A lease of water is similar to the lease of land in the terms that it is an agreement between two parties to lease an agreed parcel for a price and a term. In comparison to the temporary market, long term leasing allows you to lock in a guaranteed price for a fixed term, rather than being exposed to fluctuations in price on the spot market.
The Lessee receives complete access to the entitlement for the duration of the lease, assumes all risks associated with seasonal allocations. Additionally, the Lessee pays an amount per ML of entitlement per annum regardless of what the seasonal allocations are.
i.e., If a Lessee has leased 100ML of water entitlement for $200 per ML per annum, the price will be $200 per ML regardless of whether the entitlement receives 100% seasonal allocations or 20%.
The seasonal allocations and carryover functionality associated with the entitlement is granted to the Lessee in exchange for paying a fee to the Lessor and all outgoings associated with the entitlement.
Leases should all be established through a contractual arrangement which clearly specifies the rights and obligations of each party, the lease fees and the payment terms.
In addition to the contract, application forms need to be submitted to the relevant water authority to formalise the arrangement. The time to establish a formal lease depends on the jurisdiction however it generally takes a minimum of 4 weeks.
With the continual increase in value of Water Entitlements, water users are looking for alternative ways to lock in their water requirements, aside from holding the entitlement themselves due to the high capital requirements.
As a lessor – you get a guaranteed return for a fixed term. You also still own the entitlement, but you don’t have the rights to use it.
As a lessee – you can secure water, long-term for a known price.
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