Following the publication of a new Guidance Note on long-term Farm Business Tenancies (‘FBTs’), our Agriculture and Rural Land team provide a summary of key points to note for landowners and tenants looking to enter into any such agreements.
A new Guidance Note on long-term Farm Business Tenancies has recently been published by RICS in association with a number of expert rural organisations. The Guidance Note highlights key considerations for landlords and tenants before entering into an FBT, focusing on “security, stability and the ability to implement long-term farming plans.”
As a landowner or tenant looking to enter into an FBT, what are these considerations which you should focus on? In summary, the Guidance Note suggests the following:
- The principles of an FBT:
- In order for a tenancy to be classed as an FBT, it must first meet the business condition and either the agriculture or notice condition under the Agricultural Tenancies Act 1995 (for more detail on this, please refer to our article here).
- If all or part of the Landlord’s holding is subject to a mortgage, you will likely require mortgage consent.
- If the FBT provides for a term of 7+ years, the tenancy must be registered at HM Land Registry.
- Entering into a FBT may trigger Stamp Duty Land Tax (‘SDLT’) obligations, making the tenant responsible for submitting the SDLT return and paying any SDLT.
- Detailed Heads of Terms should be negotiated by the parties to record the principal terms of the proposed agreement. These should include the key commercial terms (such as the term, the rent payable or any break notice provisions), the terms for the use and management of the holding (see further below), and any rights to be granted to the tenant or reserved to the landlord.
- The parties to the FBT should be clearly identified, as should the extent of the holding, using Land Registry compliant plans.
- It is recommended that the parties obtain professional advice from solicitors, accountants and land agents working in the rural sector.
- Terms covering the use and management of the holding:
It is important to consider and agree upon the following terms:
- The permitted use provisions, covering agricultural, non-agricultural and environmental activities.
- Fixed equipment schedules and tenant improvements with mechanisms for obtaining consent and claiming compensation.
- Repairs, maintenance and insurance responsibilities.
- Rent structures and review mechanisms (upwards-only rent reviews are prohibited).
- Tailored alienation (i.e. underletting or assignment), break clause and termination provisions.
- The Management Plan:
The Guidance Note advocates for the use of a detailed Management Plan. This is recommended to include:
- Shared objectives and a masterplan for land use, habitats and rotations.
- Records of soil health, fertiliser/agrochemical policy, waste management, net-zero and habitat creation.
- Review cycles aligned with rent reviews and dispute resolution options.
- Collaboration frameworks where relevant.
In summary, long-term FBTs can secure commercial stability, support sustainable land use, attract investment, and strengthen landlord–tenant collaboration; however, this can only materialise when the parties have thoroughly considered and agreed clear contractual terms. It is therefore recommended that landowners seek advice where appropriate before entering into FBTs.
If you would like any more information, please get in touch with a member of our Agriculture and Rural Land team.
