Tenanted agricultural land
Kelsie Essenhigh gives an overview of the two schemes of legislation that apply to tenanted agricultural land, and the features of and differences between the two different types of tenancy.
Two schemes of legislation apply to tenanted agricultural land. These are the Agricultural Holdings Act (the 1986 Act) and the Agricultural Tenancies Act 1995 (the 1995 Act)
Which scheme of legislation applies to your tenancy?
- tenancies before 12 July 1984 will be governed by the 1986 Act (and will have the statutory succession rights set out in the 1986 Act).
- tenancies beginning between 12 July 1984 and 31 August 1995 will be governed by the 1986 Act (but without any succession rights unless they are expressly included).
- tenancies beginning on or after 1 September 1995 will mainly be governed by the 1995 Act (under which there are no succession rights).
Features of 1986 Act tenancy
Security of tenure – 1986 Act tenancies can only be terminated on one of the specific grounds set out in the 1986 Act. Examples of some of the grounds are (i) that the land is required for non-agricultural use for which actual or deemed planning permission has been granted or, (ii) that the tenant has failed to comply with either a notice to pay rent due or a notice to remedy a breach of covenant or (iii) that the tenant has become insolvent.
Rent reviews – the 1986 Act sets out the procedure for any review of rent under a 1986 Act tenancy. Reviews may not take place any more frequently than 3-yearly except in limited circumstances. The process begins with a notice requiring the rent to be referred to arbitration and the arbitrator must use a formula set out in the legislation to determine the rent.
Succession rights – a 1986 tenancy will only have rights of succession where:-
- the tenancy was granted before 12 July 1984, or
- was granted between, 12 July 1984 and 1 September 1995 and contains an express agreement, or
- although granted after 1 September 1995, is a succession tenancy under the 1986 Act which clearly states that the 1986 Act succession rights apply.
Succession rights may be exercised on a maximum of two occasions, either on the death of the tenant or on his retirement.
On the death of a tenant, the eligibility criteria are that the applicant for succession (i) is a close relative of the deceased, (ii) is not in occupation of a commercial unit of agricultural land, (iii) has earned his principal source of livelihood from agricultural work on the holding in at least five of the seven years prior to the date of death of the tenant, or has applied to be treated as eligible as he meets this test to a material extent. On death, as well as eligibility criteria, there are suitability criteria which involve a tribunal considering whether an applicant is suitable to become a tenant, considering his training, experience, age, physical health, financial standing and the landlord’s views. There may be more than one applicant and the Tribunal may choose between applicants, order a joint tenancy or order tenancies of part. The application to the Tribunal must be made within three months starting on the day after the death of a tenant. This is an inflexible deadline that cannot be extended even by agreement between the parties.
On the retirement of a tenant, who must have attained the age of 65, the eligibility criteria are the same as those in respect of succession on death except (i) the notice must nominate a successor (who must sign the notice) so there cannot be more than one applicant for succession and therefore the rules for the Tribunal to decide between a number of applicants are not applicable, (ii) the nominated successor may only succeed the whole of the holding, not a part, and (iii) there is no provision for the nominated successor to apply to be treated as eligible if he does not fully satisfy the principal source of livelihood test. On retirement, the suitability criteria to succeed are the same as on death.
Features of a 1995 Act tenancy
Tenancies under the 1995 Act are called Farm Business Tenancies (FBTs). All tenancies granted on or after 1 September 1995 will be FBTs unless:
- – they are 1986 Act succession tenancies, which clearly state that the succession rules in the 1986 Act apply to them, or
- they are a replacement tenancy of a 1986 tenancy; or
- they are a new tenancy granted over the whole or substanically the whole of the land comprised in the 1986 Act tenancy, containing a clear statement that the 1986 Act is to apply.
FBTs differ from 1986 Act tenancies in a number of ways:
- there are no succession rights.
- there is no security of tenure. If the tenancy is two years or less, it will expire at the end of the term. If the term is longer, a notice of at least 12 months expiring on the contractual end date is required. If the tenancy is not terminated in this way, it will continue from year to year until 12 months notice is given to expire on an anniversary of the contractual end date.
- the parties are free to include break clauses, but in the case of tenancy for more than two years the minimum period of notice for a break clause is 12 months.
- unlike the 1986 Act, which contains numerous provisions which will apply to all Agricultural Holdings Act tenancies, if a Farm Business Tenancy is silent, the law will not intervene to impose or imply terms. Parties must be thorough in considering the issues thay need to cover and must make sure the tenancy deals with them.
- since 2006, a 1995 Act tenancy has no restrictions on rent reviews, other than that the parties may not agree an upwards-only review.