New legislation effective on July 1st will change the way conacre letting arrangements will be conducted writes Tom McDonald, Chairman of the Society of Chartered Surveyors Ireland (SCSI) Rural Professional group.
Recent estimates suggest about 640,000 hectares is rented by way of conacre, which is the right to sow and harvest crops on another’s land. Under the current system, conacre agreements involving an auctioneer usually involve the landowner and farmer signing a standard licence agreement.
This system will now change on July 1st due to new legislation which will require a full ‘letter of engagement’, or contract, to be signed by the landowner or person appointing the auctioneer. In the majority of cases under the new system, the landowner will now be obliged to pay the agent’s fee and not the farmer, which was traditionally the case.
The legislation comes from the Property Service (Regulation) Act which came into law in 2011. This led to the establishment of the Property Services Regulatory Authority (PSRA) in 2012. The purpose of the new legislation is to protect the public and the main function of the PSRA is to licence and regulate Property Services Providers (i.e. Auctioneers & Estate Agents, Letting Agents and Property Management Agents) and to put in place a complaint, investigation and redress system for consumers. Further information is available on the PSRA website www.psr.ie. Under the 2011 Property Services Regulation Act, conacre is now deemed a property service and an auctioneer or estate agent is referred to as a Property Service Provider.
Letter of Engagement
One of the new legal requirements is that a Letter of Engagement (or contract) must be provided by a Property Service Provider (PSP) and signed by a client (i.e. a landowner or farmer) before the agent/PSP can act on behalf of the client. This is now a statutory requirement for new lettings in conacre & agistment from the 1st July 2014. The agreement is usually on a seasonal basis for normally eleven months but never for a full twelve months to avoid creating a relationship of landlord and tenant and therefore it is not a lease and the farmer taking the land is not a lessee
The Letter of Engagement is a standard form which has been made available by the PSRA on its website www.psr.ie. The nature of this agency agreement is that of sole agency and the named agent is the only agent with the right to let or auction the agricultural land for the duration of the agreement. Any items within brackets on the Letter of Engagement should confirm the agreement between the landowner and agent.
The letter of engagement must be issued by an agent to a landowner within 7 days of agreeing or beginning to provide a property service, whichever is the earliest. The landowner must return the Letter of Engagement, duly signed, within 7 working days. If an agent does not receive a signed Letter of Engagement returned from the landowner, they must cease to provide or shall not start to provide the property service
The Letter of Engagement is between the landowner and the agent and therefore the landowner is liable to pay the agents fee.
Sourcing of Land
Sourcing in conacre & agistmentis a property service where the agent is contracted to source the rights to sow or harvest crops (conacre) or to source the right to graze (agistment), on behalf of a farmer.
The farmer is the only party who can initially instruct an agent to source agricultural land in conacre & agistment and therefore the farmer is the client.
In this situation, the letter of engagement is between the farmer and the agent and therefore the farmer is liable to pay the agents fee.
Ultimately, this legislation will change the Conacre system and landowners, farmers and auctioneers/estate agents must all meet the statutory requirements.
It should be remembered that the Letter of Engagement will help protect the client and has all of the advantages of contract and statutory law in relation to an agreement. In most other property transactions – the sale or letting of property already requires a Letter of Engagement and the person appointing the auctioneer/estate agent usually pays for the service. This new conacre system will result in Conacre transactions becoming more like other property sales/lettings transactions.
The Society of Chartered Surveyors Ireland (SCSI), which is the largest professional body for auctioneers & estate agents in Ireland, has recently completed a series of regional roadshows to ensure its members are fully informed of the new conacre legislation.
The Conacre system continues to play an important role in the Irish agriculture sector. Land mobility is also a key issue and the SCSI recently presented its submission to the Department of Agriculture ‘Agri Tax Review’ group which contained some recommendations to improve land mobility in the context of meeting the targets set out in Food Harvest 2020, which is available on www.scsi.ie
Conacre Changes from 1st July – What you need to know
- New legislation under the Property Services (Regulation) Act 2011 will change the Conacre system from July 1st
- A Letter of Engagement (i.e a contract) will be required to be signed by the party appointing the auctioneer/estate agent
- If a Landowner is letting the land and appointing an agent, he/she must now pay the agent’s fees
- If a Farmer is seeking land and appointing an agent, he/she must pay the agent’s fees
- The agent can only have one client in the transaction and can only be paid by one party
- For more information visit www.scsi.ie or www.psr.ie
This article appeared in the Farmers Journal on 3/17/14.