For small wine producers, leasing agricultural land can be a much more cost-effective business decision than buying land. With such specific conditions needed for wine making, the options for growers and wine producers may be limited in the kinds of leases available.
Thinking about lease terms
Though long-term leases are desirable for those starting a vineyard, landowners may only want to agree to a short-term lease. A short-term lease creates a more instable future projection for the vineyard. Vineyards take a minimum of two years to begin producing fruit. The risk associated with the ending of a lease agreement could mean the end of a vineyard’s business. Here are the kinds of lease terms available to grape growers and wine makers:
Long-term lease: This lease has more security for growers, but less flexibility for land owners.
Rolling lease: A rolling lease renews itself automatically each year with a set term end. So, if lease term is set for four years, the tenant can anticipate that they will have that lease for four additional years.
Ground lease: This variety allows a tenant to purchase parcels of the leased land that the tenant improved during the lease. This structure is not popular amongst landowners, but can be arranged to enable tenants to sell those purchased parcels later.
Purchase option leases: Some leases include the option to buy, usually after a predetermined period.
Planning for the future
Growers, wine makers and vineyard managers have so much to worry about during the course of a vineyard life. They contend with vine disease, variable weather, fire, droughts as well as a long turnaround for wine sales. Reduce the risk involved in a new venture and pursue the best options available for a new agricultural lease.