What is it: A Farm Business Tenancy (FBT)

What is an FBT?

A Farm Business Tenancy (FBT) is a legal agreement that allows farmland and associated buildings to be let to a tenant for the purpose of conducting a business primarily engaged in farming. FBTs were introduced under the Agricultural Tenancies Act 1995 and are designed to provide flexibility for both landlords and tenants, allowing both parties to agree the length and terms of the tenancy arrangement.

The core requirement of an FBT is that the tenant must use the land for the purpose of a “business,” with farming being the principal activity. These tenancies have become the standard structure for new agricultural lettings in England and Wales.

When is an FBT used?

An FBT is used whenever landowners wish to let agricultural land to a third party for farming purposes. “Farming” is defined in the Agricultural Tenancies Act 1995 and does not include, for example, the grazing of horses for recreation purposes. It is particularly applicable to:

• New agricultural lettings after 1 September 1995.
• Instances where flexibility in the terms or length of tenancy is required.
• Commercial farm arrangements, including estates letting farmland to local farmers or farming companies.
• Situations where business rates, tax planning, and succession are important considerations.

FBTs are not suitable for non-farming uses, garden tenancies, or purely residential agricultural tenancies.

Who drafts an FBT?

The drafting of an FBT is typically carried out by a legal professional – usually a specialist agricultural lawyer or a real estate solicitor.

The landlord’s legal advisors most commonly draft the tenancy document, but tenant legal representatives will also scrutinize the draft and suggest amendments. Sometimes the landlord’s agent may produce the draft FBT for review or prepare heads of terms agreed between the parties to assist with the preparation of the draft FBT.  If the FBT will have a term of over 2 years it is recommended that the parties review and consider the Guidance Note on long-term Farm Business Tenancies recently published by RICS in association with a number of expert rural organisations – available here: https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/land-standards/guidance-note-on-long-term-farm-business-tenancies-in-england

How much does a FBT cost and who pays?

The cost of an FBT varies depending on complexity and location. Typical additional costs may include Stamp Duty Land Tax, Agent fees and registration fees. Traditionally, the landlord pays for the preparation of the FBT document and the legal costs associated with this, but costs may be negotiated or split between the parties. The tenant will usually pay the SDLT (if applicable) and is usually responsible for registration fees or costs for their own legal advice.

Does an FBT need to be registered?

FBTs do not require registration with HM Land Registry unless:

• The FBT is for a term of seven years or more, in which case registration is compulsory.
• The agreement grants long-term rights over the land or buildings that require registration.

If you need help with a Farm Business Tenancy, please contact our Agriculture and Rural Land Team who would be more than happy to assist.

This article is part of our “What Is It” series where we consider various property documentation and explain what it is and when it is used, find more in the series here.