Buying and selling farmland in Queensland: what to check before you sign

Which contract are you actually using?

Rural sales in Queensland typically use the REIQ Contract for Houses and Residential Land only where the land is small and essentially residential. A genuine farm should be on a rural or commercial land contract with special conditions drafted for the particular property.

There is no statutory cooling-off period on a commercial or rural land contract in most cases, and the standard residential warranties do not fit a working property. Your protection has to be built into the conditions before you sign — a due diligence condition, a finance condition with a realistic date, and specific conditions dealing with water, plant and livestock.

Water — usually the most valuable thing on the title

Water entitlements in Queensland are regulated under the Water Act 2000 and are not automatically included just because the dam or bore is on the land. Some entitlements are attached to the land, some are separate tradeable allocations recorded on a water allocations register, and some are only a licence that must be transferred.

• Identify every entitlement: water allocations, water licences, stock and domestic rights, bore permits and irrigation entitlements
• Confirm whether the entitlement is on the land title, on the water allocations register, or held personally by the seller
• Check any water supply scheme, resource operations plan or distribution arrangement that limits how much can actually be taken
• Confirm the transfer mechanism and who bears the cost — some transfers need departmental approval and take time
• Ask about metering compliance and outstanding water charges, which can be adjusted at settlement

Vegetation management and clearing rights

What you may and may not clear is governed by the Vegetation Management Act 1999 and the property's regulated vegetation management map. Assumptions here are expensive: a plan to run more head, plant a new block or build sheds can be defeated by category B or C vegetation across the paddock you were counting on.

Order the property map of assessable vegetation and check whether an area management plan, a property map of assessable vegetation agreement or an accepted development vegetation clearing code applies. Any past unlawful clearing can attach compliance obligations that follow the land.

Searches that matter on rural land

The residential search set is not sufficient. On a rural purchase, expect to order and read:

• Title, registered plan and all registered easements, leases and profits
• Vegetation management map and any clearing history
• Environmental management register and contaminated land register — cattle dips, fuel storage, chemical sheds and old landfill are common hits
• Resource and mining tenure searches: exploration permits, mining leases, petroleum and gas authorities, and any conduct and compensation agreement already in place
• Local government searches: rates, planning scheme designation, development approvals and any show cause or enforcement notice
• Biosecurity Queensland matters, including restricted matter and any movement restrictions
• PPSR searches against the seller for plant, equipment and livestock
• Overland flow, water course and flood mapping

Freehold, leasehold and state land

A significant amount of Queensland grazing country is not freehold. Term leases, perpetual leases and grazing homestead perpetual leases under the Land Act 1994 have conditions attached — a requirement to reside, to develop, to maintain improvements — and transfers need Ministerial or departmental approval, which takes time and can be refused.

If any part of the property is state leasehold, your settlement date must accommodate the approval process, and your contract must be conditional on that approval being obtained.

GST and the going concern

Farmland sales have their own GST rules. A supply of land used for a farming business for at least five years to a buyer who intends to carry on a farming business can be GST-free as a supply of farmland. Separately, the going concern rules can apply where the whole enterprise is transferred and both parties are registered and agree in writing.

The two concessions are not the same and the conditions are strict. Get your accountant to confirm the treatment before the contract is signed — a GST error on a multi-million-dollar rural sale is not a small mistake, and the contract must state the position clearly.

Plant, livestock, crops and the apportionment

Farm deals routinely include tractors, headers, irrigators, silos, fencing materials, breeding stock and crops in the ground. Each raises issues:

• A full inventory annexed to the contract, with serial numbers for registrable plant
• PPSR searches and releases for anything under finance — the security follows the goods, not the seller
• A sensible apportionment of the price between land, plant, livestock and goodwill, with duty and tax consequences considered
• Livestock counts, National Livestock Identification System transfers, and who bears risk between contract and settlement
• Standing crops: who owns them at settlement, who bears the input cost, and how the harvest proceeds are split
• Chemicals on hand, withholding periods and safe disposal of anything unregistered

Access, easements and neighbours

Confirm legal access to the road network. Access along a track that has been used for forty years is not the same as a registered easement, and a purchase without secure access is very difficult to finance or resell.

Check boundary fencing responsibilities, any grazing or agistment arrangements in place, telecommunications and power easements, and any adjoining resource tenure that gives a third party the right to enter.

If you are selling

Preparation lifts the price and shortens the contract. Assemble the water entitlement documents, vegetation map, plant list with finance details, livestock records, lease and agistment agreements, and any conduct and compensation agreement with a resource company before you go to market.

Deal with the loose ends: undocumented agistment arrangements, unreleased mortgages over plant, unpermitted structures and old chemical storage. Every one of these becomes a due diligence issue, and due diligence issues become price reductions.

Frequently asked questions