On to a new lease policy

Minister Carola Schouten (Agriculture, Nature and Food Quality) has announced that she will inform the House of Representatives about the revision of the lease system after the summer recess. It is not entirely coincidentally that the lessors' organization FPG makes a plea for the introduction of the alternative forms of lease from the Spelderholt proposal.

De Federation Private Land Ownership (FPG) wants to improve the yield of the lessors with the above. And for that, the current regular lease would be better off disappearing. The FPG even sounds the alarm. Time to get some facts straight.

Long-term return
The long-term return on regular leased land amounts to 6% to 7%, according to figures from Wageningen research (2003). As a result of the dramatic results in the agricultural sector, the 2017 and 2018 lease standards (after a strong increase in 2015 and 2016) have fallen to the level of 2014. And the FPG does not want that.

The FPG does not report that the demand for leased land is very high. Apparently it is more attractive for investors to invest in leased land than in other investments. Jan Willemink, chairman of the lease working group of the Dutch Association of Rentmasters (NVR), previously argued in favor of a balanced system of lease prices. According to him, it would be in the interests of both the lessor and lessee to link the lease standards to the (free) land prices.

I miss it
First of all, it escapes me why leased land must have a (in fact double) return that is based on the value of the lease-free land. In addition, this comes down to wanting to receive an annual interest on the present value of the land (without wanting to sell). That will push up land prices.

It is right that CDA MPs Jaco Geurts and Pieter Omtzigt seized Willemink's plea to ask parliamentary questions. Those questions were (only) about the capital yield tax, which indeed puts too much pressure on rental income. The Association of Land Tenants and Own Land Users (BLHB) has previously argued in favor of the capital yield tax to attune on the actual rental income (maximised by the government) and not on a fictitious yield of 4%.

Landlords see it differently themselves: they prefer liberalized leases in order to be able to enforce 'free' lease prices. This allows them to pass on the higher capital yield tax to the temporary tenant. And that must be the future!

Hand rubbing?
However, 1 comment from Willemink still requires a response. He states that the Bond van Landpachters will find 'hands-rubbing' that the lease standards of 2018 are good for its members. Let me first say that I have no objection whatsoever to paying a higher rent, if the incomes in agriculture are also higher. There is no such thing as rubbing hands, but rather 'wringing hands' to keep one's head above water: the fall in lease prices comes at the right time.

The NVR and FPG use slogans such as: "Regular lease is doomed" and "It is the bankruptcy of the current lease policy". That is mood-making, with the aim of achieving a lease policy in which there is only room for long-term (temporary) leases, at free (the highest possible) lease prices. In that case, not much will come of sustainable land use, although the FPG believes it can also enforce this in the lease conditions.

Spelderholt partial agreement
It can also be different. In the Spelderholt partial agreement, the BLHB has agreed to free lease prices for new regular lease† Existing regular leases must be maintained (contract is contract) and there is no reason for unjust enrichment of the lessors. A price discount should apply for temporary leases. Without this price discount, a lessor will not be encouraged to also take out new regular leases.

Various political parties (such as the CDA and the SGP) have indicated that a price discount for flexible leases is negotiable. There is no need for the career lease, because ground lease is sufficient for a period of at least 26 years. The cultivation lease with a free lease price can continue to exist for 1- or 2-year cultivations.

However, sustainable land use and the preservation of soil fertility must be the starting point for all forms of lease. This is of course already the case with regular leases. It can be that simple.

Peter van der Eijk

Piet van der Eijk was the chairman of the Association of Land Tenants and Own Land Users (BLHB) from 2012 to the beginning of 2019. He also has an arable farm in the Biesbosch polder in the outskirts of the Eiland van Dordrecht.

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