Many farmers let out land on a Farm Business Tenancy or an older agreement under the various Agricultural Holdings Acts. With a third of agricultural land in England let under various agreements, changes to tenancy legislation has been a long time coming.
The aim of the legislation is to encourage structural change in the Agricultural Holding Act sector (Life tenancies) and to update its succession criteria. It should also remove potential barriers to productivity, investment and environmental improvements – the proof of the pudding will be in 18 months’ time when the Bill gets its first reading.
Liza Randall of G Herbert Banks took part in the consultation feedback sessions, and perhaps one of the most hotly debated topics was that of Assignable AHAs, as she explains, “Put simply, an assignment would enable the tenant to assign and sell their interest in the tenancy agreement to a new third-party tenant.
“If the Landlord wanted to stop the assignment, he could do, but only by purchasing the tenant’s interest. Not ideal if finances were not available to do so. It is essential, therefore, that the Landlord should have a veto in the process if he didn’t think the candidate would be suitable.
“The assigned tenancy would be subject to an incontestable notice to Quit 25 years after the assignment, at an open market rent. The idea behind this is to help older tenants with no family successor to retire and thus unlock the land either for new tenants to farm or for the landlord to take it back in hand. Good in theory, but we await to see how it would work in practice.”
Other areas of discussion were a hold on succession rights when tenant reaches 5 years past the pension age which does seem a sensible step forward. Another positive move is the proposed repeal of the commercial unit test and replacing the suitability test with a more up-to-date business competency test. This will help modernise the currently very stringent requirements and not penalise more business-minded farmers who may have other on-farm but non-farming businesses to support the farming enterprise.
Another very important area is the widening the close relative test, “So often we find when consulting with tenant farmers who want to retire that it is often their grandchildren who are better placed to succeed, as many are already working within the wider farming business.
“If a grandchild were to succeed, it would be classed as a second succession. DEFRA are still looking at whether in this case a Landlord would also be able to issue a 25-year incontestable Notice to quit.”
Good news is that DEFRA have listened to Agents when looking at Farm Business Tenancies, and the need for short-term lets to get land back for planning. They have agreed to write in a 6 month notice to quit for planning – but nothing similar for traditional lifetime tenancies.
If you need any letting advice, please feel free to give us a call on 01299 896968