News & Insights

The laws on the ownership and use of land for agricultural purposes are generally the same as for general land ownership and usage across Australia but there are still many things to consider during the lease or purchase process.

There are certain title and usage rights that are specifically relevant to how an owner of tenant while make use of the agricultural land. In the first of a two-part series, Stephen Pallavacini does a deep dives on what things you may need to be aware of during the lease or purchase process.

Leasing agricultural land

In Australia, farmers hold agricultural land in different ways including freehold, leasehold and Crown leasehold.

Leases can be granted for a fixed number of years as agreed between the landlord and tenant. Leases may be required to be registered to provide indefeasibility of title and in that case, parties must follow the lease registration requirements in the relevant state or territory.

There may be specific statutory controls. The following are examples in New South Wales:

• The Agricultural Tenancies Act 1990 (NSW) governs some aspects of leasing arrangements between owners, tenants and sharefarmers of agricultural land but does not impose a maximum term for leases of agricultural land.
• Western lands leases can be granted in perpetuity or for a term up to 40 years (section 28A, Western Lands Act 1901 (NSW)), and can be extended for further terms, up to 40 years each time (section 28B).
• Crown land in NSW can be leased for up to 100 years (sections 34 and 41, Crown Lands Act 1989 (NSW)).
• Most states and territories restrict the duration of a lease of part of a parcel of land. In NSW, the time limit is generally five years (sections 23F and G, Conveyancing Act 1919 (NSW)).
• Some states and territories allow the transfer of specific annual allocations of water under a water entitlement. Usually, these transfers cannot cover more than one year of allocations.
• Section 134 of the Conveyancing Act 1919 (NSW) states that a lease for a term of more than 300 years can be converted into a freehold interest in the leased premises, if there are more than 200 years still to run on the lease and various other criteria are satisfied.

Profit à prendre

A profit à prendre is a right to take from the land owned by another person, part of the natural produce grown on that land, or part of the soil, earth or rock in the land. For example, a right to graze stock, plant and harvest crops, quarry stone, sand or gravel, or take timber.

A forestry right is defined in section 87A of the Conveyancing Act 1919 (NSW) as an interest in land allowing a person to:

• enter the land;
• establish, maintain and harvest a crop of trees on it;
• construct and use buildings, works and facilities as may be necessary; or convenient to enable the person to establish, maintain and harvest the crop.

Native title rights 

Agricultural land may be affected by any native title claims or registered interests.

If there is a native title claim the Federal Court may decide if native title exists in areas where native title has not been extinguished. If this happens, details of the determination (including access or use restrictions) will be entered onto the National Native Title Register administered by the National Native Title Tribunal.

A voluntary agreement may be entered into between a native title group and other people, organisations or government agencies, regarding access to, use and management of land and waters.

Mining or petroleum tenements or permits

Mining or petroleum tenements or permits may be granted over the whole or part of the land. They could impact on its proposed use.

Environmental matters

If the land is affected by any environmental (including flora and fauna), pollution or contamination-related issue these factors may be listed on a register and prohibit certain uses of land unless the acquirer complies with relevant conditions or the land is not remediated to a specific level.

Planning restrictions

The land may be subject to any zoning or planning restrictions, impacting the ability to use the whole or part of the land for agricultural purposes.

Resumption

Specific legislation at the federal level (for example, the Lands Acquisition Act 1989 (Cth)), and in most states and territories, allows specified government authorities to compulsorily acquire land.

Usually, the acquisition must be for a specified purpose (for example, public works if the authority is a utility provider, or railway purposes if a rail authority).

The relevant statute will provide a procedure for the acquisition. In general, the acquiring authority can acquire the land by agreement with the landowner, failing which the expropriation process can be used.

The Australian constitution requires that any acquisition of property by the federal government must be on just terms. The relevant federal, state and territory legislation provides compensation for the acquisition, which goes beyond the market value of the acquired land.

Water rights can also be compulsorily acquired by a government authority. An owner is entitled to compensation at the market value of the rights. In NSW, compulsory acquisition can only occur if the public interest requires compulsory acquisition of the water rights.

Water rights

Water in Australia is owned by the state or territory. Generally, water can only be taken from a water resource for use under a water right.

The federal government has developed water management policies and legislation, including the National Water Initiative, the Murray-Darling Basin Plan, and water quality management plans at a more local level. In relation to the Murray-Darling Basin, water rights issued are subject to a regulatory regime imposed by the federal government under the Water Act 2007 (Cth).

Each state and territory has its own legislative regime for planning and granting rights to use surface water and groundwater. Water rights are often subject to overarching water resource plans, which set economic, social, cultural and environmental outcomes.

When a water right is required

A water right is granted by the owner to access, take or use water from a specific resource (surface water, groundwater or landscape water), for reasons other than those relating to riparian rights or indiscriminate water flows.

A riparian right gives property owners the right to the ordinary use of water flowing past the riparian land for reasonable domestic and/or livestock purposes.

Removal of water from rivers, storages, high-yielding aquifers and manufactured water plants is controlled through water allocations, licences or permits issued by the relevant state or territory government.

Water rights are generally required to take water for:

• stock and domestic use on lands that do not adjoin a watercourse, lake or spring;
• irrigation;
• industrial or commercial use;
• storing water behind a weir or storage facility; or
• storing water in excavations within or connected to a watercourse.

Exceptions to the requirement to obtain a water right include:

• water for general domestic and stock purposes (including watering travelling livestock);
• water for public purposes in an emergency situation, including fighting fires or undertaking routine testing of firefighting equipment; or
• where the land is subject to native title rights, or is a dedicated water reserve for Aboriginal persons or Torres Strait Islanders (largely in the northern parts of Queensland and the Northern Territory).

Obtaining a water right

Persons requiring a water right must apply to the relevant authority and the relevant state and territory water authority.

If successful, the water right holder must comply with conditions of use and may be required to enter into a supply agreement with the water resource manager.

The types of conditions generally include:

• the quantity of water allowed to be taken during the relevant water year;
• metering requirements and charges; and/or
• the period for which the right applies.

Foreign persons with interests in certain water entitlements are also required to register their interests on the Register of Foreign Ownership of Water Entitlements.

Types of water rights

A range of water rights are issued. Some attach to land and can only be transferred with the land. Others are stand-alone rights, which can be bought and sold separately to land. An acquirer of ownership or rights in agricultural land should consider what water rights attach to the land, the party who holds them (they may not be the registered owner of the land) and whether to purchase water rights separately.

In most areas of NSW, for example, water rights are considered to be personal property, and can be transacted and securitised separately from land.

Water rights are often granted in priority to other water rights in the area, to determine the amount a holder can take in periods of water scarcity. Priority designations affect the value of the water right.

Check with a Property Lawyer before you make your move

Before you jump in on a lease or purchase, make sure you consult with a Property Lawyer to go through your title and usage rights. Though it may look familiar to a regular purchase – looking at a purchase or lease within the context how the land will be used is crucial for making an informed decision and getting the right advice.