Phosphate rights belong to the tenant and here's why

Almost unnoticed, tenants are confronted with restrictions on the land they lease. This is a threat in particular for tenants with a regular lease. 

All the more so because compensation is not self-evident. And if there is compensation, for example in the form of payment entitlements, these are actually claimed by some lessors. Also with regard to the phosphate rights, which is in fact a limitation for the tenant, a few lessors are at the forefront to claim 'their' rights. Time to take a critical look at this phenomenon, where a limitation of the tenant leads to an extra bonus for the landlord.   

In fact, the use of agricultural land has been restricted by fertilizer legislation many years ago. Due to the regular tightening of the application standards, some soils can no longer be sufficiently fertilized to achieve a good yield. We also see that this results in the need for soil to remove less manure. Both developments are creating additional demand for land and higher lease prices. 

In January 2015 a restriction was introduced (land-relatedness) with regard to land and animals due to the introduction of the Dairy Cattle Act. And with that the earning capacity per hectare. With the introduction of the phosphate rights (reference date 1 July 2018), a restriction was introduced on 2 January 2015, whereby phosphate production is maximized while the dairy sector is faced with a world market milk price.

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Now critics can say: 'Then you should not produce more than the national need'. That kite won't fly. Take, for example, the beef farmers in the Netherlands, who produce less meat than the national need. They face great competition from meat from abroad. In other words, the world market price always applies, even if production is limited.

There is compensation in the form of payment entitlements. Clubs such as Natuurmonumenten and the provincial landscapes, however, demand this from their tenants. This is a thorn in our side, because the payment rights are precisely intended to compensate the income of agricultural entrepreneurs for adverse trade agreements with regard to agricultural products. 

Nature conservation legislation also imposes restrictions. The Netherlands Nature Network, including the Natura 2000 areas, imposes restrictions on land and companies. In many cases it means a lengthy permit process, uncertainty and costs. Recently, with the sweeping of the PAS, it has once again been shown that the judiciary is unpredictable and can plunge many companies into uncertainty. Moreover, I foresee even more 'obstacles' in the future. It is now important that these 'obstacles' do not lead to higher lease prices, for which purpose limiting short-term leases may be an option. 

As a tenant you have to be a real entrepreneur to farm successfully in the Netherlands in the present time. Precisely in these times, a cooperative lessor can help the lessee to further develop the company. Not by giving the tenant additional assignments or restrictions, but by allowing the tenant to undertake and offer more options. The attitude of the lessor should be a determining factor for me when determining the lease price.

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The phosphate rights system is a limitation for the tenant, while there is no price advantage in return. In fact, the phosphate rights mean that less is earned. It is therefore remarkable that it is precisely the phosphate rights that generate money for the lessor by the court's ruling. 

LTO Nederland continues to argue in favor of retaining the long-term vision within the lease system. This also means that the interests of both parties must be viewed fairly and factually. Based on this, our position is that the phosphate rights belong to the lessee.  

Alfred Jansen

Alfred Jansen is a safety and lease manager at LTO Nederland, a steward and he has a farm with calves and arable farming. In his opinions he outlines the developments in the market for agricultural real estate and animal rights.

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