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Guide to the Agricultural Tenancies Act 1995: Some Questions & Answers about the Act

 

Farm Business Tenancies

What happens if I don't exchange notices before the start of a tenancy?

There will then be no certainty that the tenancy will remain a farm business tenancy throughout. If notices are not exchanged it will be possible for one party to challenge the legal basis for the tenancy: depending on the outcome of any such challenge, the tenancy might be subject to other legislation (for example, the Landlord and Tenant Act 1954).

Does a farm business tenancy have to be in writing?

No, but it is in your own best interests to have a written tenancy agreement which clearly sets out all the agreed terms and conditions. Some provisions of the new Act apply automatically to farm business tenancies unless parties agree otherwise in writing (for example, in respect of rent or of general disputes procedures).

Rent

Can I agree with my tenant that the rent will be fixed for five years, then increase by five per cent every five years thereafter?

Yes. Such an objective formula would be perfectly acceptable. It would override the provisions in the Act which require open market rent reviews every three years.

Must I go to formal arbitration in order to get a rent review for my holding?

No. Unless the parties have expressly agreed that the rent is not to be reviewed during the tenancy, rent reviews can be carried out by mutual agreement or with the help of an independent expert. However, either party has the right to give at least one year's notice that they want a rent review, and that they want an arbitrator to conduct it. If they do go to arbitration, the rent will be settled for them on the basis of an open market value.

Do rent reviews have to take place at three-year intervals?

No. Parties may agree how frequently the rent is to be reviewed. However, if they do not include specific provisions in their tenancy agreement, the Act provides for statutory rent reviews at not less than three-year intervals.

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Notices To Quit

Can I get my land back if the tenant fails to pay rent when it is due?

Although the Act does not give any specific grounds for ending a tenancy before the agreed date, failure to pay rent when it is properly due may lead to forfeiture of the tenancy at common law. It is essential that landowners take professional advice before becoming committed to a tenancy, so that they can ensure they safeguard their position if a tenant fails to pay rent or becomes bankrupt.

As a tenant, can I give up a fixed-term tenancy before the agreed date on which it is to end?

A fixed-term agreement is binding on both parties. It may be possible to negotiate suitable break clauses to apply in certain agreed circumstances (for example, on the death of the tenant) although these are also subject to at least a year's notice before they can be operated.

If a tenancy has no such break clauses it may be possible to surrender the tenancy, but landlords are not obliged to accept a surrender. It is therefore very important to be clear about your position within a fixed term tenancy before you become committed to taking it on.

If my landlord triggers an agreed break clause, will I get compensation for disturbance because of my having to move farm?

Only if you have negotiated this as a condition of the tenancy agreement. The Act has no provisions on payments for disturbance if a tenancy ends earlier than originally agreed.

Will I have to leave the farmhouse at the end of the tenancy?

There will be no security for a tenant beyond the agreed date on which the tenancy is to end. Where a farmhouse is to be the family home and the farm business tenancy is for a fixed term, the tenant should make plans for what will happen when the tenancy expires.

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Assignment And Sub-Letting

Can I assign the tenancy to someone else, or sub-let all or part of the holding?

This is entirely up to the parties to negotiate for themselves. Some landlords may permit it subject to their consent. Others may prohibit assignment or sub-letting. If the tenancy agreement does not specifically bar assignment or sub-letting then it will be possible in law for the tenant to do so.

Tenant's compensation on quitting

What are the rules on compensation for milk quota?

Where a tenant adds milk quota to a holding at his or her expense, and does so with the landlord's consent, compensation will be payable at the end of the tenancy for the current value of the quota which remains attached to the holding. If parties cannot agree on the amount of compensation due, either will have the right to seek arbitration.

Compensation may be carried forward if a tenant remains on the holding and takes up a further farm business tenancy immediately after the end of a previous one. Alternatively, they may choose to settle up even though the tenant will remain on the holding under a new tenancy.

Any statutory entitlement to compensation for milk quota in respect of a holding occupied under the Agricultural Holdings Act 1986 immediately before a farm business tenancy began cannot be carried forward into a farm business tenancy unless both parties agree.

Must I get my landlord's written consent before, for example, putting lime or fertiliser on the land which will be of continuing benefit after the tenancy is due to end?

The Act requires the landlord's written consent to have been obtained for any tenant's improvements in order for them to be eligible for compensation. Although the Act does not stipulate that consent must have been granted before the tenant begins to carry out an improvement, there is no right to arbitration if work has been started. It is therefore in the tenant's interest to ensure that consent is obtained (or an arbitrator has made his award) before starting work.

However, the Act has special provisions in respect of 'routine improvements'. A tenant can carry out these routine acts of husbandry before seeking consent and without losing the right to arbitration if for any reason the landlord subsequently withholds consent. It may be easier for all concerned if a blanket consent for such routine improvements is included in the tenancy agreement at the outset.

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Tenant's fixtures

What are the rules on tenant's fixtures?

A farm business tenant has the statutory right to remove any type of fixture or building which he has fixed to the holding or built. However, any damage done during removal must be made good.

Where a fixture or building is a 'tenant's improvement' to which the landlord has given consent in writing, the tenant has the choice of either leaving it behind and receiving compensation for it, or removing it as a fixture.

Landlord's claims at the end of a tenancy

As a landlord, will I be able to claim for dilapidation's at the end of the tenancy?

It will depend on what has been agreed as a condition of the tenancy, since the Act gives no automatic right for a landlord to claim for dilapidations. However, you may have a remedy at common law if the holding is very badly run down during the course of a letting. You should ensure that you take advice before the tenancy begins on the best means of protecting your interests.

Resolution of disputes

What is different about the new disputes procedures?

Some disputes under the 1986 Act are dealt with by arbitration, while others fall to the Agricultural Land Tribunals.

General disputes about farm business tenancy agreements may be resolved through arbitration procedures which are in line with those used in other business sectors, unless parties have agreed some other independent means of resolving them. For minor matters it may make more sense to use a mediator or independent expert than incur the greater expense of formal arbitration. The choice will be for parties themselves to make.

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Repairing and maintenance obligations

Who will be responsible for repairs to the farm buildings and for maintenance work around the holding?

It is entirely for the parties to agree, and in their interests to ensure that they do so. Unlike tenancies under the Agricultural Holdings Act 1986, there is no legal presumption that regulations prescribing responsibilities for maintenance, repairs and insurance (known as the 'model clauses') will apply unless parties contract to different responsibilities for repairs and maintenance.

Where a holding is restricted solely to agricultural use, parties may decide that a simple solution is for the existing 'model clauses' to apply. However, where a farm business tenancy enables the tenant to diversify away from traditional agricultural activities the 'model clauses' may be inappropriate, and specific arrangements about repairs will be needed. You are strongly advised to seek professional advice on this important point.

Conservation and environmental considerations

Can I include environmental requirements in the tenancy?

It will be possible to include specific environmental provisions in a tenancy agreement - for example, preventing the tenant from removing hedges or requiring the holding to be managed in a particular manner. If onerous, such restrictions may of course affect the rent that can be obtained for the holding. Another change is that 'the Rules of Good Husbandry' from the Agriculture Act 1947 will not automatically apply unless the parties agree that they should do.

How should the tenancy agreement cater for environmental schemes such as ESAs?

The new Act enables parties to negotiate farm business tenancies which meet their own special needs. Where schemes have particular requirements - e.g. that participants must stay in them for a certain minimum period of time, or must stock land less intensively, or allow greater public access - farm business tenancies can be drawn up with those requirements in mind. Landowners with farms that might be suitable for participation in environmental schemes should discuss this with prospective tenants, so that both parties are clear about what the tenancy agreement should cover before they enter it.

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County farms

Will the new Act apply to county farm estates?

Yes, as for other agricultural tenancies (i.e. to new lettings on or after 1 September 1995).

Councils will be able to negotiate the right length of tenancy with individuals to best suit both parties' needs. Such lettings will still be within statutory smallholding estates and subject to the general provisions of the smallholdings legislation.

©Crown Copyright July 1995.

Publication code: PB2250

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Page last modified: 3 June 2003

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