“I am a young dairy farmer farming with my partner on a leased farm. We came across a second farm for lease in February this year. The lease was for 15 years. We haven’t signed the lease but the entitlements were transferred by the deadline of this year and we have stock on the land. With the low milk price, we can’t take on the lease and the more we get to know the owner, the harder we find dealing with him. We don’t intend to go further with the lease but our solicitor is saying that there is a part performance of the lease because of stock on the land and we paid some rent for this year. Our solicitor thinks that there may be actions taken against us. Have you ever come across this, and what would be your advice in dealing with this situation?”

It is an unfortunate situation you find yourself in, but I suspect there may be many more in the same situation dazzled by the projected returns from higher milk prices and the Young Farmer Scheme and National Reserve introduced earlier this year.

There are two relevant legislative provisions relating to the formalities necessary for the establishment of a lease. Failure to comply with the formalities results in the agreement being unenforceable. Deasy’s Act 1860 provides that the relationship of landlord and tenant in respect of any land for any period of time more than one year shall be in writing. In your case, where you have entered into possession prior to actually signing the lease, it could be construed as a contract for a future lease for more than one year. Consequently, any agreement must be in writing signed by you. If no agreement was signed, this formality has not been complied with.

The Land and Conveyancing Law Reform Act 2009, which re-enacts the substance of section 2 of the Statute of Frauds 1695, provides that contracts for the future relationship of landlord and tenant and involving an interest in land must be evidenced by a note or memorandum in writing signed by the party against whom it is sought to enforce the contract. This note or memorandum need not be a contract in the formal sense as long as it sets out the essential terms of the lease/tenancy. There must also be sufficient evidence of an unconditional and complete agreement between the parties as to the terms. Correspondence between the parties has been deemed sufficient evidence.

However, I note that you say that you have been to your solicitor and if your solicitor was corresponding on your behalf, it is most likely that he/she marked any correspondence as being “subject to agreement/agreement denied”. The effect of this is that any correspondence should not constitute or be deemed to constitute a sufficient note or memorandum for the purposes of Section 51 of the Land and Conveyancing Law Reform Act 2009. Consequently, it may be argued that this formality has not been complied with either and that any agreement is unenforceable.

However, in equity the agreement could be enforceable if there has been a sufficient act of part performance such as payment of rent in that “equity regards as done what ought to have been done”.

The rights of the parties are equitable only until a formal lease is executed, if necessary, as a result of a decree of specific performance. Whether the landowner has a right to enforce the agreement in equity will generally only be determined by him having to take legal proceedings against you claiming the relief and it will be up to the court to decide based on the facts of the case.

Next steps

While from a legal viewpoint you may be successful in arguing that any purported agreement is unenforceable at law, it would be much more preferable to come to an agreement with the landowner.

If you were the landowner, presumably you would prefer the tenant to “come clean” so to speak rather than having to engage in what could become a lengthy and costly legal battle to get a non-paying tenant off the land. From the landowner’s point of view, it would be much more preferable to have a tenant on the land who is able to comply with the covenants in the lease including payment of rent in full as and when it is due.

Consequently, I would suggest that you approach the landowner and ask him if you can discuss matters off the record, or what is referred to legally as on a “without prejudice basis”. In layman’s terms, this means that he cannot use what you say against you in subsequent legal proceedings. While strictly speaking it might be more preferable to do this through your solicitor so that there is a written record that it is on a “without prejudice” basis, the more informal meeting might serve to foster a better spirit of goodwill.

Perhaps you could suggest that you would pay him the year’s rent including the value of his Basic Payment and that you would give vacant possession towards the end of the year which will give him a chance to find a replacement for the coming year.

If he refuses to allow you to break the purported lease, you may then have no option other than to argue that there is no such enforceable agreement in place.