Agricultural tenancies

Most tenancy agreements made prior to 1 September 1995 are subject to the Agricultural Holdings Act 1986. These are commonly known as 1986 Act tenancies, ‘full agricultural tenancies’, or Agricultural Holdings Act tenancies. Landlords and tenants under a 1986 Act tenancy have the right to a rent review every three years.

Tenants under a 1986 Act tenancy are entitled to receive compensation at the end of the tenancy for any major long-term improvements and short-term improvements that they have made, any ‘tenant rights’, and for the use of any special system of farming which benefitted the farm. The amount of compensation is determined in relation to the value by which the farm increased as a result of the improvements.

Major long-term improvements may include the erection or alteration of buildings, the construction of silos, roads or bridges, the planting of orchards, the creation of or planting of water meadows and the repair of fixed equipment.

Short-term improvements may include measures to protect fruit trees from damage by animals, the burning of clay, and the liming and chalking of land.

A ‘tenant right’ may include the value of any crops growing when the tenancy ends, the cost of husbandry, for example, the cost of sowing seeds, and compensation for disturbance where a landlord terminates a tenancy.

A special system of farming may include farming organically.

Landlords can claim compensation from their tenants for any disrepair. This will normally be determined by reference to the repairing costs.

These tenancies usually have lifetime security of tenure. Note that 1986 Act tenancies created before 12 July 1984 can also carry succession rights on the death or retirement of the tenant as long as the potential successor meets certain criteria. Close relatives of a deceased tenant can apply to succeed the tenancy within three months of the tenant’s death. Two tenancies by succession can be granted. This means that the grandchildren, for example, of the original tenant will be able to continue the farm business.

Most tenancy agreements made after 1 September 1995 are subject to the Agricultural Tenancies Act 1995 and are commonly known as Farm Business Tenancies. The landlord and tenant have a lot of freedom to agree matters between themselves. The requirements of a Farm Business Tenancy are as follows:

• at least part of the land must be farmed throughout the duration of the tenancy, and;
• the landlord and tenant must have exchanged notices before the tenancy began confirming their intention for the tenancy to remain a Farm Business Tenancy throughout the tenancy, or;
• the tenancy must be primarily agricultural.

The landlord and tenant have the right to negotiate terms relating to length of term, rent levels and rent reviews, so long as those terms do not preclude a reduction in rent. Where no such terms are agreed the landlord or tenant can demand a rent review every three years. There is no minimum length of term, however, a tenancy of more than 2 years’ duration will only come to an end when a minimum 12 month written notice is given.

Tenants under a Farm Business Tenancy are entitled to receive compensation at the end of the tenancy for any physical improvements they have made to the farm, so long as the landlord’s consent was first obtained. Tenants can also be entitled to compensation for any other improvements which increase the value of the farm, for example, if they have obtained a milk quota or planning permission, so long as such improvements remain with the farm when the tenant leaves it.

Landlords and tenants are free to agree an upper limit on the amount of any compensation payable but these must be in writing. They are also free to agree a maximum notice period in relation to notices to quit (the minimum notice period is 12 months).

Disputes relating to 1986 Act tenancies are generally dealt with by the Agricultural Land Tribunal. Disputes relating to Farm Business Tenancies are generally dealt with by way of arbitration.