Rents for agricultural leases vary, depending on the location and productivity of the land. Prospective tenants should calculate how much rent they can afford to pay by working out their likely income and expenses. A fair rent should:
- provide landlords with a reasonable rate of return for their investment in land; and
- enable tenants to earn a reasonable income in an average year and a return for their labour, their working capital and management skills after covering their expenses.
The Department of Primary Industries (DPI) provides a rule of thumb for setting a fair rent. For 'bare' land that includes land, fences, and watering facilities, the rental could vary from 3 to 8 per cent of the market value of the land, depending on how the land is used. If it is for grazing only, then the rental could be at the lower end of this range. If the entire area is to be cropped, the rent could be at the higher end.
Where fixed improvements, such as shearing sheds, hay sheds, machinery sheds and grain storage facilities are included, the rental could be increased by between 4 and 6 per cent of the value of the fixed improvements. If the leasing arrangements include a house, an additional charge of between 6 and 8 per cent of its value could be made. Stock and station agents usually have experience in advising on fair rents for properties in their districts.
A lease agreement may also allow for a periodic review of the rate of rent to allow for significant changes in circumstances.
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