All change for agricultural tenancies?

Yet another aspect of the Government's view for the future of the farming industry was unveiled in April with the issue of a consultation paper on proposed changes to the legislation governing agricultural tenancies.

The Government is acutely aware that productivity growth in UK agriculture has lagged behind that of our competitors for many years, and sees agricultural tenancy reform as one of the ways by which this trend could be reversed. The intention is to:

• Provide an enabling environment for sustainable productivity improvements and investment
• Facilitate structural change and support new entrants and next generation farmers so the sector has the skills and talent needed to thrive in the future
•  Enable tenant farmers to access new agricultural and land management schemes

The proposed farming industry reforms follow on from recent findings of the Tenancy Reform Industry Group, where succession provisions and restrictions in the 1986 Agricultural Holdings Act (AHA) were felt to be a barrier to productivity gains. Key provisions within the consultation recommendations are:

• Making 1986 Act agricultural tenancies assignable, subject to a 25-year term and a pre-emption right for the landlord
• Encouraging retirement by removing the minimum age at which a retirement succession claim can be made and possibly removing succession rights where tenants are well past retirement age (with corresponding amendments to the rules on council farms)
• Modernising succession rules to change the tests which a successor must meet and the definitions of family members who might be eligible to succeed
• Making it easier for landlords to regain possession of land let under Farm Business Tenancies  (FBT) in certain circumstances, such as non-payment of rent

The proposals have implications for both landlords and tenants within the farming industry. Some landlords who were looking forward to regaining possession may find that a successor may now come forward and extend the tenancy for another 25 years (or oblige the landlord to buy out the former tenant to prevent this happening). Agricultural tenants may now find that they have been given a valuable asset which may ease their retirement. Some landlords may take fright at this tilting of the playing field in favour of the tenant and decide to keep land in hand rather than let it under an FBT. Tax authorities will now have a conclusive answer to the vexed question of how much an AHA tenancy is worth in the hands of the tenant.

Commenting on the proposed changes within the farming industry, Larking Gowen agriculture partner, Steven Rudd, said: “As always the actual consequences of such fundamental changes will take years to develop and may not be entirely as expected. We can see that this might be a lifeline to some tenants who are wanting to leave the farming industry, but equally, landlords may use these changes to take land back in hand for the long term.”

The consultation summary can be found here, and responses are required by 2 July.

For more information, please speak to me or your usual contact. Call 0330 024 0888 or email enquiry@larking-gowen.co.uk

Steven Rudd