Key changes and implications of the new Farm Lease Decree in Flanders

sOn 1 November 2023, the decree of 13 October 2023 governing the specific rules on farm lease (and published only on 28 November 2023) entered into force in Flanders (the “Farm Lease Decree”). Farm lease legislation is a competence of the Regions since 1 July 2014. The Walloon Region already introduced its own farm lease decree on 1 January 2020. The new Flemish Farm Lease Decree aims at amending the federal farm lease act of 4 November 1969 (the “Farm Lease Act"), and creating a fair balance between the rights and obligations of the farmers as tenants and their respective landlords. As more than 60 percent of the land in the Flemish Region is leased by farmers, the farm lease legislation is therefore essential for the Flemish agricultural sector.

The new provisions of the Farm Lease Decree are applicable since 1 November 2023. They do not only apply to farm leases concluded after 1 November 2023, but also apply to existing farm lease agreements concluded before 1 November 2023 that have not been terminated.

Scope of application

The Farm Lease Decree applies to (i) leases, (ii) the taking into use through the granting of a usufruct right among the living by the will of man and for a fixed term, or (iii) the taking into use through the granting of a long-term lease right for a term of less than 27 years, of immovable property which, either from the tenant’s inception or pursuant to an agreement between the parties during the lease period, is used primarily for the tenant’s agricultural business, excluding forestry.

Unlike the federal Farm Lease Act, the Flemish Farm Lease Decree applies to agreements granting a long-term lease right for a term of less than 27 years relating to immovable property primarily used for agricultural business. The reason for this is that, since the entry into force of Book 3 of the new Belgian Civil Code on 1 September 2021, the minimum duration of a long-term lease right has been reduced from 27 to 15 years, making the long-term lease attractive as an alternative to the ordinary lease. This way, the Flemish legislator avoided that parties could circumvent the mandatory provisions of the Farm Lease Decree by concluding a (short-term) long-term lease agreement with a term of less than 27 years instead of an ordinary farm lease.

Condition of written agreement

There is often no written farm lease agreement in place, which creates a lot of legal uncertainty for both tenants and landlords. 

The Farm Lease Decree aims to turn the written farm lease into the standard, not only for new but also for existing farm leases. First of all, the Farm Lease Decree lists a number of details that must at least be included in a written farm lease agreement, including, among others, the commencement date and duration of the farm lease, the cadastral description of the plots and the non-indexed cadastral income. in this regard, the Flemish government plans to publish a template farm lease agreement on their website.

Unlike the farm lease decree adopted in the Walloon Region, there is no transition period in the Flemish region in which existing oral farm lease agreements must be converted into written farm lease agreements. Under the Farm Lease Decree, oral agreements will still remain valid but a penalty mechanism is provided in case one of the parties refuses to cooperate to sign a written farm lease contract.

Non-applicability of the pre-emption right

In principle, upon sale of the land subject to the farm lease, the tenant as well as his family members who effectively participate in the exploitation of the land benefit from a pre-emption right. The federal Farm Lease Act already contained a number of exceptions to this pre-emption right. These exceptions are mostly reproduced in the Farm Lease Decree, including two additional exceptions to the pre-emption right:

  • The tenant loses its pre-emption right in case of acquisition by a public authority for afforestation (‘bebossing’) or inclusion of the property in a nature management plan (‘natuurbeheerplan’) within 3 years, and the habitability (leefbaarheid) of the tenant’s farm is not seriously disrupted.
  • Tenants who have reached the official retirement age will no longer have a pre-emption right if they receive a retirement allowance and if they do not designate one or more privileged family members who may continue their operation. Farmer-tenants who have already reached the retirement age often sublease or seasonally lease their land. The Flemish legislator considered this is detrimental to young farmers as it prevents them from buying the land.

Limitations to the transfer of the pre-emption right

To guarantee the continued operation and ensure that the land remains at the farmer’s disposal, the Farm Lease Decree introduces the concept of a “secured purchaser”. In principle, the tenant can transfer its pre-emption right for all or part of the land to one or more third parties. However, the Farm Lease Decree provides that in case the purchaser of the land is (i) a natural person and (ii) the purchase agreement includes a statement by the purchaser of the land that (a) the tenant may continue to lease the land under the same conditions and (b) he will not claim the land for at least 18 years, the tenant cannot transfer its pre-emption right.

The tenant who cannot transfer its pre-emption right on this basis, and therefore loses an essential right, will be compensated for this and will be entitled to a farm lease renewal, without prejudice to the duration of the initially agreed farm lease period.

Termination option: afforestation or nature realisation in green areas

The new Farm Lease Decree includes two additional termination options for afforestation or nature realisation in the so-called “green areas”. As from 1 November 2023, private landlords can also terminate a farm lease for the purpose of forest or nature realisation. The first termination option is open to all, but limited to land in these “green areas”. The second termination option can only be exercised by municipalities, but will – under a number of conditions – be applicable in all spatial destinations.

To safeguard the balance between nature and agriculture, the Farm Lease Decree introduces the “habitability test” (leefbaarheidstest). The termination for nature realisation or afforestation can be refused or restricted if the habitability of the tenant’s existing business would be seriously disrupted by the termination. The Decree lists a number of situations in which the serious disruption of habitability is irrefutably presumed.

Termination option: long-term farm lease

Long farm leases are made more attractive by the Flemish legislator by providing the possibility to terminate the farm lease to alienate the property after a period of 18 years. Under the federal Farm Lease Act, this could be done after a 27-year term and only once at the end of the first 27-year lease. With the introduction of the Farm Lease Decree, the termination possibility exists for a lease of 18 years and, moreover, for every subsequent 9-year period. The termination option should be provided for in the written farm lease agreement. Without the exercise of the termination option, the farm lease will be tacitly renewed for 9 years.

This termination option has to be included in the farm lease agreement, and is therefore not applicable to the old farm lease agreement concluded under the Farm Lease Act.

Termination option: retirement of the tenant

The federal Farm Lease Act allowed the landlord to terminate a farm lease agreement with a retired tenant without a successor if (i) the landlord would operate the leased premises himself or transfer the operation to one or more family members specified in the Act or to a habitable agricultural business, and (ii) the tenant receives a retirement allowance.

The new Farm Lease Decree introduces a rebuttable presumption regarding the receipt of a retirement allowance as from the legal retirement age. In this way, the burden of proof is reversed. As from the moment the tenant has reached the legal retirement age, the landlord can ask the tenant whether he receives a retirement or survivor’s allowance. If, within 60 days from that question, the tenant has not proved that he is still in business and is not receiving a retirement or survivor’s allowance, or if, as the case may be, he does not designate one or more privileged family members to continue the activity, the tenant will be deemed to be receiving a retirement or survivor’s allowance.

In case the retired tenant designates a successor, the designated successor must continue the activity within one year as from the designation. Should this not be the case, the landlord can still terminate the farm lease agreement.