Agricultural tenancies

There are two main types of agricultural tenancies. They are as follows:

  • Agricultural tenancies which are subject to the Agricultural Holdings Act 1986;
  • Agricultural tenancies which are subject to the Agricultural Tenancies Act 1995.

Agricultural tenancies subject to the Agricultural Holdings Act 1986

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” or “full agricultural tenancies”.

Landlords and tenants who hold a 1986 Act tenancy can demand a rent review every three years.

1986 Act tenancies created before 12 July 1984 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.

Tenants who have 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 right” and for the use of any special system of farming which benefitted the farm.

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 used to protect fruit trees from damage by animals, the burning of clay and the liming and chalking of land.

“Tenant right” may include the value of any crops that are 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.

The amount of compensation is determined in relation to the value by which the farm increased as a result of the improvements.

Landlords can claim compensation against their tenants for any disrepair. Such compensation will normally be determined by reference to the cost of repairing such damage.

Disputes relating to 1986 Act tenancies are generally dealt with by the Agricultural Land Tribunal.

Agricultural tenancies subject to the Agricultural Tenancies Act 1995

Most tenancy agreements made after 1 September 1995 are subject to the Agricultural Tenancies Act 1995. These are commonly known as “Farm Business Tenancies”.

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 duration of the tenancy; or
  • the tenancy must be primarily agricultural.

In the case of Farm Business Tenancies the landlord and tenant have the right to negotiate terms relating to rent levels and rent reviews as long as such 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.

Tenants who have 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 as long as such improvements were made with the landlord’s consent. 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 as 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. Any upper limits agreed must be in writing.

Landlords and tenants are free to agree whatever maximum notice period they wish in relation to notices to quit. The minimum notice period is 12 months.

Disputes relating to Farm Business Tenancies are generally dealt with by way of arbitration.