No room for investment

Leasing farmers in oppression

1 March 2018 - Anne Jan Doorn - 29 comments

Lease-dependent companies lag behind in their development and show disappointing results. The situation is not improving due to recent developments regarding borrowing capacity and melioration rights. For example, the Association of Land Tenants and Own Land Users (BLHB) announces in the Land Tenant.

Earlier it appeared that the economic position and results of lease-dependent companies are lagging behind. It appears, for example, that the high rent on Kampereiland means that the above-mentioned companies are lagging behind in their development.

Lease investments require a lot of equity

Borrowing capacity decreases
The union notices that lease-dependent companies have a smaller borrowing capacity, for example due to the shorter repayment term and a higher depreciation percentage. The problem is that the tenant must have a relatively large amount of equity capital to be able to finance the investments. In practice, the shareholders' equity proves to be a bottleneck. Moreover, banks give these companies the predicate of an increased risk, as a result of which banks limit financing to lease-dependent companies.

Tenant investments
In the event of ceasing to operate lease companies, the lease investment must be reimbursed to the lessee. First of all, it is important that the agreements about this are put on paper. Something that often doesn't happen.

The valuation is determined according to the melioration law, but is unclear. At least, that is the opinion of the BLHB. "The improvements made will be depreciated, but that is after the tenant has been able to reap the benefits of the investments," the union said. The residual value of the investments should be paid out to the tenant.

In practice, however, the BLHB sees that this depreciation is determined over 20 years and does not receive any residual value. Through this accounting method, the added value of the investments by the tenant is (in many cases) not paid out according to value. This method must be replaced by a commercial method in which the residual value is taken into account, the tenants' organization believes.

Measures
The BLHB also wants tenants to have greater borrowing capacity and wants the economic depreciation method to be used as a guideline. The association also wants to encourage banks to optimally support lease-dependent companies, so that development is possible.

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Anne-Jan Doorn

Anne Jan Doorn is an arable expert at Boerenbusiness. He writes about the various arable farming markets and also focuses on the land and energy market.

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29 comments
Subscriber
Farmer Jan 1 March 2018
This is a response to this article:
[url=http://www.boerenbusiness.nl/ondernemen/grond/ artikel/10877701/pachtende-boeren-in-de-verdruk][/url]
There is simply too little earned in the agro sector, costs are skyrocketing, yields are very marginal.
Companies with good ownership positions can often operate from capital, but often carry a high debt burden.
It would be good if the government changed its policy and offered tenants more/other opportunities to stop their businesses.
This gives other entrepreneurs (including tenant farmers) new opportunities to farm ahead.
Claas 1 March 2018
What kind of opportunities do you mean for quitting tenant farmers Jan?
Warm clean up and put the bill somewhere in a drawer?
Subscriber
Peter 1 March 2018
Good that this is being discussed. However, I have a completely different view of the lease instrument.

Lease is a disguised subsidy. The rent is much too low compared to the possibilities in the profit model.
If I look at it in my South Flevoland area (also for eastern Flevoland and NOP), the lease price is a joke. Land prices are high here, and with property the repayment and interest charges are high. A tenant with top soil and a high yielding capacity farms here for an apple and an egg. A tenant pays half of the water board charges and no WOZ.

It is precisely here that the lease companies continue to develop, but you do not see it and/or you do not hear it. You need to know how much people have earned and how much they have invested in objects/projects next to the company.

Apparently this should not be brought out, but there are many tenants here who are warm in the real estate. The farm/tenancy object functions as "a money tree".


Now there is a large windmill project and it is the tenants who once again benefit. The owned companies are fobbed off with an extremely low fee. The tenants are doing very well, you lease land from RVOB and participate in a mill project, you don't have to do anything and you still get the best reward. That "that pole" is on your land so what, it is not your own land and the decrease in value is for RVOB. You get a nice penny for it and the hectares around it are also reimbursed. Doing nothing and all on someone else's soil.

The situation I describe above does not apply to the whole of the Netherlands, certainly not for the meadow areas there it will be different. Still, I stand by my point:

"Lease is a disguised subsidy"

The liberalized lease in Flevoland is excellent, everyone gets a fair chance to participate. It doesn't matter that the highest bidder is awarded this, don't you, as a grower, also want the highest price? Look at the auction, and if you sell something on the marketplace, you do that to the highest bidder.

The problem is that emotion, greed and selfishness reign.

In response I will probably be told that I am wrong and report this as envy. On the contrary, even I wish everyone the best, I appreciate entrepreneurship very much.

It's about the facts and not about the wish of the thought.....
all 1 March 2018
peter completely agree with you that this is mentioned. It should also be noted that the polder farmers also had the chance to own it for an apple and an egg
Claas 1 March 2018
BLHB is also for mortgage farmers. Instead of via this forum, these can also become a member and make their sound heard via the BLHB
Subscriber
Berry 1 March 2018
There is also a world of difference between ownership and ownership. Did you buy the land recently or grab it 20 years ago. The cost of rent is in the middle.
Subscriber
Paul 1 March 2018
Peter certainly has a point. The yielding capacity is high and the rent in Flevoland is then very low. What he also indicates well is that a tenant has no WOZ and lower water board charges. That is a point, why does a tenant pay a lower water board tax than a property farmer?

The water board wants to increase the charges, after all, it is believed that "the polluter" (read user) pays, so there should be no distinction at all in these charges between tenant or property.

I also have a comment about the exposation establishment of a wind farm.

Do you really think RVOB is crazy?
They already know when the farmers start up their park in Southern Flevoland, the rent will go up.

Why?

Very simple, rent is calculated, including the side income.
When I read the documents and articles, every land user can participate (according to many, it is the board's obligation to do so). So the entire individual income of the mill project can be included in the lease calculation. In addition, there will be a compensation for the company house, (a distance compensation)

So it comes down to calculating the average of the starting capital (read certificates) and making an average assumption of extra money per company such as hectare and company housing fee. In addition, a pole fee. I am given a calculation factor.
This gives an amount and this is then allocated in a ha amount. This will then be included as ancillary income.

A nice case for the LEI.
People have experience with this, in a number of regions in the Netherlands this has been the case for years. With us in Zeeland you also see a contribution from agro tourism in the lease pricing. This is not known to many people, but if you look into it, it quickly becomes clear. I have no problem with it either, it's correct.

So be prepared, the rent will go up there by a few hundred euros. This is also completely justified and legitimate.

I wonder if anyone from the mill initiative has thought about this?
Subscriber
polder farmer 1 March 2018
To be honest, I haven't looked at it that way yet. I agree with you about water charges. I have been saying that for years that I find it absurd that a tenant only has to pay half.

I didn't think about your comment about increased rent in connection with a wind farm. It is true, it is an income that has arisen from leasing your company.

Well and rightly noticed!
Berry 1 March 2018
Because of the additional income you will also pay more income tax! That a tenant has paid less water board tax as a result of his income is higher and therefore also the rent he pays.
conclusion 1 March 2018
Polderboer wrote:


Well and rightly noticed!


It remains that it is of course bullshit if the rent prices also have to rise due to an increase in free market prices. This increase is not due to the value of agriculture. This is due to nature policy, urban expansion, etc. Here in the polder, a bought out Dutchman is regularly shot down with money like water.
Peer 1 March 2018
Spicy reaction from Peter, but a large kernel of truth as far as I'm concerned.

A tenant who has not earned well on average with this rent is most likely a bad farmer. And if you're not good at something, you can (should!) just stop. Go do something you can do and a new boss will come forward for that land; good farmers stand in line.
Karel 1 March 2018
Make tenants pay 2% of the free value
Nothing wrong with it.
Sanders 1 March 2018
That's right, 2 percent is the price. In the polders they can set the rent at 2500.
conclusion 2 March 2018
Let's wait and see how the property companies talk when repayments have to be made in times of interest of 6%. Anyone who is healthy is an entrepreneur.
Karel 2 March 2018
Rent to 6%
I also do not know it 2 March 2018
The point is that it remains a difficult story. It would be ideal if lease companies were also handed in once again. Then you get a healthy balance again. Now a son remains a “farmer” to take the extra money. Accountancy firms are busy with partnerships, etc. While the best farmer no longer wants to cultivate.

Very high rent is also not the solution. Neither is free lease. Anything in between would be reasonable. Also in the interest of the growers that the lease does not disappear in the long run, there must be a return for the lessor.
clod 2 March 2018
A side note in this discussion is in order. Many owned companies are family companies where the other family members still have a big finger in the pie. The person who has taken over the company may take over the company by the grace of these family members, or that is I also doubt the situation

Personally, I think the system is a good addition to the land market, there is no doubt that there are flaws in the system.

I think it is a bad thing that ancillary activities that are not land-related are included in the lease price, as this has nothing to do with farming per se.

Now the discussion is windmills in many places, an owner of the land can simply say for that tip I will not do it I will develop the location that apparently comes on my land myself A tenant has to swallow or choke
Subscriber
Motorway 2 March 2018
Clod, I disagree with you;

Two tenant farmers on the mill board have KEIHARDly threatened me with expropriation. You read that right, it is!

The threat was so bad that my wife has been personally confronted about it, while she does not want to be involved.
The worst for me was the tone and the cynical laugh.

Now you can say don't let yourself be pressured. I had no choice take it from me. I've had two lawyers join them and they were dumbfounded, but both said I don't have a choice.

Personally, it has done a lot for us as a family.

I'm not against the park, but don't bother me/us with it. I also clearly stated three years in advance; don't subscribe our company, I'm not participating, no interest.

It is the tenant farmers who push a mill project down our throats. The whole concept was infused by the influence of 4 tenant farmers, Mr T, Mr V, Mr R and Mr S and two retired farmers Mr VE and Mr V. They should be ashamed to the bone.

I think it is right that RVOB is increasing the rent in this area, the reason being the participation/realization of the Zeewolde wind farm.

It costs us a lot of money, my company has become worth less because I have to tolerate a windmill coming on our land.

As the directors read this, their pride comes to the fore because ooo they are so proud of what they do. They should know how much misery they have caused many families in recent years.

I'm writing this because this is the truth and it needs to get out. That's how it goes here in Southern Flevoland. I hope that the national press will also pay attention to the sacrifices that many have had to make.
I only read hallelujah stories that the park is coming.

The truth is different, that should be clear by now.

quote to editors:
I write according to the rules, do not name names and use correct language.
Subscriber
Southwestern 2 March 2018
Nice atmosphere in that p(r)acht polder there in Zeewolde.
What will the birthdays be there ....

Fortunately, we don't have those ego farmers here and we go and do fun and pleasant things with our neighbourhood/neighbors a few times a year.
clod 2 March 2018
Snel (w)eg wrote:
Clod, I disagree with you;

Two tenant farmers on the mill board have KEIHARDly threatened me with expropriation. You read that right, it is!

The threat was so bad that my wife has been personally confronted about it, while she does not want to be involved.
The worst for me was the tone and the cynical laugh.

Now you can say don't let yourself be pressured. I had no choice take it from me. I've had two lawyers join them and they were dumbfounded, but both said I don't have a choice.

Personally, it has done a lot for us as a family.

I'm not against the park, but don't bother me/us with it. I also clearly stated three years in advance; don't subscribe our company, I'm not participating, no interest.

It is the tenant farmers who push a mill project down our throats. The whole concept was infused by the influence of 4 tenant farmers, Mr T, Mr V, Mr R and Mr S and two retired farmers Mr VE and Mr V. They should be ashamed to the bone.

I think it is right that RVOB is increasing the rent in this area, the reason being the participation/realization of the Zeewolde wind farm.

It costs us a lot of money, my company has become worth less because I have to tolerate a windmill coming on our land.

As the directors read this, their pride comes to the fore because ooo they are so proud of what they do. They should know how much misery they have caused many families in recent years.

I'm writing this because this is the truth and it needs to get out. That's how it goes here in Southern Flevoland. I hope that the national press will also pay attention to the sacrifices that many have had to make.
I only read hallelujah stories that the park is coming.

The truth is different, that should be clear by now.

quote to editors:
I write according to the rules, do not name names and use correct language.


I know all about that reprehensible things happen in southern Flevoland. I also distance myself from this club, which in the beginning spoke during meetings that they were going to achieve a return of 17%+ and now have to put their tails between their legs. report that they hope to still reach the 10%
And the most painful announcements for the members are yet to come
pete s 2 March 2018
Snel (w)eg wrote:
Clod, I disagree with you;

Two tenant farmers on the mill board have KEIHARDly threatened me with expropriation. You read that right, it is!

The threat was so bad that my wife has been personally confronted about it, while she does not want to be involved.
The worst for me was the tone and the cynical laugh.

Now you can say don't let yourself be pressured. I had no choice take it from me. I've had two lawyers join them and they were dumbfounded, but both said I don't have a choice.

Personally, it has done a lot for us as a family.

I'm not against the park, but don't bother me/us with it. I also clearly stated three years in advance; don't subscribe our company, I'm not participating, no interest.

It is the tenant farmers who push a mill project down our throats. The whole concept was infused by the influence of 4 tenant farmers, Mr T, Mr V, Mr R and Mr S and two retired farmers Mr VE and Mr V. They should be ashamed to the bone.

I think it is right that RVOB is increasing the rent in this area, the reason being the participation/realization of the Zeewolde wind farm.

It costs us a lot of money, my company has become worth less because I have to tolerate a windmill coming on our land.

As the directors read this, their pride comes to the fore because ooo they are so proud of what they do. They should know how much misery they have caused many families in recent years.

I'm writing this because this is the truth and it needs to get out. That's how it goes here in Southern Flevoland. I hope that the national press will also pay attention to the sacrifices that many have had to make.
I only read hallelujah stories that the park is coming.

The truth is different, that should be clear by now.

quote to editors:
I write according to the rules, do not name names and use correct language.
pete s 2 March 2018
That those tenants have so much to say
When I was still a tenant until 15 years ago, I always had to be humble

Can't the owner deal with those tenants?
Z-farmer 2 March 2018
They now also consider this (bitter) farmer to be part of the "support" for the wind farm.
Subscriber
dennis 2 March 2018
the fact that less water board tax is paid on leased land is not correct. The lessor pays the entire tax and is then allowed to pass on 50% to the lessee. A lessee does not pay WOZ on agricultural land, but neither does an owner because all agricultural land is exempt from WOZ
Subscriber
quite coarse 2 March 2018
If we look at what, for example, ASR has purchased the last land for, it is around 30.000 euros, take 2% of that and you arrive at 600 euros.
Who leases the Flevo for 600??
The return on leased land is much, much higher than 2%
I therefore wonder whether the tenant farmers earn that much. With a lease of 1000 euros, I think arable farming is a trump card.
I am the owner myself but would not want to trade with a tenant who does not know how much he will have to pay in a few years.
In his life as a tenant, he must provide a capital for when he stops, home and pension must be tax-free when he stops.
Subscriber
quite coarse 2 March 2018
Most farmers in the Netherlands do not have and will never get a windmill, so this is lucky for those so-called luxe Flevoboeren.
Count your blessings with such a thing while it lasts
Z-farmer 3 March 2018
They now also consider this (bitter) farmer to be part of the "support" for the wind farm.
DQ 3 March 2018
Southern Flevoland with a lot of wheat for the top prize in the construction plan. The tenant walks in all the way with the pittance (€ 1000) that must be paid. Strange discussion here.
wcm 4 March 2018
That is certainly a strange discussion here. Why do tenant farmers have to pay a rent that is in proportion to today's free land price? If you own land, do you also pay a mortgage on today's free land price??? NO of course not, you pay that for the value for which you bought it years ago, perhaps from a family for € 20.000 ( The rest of the children in the family had to check the money and now put on big pants, yes that experience At least I've experienced it myself.)
Owners should be happy to have a tenant who helps their property over the years, paid good compensation for this. The owner also wants to claim part of the phosphate rights, payment rights and beet Quota/LLB, now don't break the BK.
And to Peter and Paul I would say: What's stopping you. Sell ​​your company to an investor tomorrow and you're a tenant, if that seems so fantastic to you. But I'm sure you won't.
Subscriber
grain onions 5 March 2018
WCM it is also about regular lease.
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