Often, selling and buying agricultural land can be really expensive.
To overcome this, farmers have explored alternatives to help generate profit efficiently. One of the most common alternative arrangements is share farming.
In a share farming arrangement, a landowner will extend their land to another farmer. From there, they will “share” the expenses and profits — all while still operating as separate businesses.
This could be a really great way to scale your farming activities, but it’s important to make sure you’re doing it right.
While it sounds simple and acceptable to agree over a handshake, it’s always a good idea to have an agreement down in writing. And, with farm sharing, there are other legal issues involved that you should consider..
This is why you need a contract: a legal document that sets out the agreement. This makes sure that both parties are on the same page (and it can prevent disputes down the track).
In this case, you would need a Share Farming Agreement.
How Does Share Farming Work?
Share farming might sound like a simple arrangement where two farmers work together on the same land. However, in reality, it’s a little bit more complex.
In a share farming arrangement, the landowner effectively “leases” out part of their land to another farmer.
However, it’s actually a lot more than just a lease. The other farmer is not just borrowing the land — they are using it to make their own profit. In a sense, you might call this profit sharing.
As such, share farming involves sharing the land and the profits you make from use of that land. This way, both parties can split the expenses but still maximise profits.
It’s important to note, however, that often the independent farmer will be treated as an independent contractor under the law — so make sure you’re careful not to enter into this arrangement with an employee. We’ve written about the importance of knowing the difference between an employee and a contractor here.
As every arrangement is unique, your Share Farming Agreement should be customised to reflect your specific agreement with the other party. The contract will vary depending on how you’ll split the share of the farm, who will be responsible for what, and what minimum standards of farming you’ll require from the independent contractor.
Why Do I Need A Share Farming Agreement?
Since share farming arrangements can be quite specific, you’ll need more than just a standard template when you’re looking to set it all up.
This is where a Share Farming Agreement comes in. It will make sure that the agreement is clear from the very beginning, addressing issues such as:
- How are income and expenses split?
- How is the farm shared?
- Is there a minimum standard required for the contractor to maintain and manage their ‘share’ of the farm?
- How will communication work (e.g. regular meetings)?
Need Help With A Share Farming Agreement?
As share farming differs from one arrangement to another, you’ll need more than a standard template.
A good lawyer can speak with you to understand your needs and draft a contract tailored to your requirements — and we’re here to help!
Don’t hesitate to reach out to us at 1800 730 617 or email@example.com.
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