of first refusal if he has reached retirement age and receives a retirement or survivor’s pension. To still be able to claim the right of first refusal, he must prove, within 2 months of being asked to do so by the instrumenting official, that he is still in business and is not receiving a retirement or survivor’s pension, or that he has designated one or more privileged family members who may continue his operation.
Lessor’s right to information
The lessee may not sublease the leased property or transfer his lease to others without the written consent of the lessor. The Flemish Farm Lease Decree lists a number of details that must be included in the request for permission for a lease transfer or sublease under penalty of nullity.
Finally, the Flemish Farm Lease Decree gives the lessor the right to request certain information from the lessee. More specifically, he can request the lessee to inform him, within a period of 2 months, who operates or has operated the leased property at a certain time or within a certain period during a period of maximum 5 years preceding the notification. If it is not the lessee himself, the lessee shall inform the lessor of the nature of the right of use of the third party operating the leased property.
However, the request of the lessor cannot relate to operation that predates the date of entry into force of the Flemish Farm Lease Decree.
A digital counter will be developed so that owners can easily find information on the identity of the person working their property. This allows the lessor to make his requests for information more targeted.
Entry into force
The Flemish Farm Lease Decree came into force on 1 November 2023 and applies both to new agreements and to agreements already concluded before this date and not terminated.
For further questions about this new Flemish Region legislation, you can always contact our team of real estate experts.