Government Moves to Normalize Farmland Leasing... "Fines for Not Signing Written Contracts"

\r\n
[Financial News] The government will launch a special cleanup campaign starting on the 18th to normalize farmland leasing. The move is aimed at bringing informal verbal lease agreements into the formal system ahead of a nationwide farmland survey set to begin in earnest in August. In particular, because many cases involving inherited farmland and other land have not been accompanied by written contracts or changes to the Farmland Ledger, the government plans to encourage voluntary reporting and crack down on illegal and irregular use of farmland.
According to MAFRA on the 13th, the government will run a "Special Cleanup Period for Farmland Leasing" from the 18th through July 31. The measure is intended to encourage landlords and tenants who have traditionally relied only on verbal agreements to sign written lease contracts and report them to the township or town office with jurisdiction over the farmland, or to entrust the lease through the Farmland Bank.
Farmland leasing is, in principle, prohibited. However, under Article 23 of the Farmland Act, private leasing contracts or Farmland Bank entrustment are allowed if they fall under an exception. Typical cases include farmland acquired before January 1, 1996, inherited or abandoned farmland of 1 hectare or less, and farmland that has been cultivated directly by a person aged 60 or older for at least five years.
During the cleanup period, the government plans to focus on explaining the principle of "written contracts" for private farmland leases. Once a written contract is signed and confirmed by the head of the relevant township or town, the tenant gains enforceability against third parties. This means the tenant is legally guaranteed the right to continue farming during the contract period, even if the owner changes. The minimum lease term will also be more clearly protected, at three years for general farmland and five years or more for land used to grow perennial crops.
However, if an application to update the Farmland Ledger is not filed within 60 days after the contract is signed, the farmland owner or tenant could face a fine of up to 3 million won.
MAFRA explained that verbal contracts have been widespread in farming because of the burden of procedures. In particular, many cases have involved heirs living in cities who lease farmland to relatives or local residents without drawing up contracts or updating the Farmland Ledger.
The government will also actively encourage the use of Farmland Bank entrustment. Farmland held for more than three years, inherited farmland, and farmland acquired before 1996 can be entrusted to the Farmland Bank for leasing. Contracts can be signed online through an electronic contract system or by visiting the Korea Rural Community Corporation. When farmland is entrusted, updates to the Farmland Ledger and registration changes for the agricultural management entity are handled at the same time.
In particular, inherited farmland exceeding 1 hectare must be entrusted to the Farmland Bank. In addition, if farmland is entrusted to the Farmland Bank for more than eight years, owners can receive an exemption from heavier capital gains tax. Farmers who entrust their farmland will also be exempt from the entrustment fee, which is equivalent to 5% of the annual rent.
After the special cleanup period, the government will also operate a reporting center in case landlords unilaterally terminate lease contracts in an attempt to avoid the farmland survey. Reports will be accepted through the online Farmland Space Portal and offline service counters. Farmland that is reported will be included in the in-depth inspection phase of the nationwide survey starting in August, and tenant farmers who suffer damage from contract termination will be given priority access to Farmland Bank supply.
Kim Ki-hwan, head of the Farmland Division at MAFRA, said, "I hope the special cleanup period will serve as an opportunity to bring informal verbal lease agreements into the formal system." He added, "Tenants will have their legal rights clearly protected, and landlords will be able to prove lawful leasing before the farmland survey."
Meanwhile, the government will also begin a phased nationwide farmland survey this year. The survey covers about 1.954 million hectares, or 14.47 million parcels, based on the entire Farmland Ledger. This year, the government will first inspect 1.15 million hectares of farmland acquired after 1996, and next year it plans to add another 800,000 hectares of farmland acquired before 1996. From May to July, the government will conduct a basic survey using administrative data and satellite images. From August to December, it plans to carry out on-site in-depth inspections, focusing on high-risk speculative areas.
\r\n\r\n
junjun@fnnews.com Choi Yong-jun Reporter