My land, my price? Far from it. Landlords can only demand a reasonable rent.
This time, I turn my attention to the specifics of land leases. But what is a land lease anyway? It exists when a piece of land or a fish farm is leased for agricultural use. In contrast to conventional lease agreements, land lease agreements are subject to special protective provisions of the Land Lease Act (LPG), the regulations of which must be observed.
Particularly relevant here is the amount of the rent: anyone who thinks that the owner is free to determine the rent as he sees fit is mistaken. The LPG stipulates that land lessors cannot arbitrarily agree the amount of the rent with the lessee, but that it must be reasonable. What is considered reasonable is judged by the courts on a case-by-case basis, as the LPG only sets out the criteria for this and does not specify how the reasonable rent is to be calculated. Thus, criteria such as the type and nature of the lease or even the value of the equipment and operating resources provided by both parties are decisive.
However, the principle for reasonableness is a fair distribution of the income, costs and risks associated with the management. The land tenant must be adequately remunerated for the services he provides, i.e. a profit must remain after deducting the rent from the yield. Even an agreed value adjustment of the rent cannot result in the land being managed at the expense of the tenant.
If the rent to be paid is so high that it exceeds the achievable yield or it deviates from the reasonable rent by more than half, the tenant may, upon application to the court, request a reduction of the rent. However, the rent determined by the court does not apply retroactively, as the Land Lease Act does not provide a basis for requesting a refund.
"Entering into a land lease agreement can have far-reaching consequences for both parties."
Consequently, it is worthwhile to have land lease agreements reviewed or drafted right away by a lawyer who specializes in this area. Feel free to contact me here for a free initial consultation!