James is a successful farmer who wants to expand his agricultural operations by planting more crops. The only problem is that James doesn’t own enough land. James now considers entering into a long term lease agreement of 15 years whereby he will lease a certain portion of land from a nearby farmer. He wants to ensure that the lease agreement between himself (the “Lessee”) and the farmer who owns the land (the “Lessor”) is valid and complies with all legalities because of the high input costs and big financial impact such an operation has.
The most important aspect James needs to take into account when entering into a long term lease agreement for a portion of agricultural land is the restrictions on the period of lease.
According to Section 3(d) of the Subdivision of Agricultural Land Act 70 of 1970 (“the Act”) no lease shall be entered into, unless the Minister of Agriculture (“the Minister”) has consented in writing, in respect of a portion of agricultural land of which the period is:
- 10 years or longer; or
- is for the natural life of the Lessee or any other person mentioned in the lease; or
- which is renewable from time to time at the will of the Lessee, either by the continuation of the original lease or by entering into a new lease, indefinitely or for periods which together with the first period of the lease amounts in all to not less than 10 years.
Importantly, any such lease agreement concluded without the consent of the Minister will be void.
The application for consent of the Minister must be made by the Lessor (the owner of the land) and be lodged in such place, in such form and be accompanied by such plans, documents and information as may be determined by the Minister.
The Act determines further that the Registrar of Deeds shall only register a lease agreement with a period of 10 years or longer if the written consent of the Minister has been submitted to him. If such consent has been granted subject to a condition, such condition shall be endorsed on the title deed of the land concerned.
The basic purpose of the Act has been identified by our courts as a measure by which the legislature wanted to prevent the division of agricultural land into small non-viable units. In order to achieve this purpose the legislature reduced the common-law right of landowners to subdivide their agricultural property.
James therefore has to consider the period of the lease before entering into the lease agreement with the nearby farmer to ensure that the lease agreement is valid. Many farmers are entering into lease agreements on a daily basis without considering the financial impact and consequences it can have if a lease agreement doesn’t comply with the Act.
It is very important for James to consult with a lawyer for advice on this specific lease agreement for a portion of agricultural land because of the high cost of such an operation and the risks associated with an invalid lease. Importantly, James will not be able to, without the consent of the Minister, lease a portion of agricultural land for a period of 10 years or longer, as it will be deemed a division of agricultural land.