Farming minister Victoria Prentis is promising reforms to agricultural tenancy laws which will give “greater freedom to farmers”.
Defra has announced its plans to modernise agricultural tenancy law which it says will provide farmer tenants with more flexibility in a bid to “unlock productivity” for the sector.
This article is based on English law and is not a definitive statement or interpretation of the law; rules change and every case is different – only a court can decide. Other jurisdictions are similar but there are important differences. Always seek expert advice before making or not making decisions.
The development is in response to a 2019 consultation on agricultural tenancy law in England, which has led to confirmation that the Agricultural Holdings Act 1995 (AHA) will be amended.
The Agricultural Holdings Act 1995 had itself reformed and substantially deregulated the law relating to agricultural tenancies under the Agricultural Holdings Act 1986 which gave long-term security of tenure, introducing the concept of the Farm Business Tenancy (FTB). This reform substantially released the amount of land available to rent, and increased the average rent per acre.
The amendments will include repeal of the minimum succession retirement age of 65, which will give farmers freedom to choose when to retire and hand over the farm to the next generation. Also, a new dispute mechanism will be introduced to enable tenants to vary the restrictions when applying for future Environmental Land Management schemes.
Victoria Prentis says that agricultural tenancies account for a third of all farmland in England and Wales, so removing barriers to productivity for farm tenants is “vital for unlocking the potential of the farming industry as a whole…We know that our tenant farmers are some of the most engaged and innovative in the sector and it is high time that we modernise outdated legislation so that it is fit for today’s farmers and their families.”
The NFU has welcomed the proposed reforms which it says will “give tenants greater flexibility and remove some barriers to productivity”. However, the NFU says more of the reforms should have been taken forward in the Agriculture Bill, in particular “the need to include requests for landlords consent or variation of terms under the Agricultural Tenancies Act in addition to AHAs”.
Chris Cardell, NFU tenants’ forum chairman, has said:
“We would have liked to have seen the reform to modernise and extend succession rights to include nephews, nieces and grandchildren included in the Bill.
“We also have concerns regarding the reform of the Suitability Test including the wording ‘Environmental Care’ and agree how this is applied should be carefully considered and the work undertaken by the Tenancy Reform Industry Group (TRIG).
“The NFU looks forward to working with government and other organisations on the proposals which require further work and we would like these to be looked at again and introduced in the next 12 months.”
What are Farm Tenancies?
There are two main types of agricultural tenancy which apply when someone is renting agricultural land or buildings and these are different from tenancies for agricultural workers occupying residential dwellings (usually ASTs) and business tenancies under the Landlord & Tenant Act 1954.
Agricultural holdings (AH) tenancies come under the Agricultural Holdings Act 1986. (AHA 1986) and barring very few exceptions, apply to tenancies pre 1st of September 1995 where the tenancy is granted for a term of years or from year to year – this includes leases and licences to occupy.
Farm Business Tenancies (FBTs) come under the Agricultural Tenancies Act 1995 (ATA 1995), and barring very few exceptions apply when the tenancy began after the 1st of September 1995, when all or part of the land is used for trade or business throughout the term of the tenancy, and is primarily or wholly agricultural or when the landlord and tenant agree prior to the grant that the tenancy is an FBT.
There are some important difference between these two tenancies: under an AH both tenant and landlord have the right to a rent review every 3 years, whereas under an FBT the parties can agree in their lease when the rent reviews occur, though the statutory position remains every 3 years if the lease agreement is silent on this.
Farm tenancies allow for compensation when there have been substantial improvements, so under an AH tenants may be entitled to compensation equal to the increase in value to the holding made by specific improvements when the tenancy comes to an end. With an FBT it is more transparent by providing for compensation when there have been any physical improvements, made with consent, and any other changes that increase the value of the holding.
When the tenancy comes to an end there’s the question of renewal: under an AH the tenant has the automatic right to a new lease, whereas with an FBT there’s no automatic right to renew, just a right to a minimum of 12 months notice for the tenancy to be brought to an end.
Family members often want to succeed, so provision for this is made under an AH where there is a right for a close relative to apply for a new lease if the tenant dies or retires, subject to certain statutory conditions being met, but only two such successions are allowed. Not applicable to FTBs.