New CAP entitlement rules to hit the land leasing market

FARM organisations have warned of potential chaos in the conacre and leasing market unless the Department of Agriculture can secure changes to the EU Commission rules on leasing entitlements.

Under the current CAP reform proposals, entitlements leased out under a Private Contract Lease Clause (PCC) will be lost both to the owner and the active farmer claiming them, unless the owner had claimed one or more entitlements in their own right in 2013, the reference year for entitlements.

Up to €25m of entitlements are leased every year in Ireland. In approximately half of these cases, the owners of the entitlements only leased part of their entitlements, ensuring that the farmer claimed at least one entitlement in their own right in 2013.

This leaves €12-13m of entitlements in danger of being lost in the new CAP. Farmers who leased their entire farms and entitlements into companies will take comfort from predictions from Tipperary-based agricultural consultant Tom Dawson.

“My understanding is that companies set up by the farmer who owned the entitlements won’t be affected,” he said.

“But it is still unclear as to whether the new entitlements will be assigned to the farmer or the company.”

LOSSES

Both the ICMSA and IFA warned that farmers faced major financial losses unless the situation was rectified. Both organisations said the issue had the potential to seriously undermine confidence in the land and entitlements leasing market.

ICMSA president John Comer said there was a simple solution to the situation if the EU Commission would allow leasees in these cases to activate the entitlements for the lessor.

“This would ensure that many long-standing arrangements which have worked for both the active farmer and the landowner will be allowed to continue,” he said.

However, sources in Brussels have indicated that the Commission was refusing to contemplate changes to the land leasing regulations. Farmers in France are also understood to be facing difficulties because of the rule changes.

If a solution to the problem is not found, farm organisations have warned that long-standing agreements and relationships between farmers could break down irreparably.

“It will negatively impact on farm output and expansion programmes, particularly for productive dair y, beef and tillage farmers. It will also restrict land availability for young farmers.

“It will undermine existing busi- ness, financial and banking arrangements with possible legal implications for all affected parties,” warned Liam Dunne, IFA’s grain chairman.

“Lessors and lessees who enter into a PCC have a legitimate expectation that the contrac t would be honoured in full and that both their respective positions would be fully protected.

ADVICE

“Both farmers and single farmer payment entitlement owners entered into PCCs on the advice of the Department of Agriculture,” he pointed out.

The ICMSA also warned of another potential pitfall contained in the entitlements leasing rules, which would require a farmer who lost leased land to retain his full acreage in order to retain his own entitlements.

“It’s a complete minefield at the moment,” remarked one ICMSA official.