Farm landlords and tenants are being urged to work together to achieve positive outcomes from a landmark reform of agricultural tenancy laws in England.
“Changes like this don’t come around often,’’ says land agent Lulu Burton, of Brown & Co, after the Agriculture Act 2020 set
out sweeping changes which represent the first agricultural tenancy reform for more than 20 years.
“It’s certainly not an overhaul of tenancy law but it has made some useful changes – particularly to Agricultural Holdings Act 1986 tenancies – to assist forward thinking parties in a post-Brexit world.’’
The changes are subject to secondary legislation expected later in 2021 before they are enforced. But they provide an important early framework for landlords and tenants.
“These reforms are an opportunity to cultivate landlord and tenant relationships, focus on future proofing farm businesses and remove barriers to productivity and environmental management on holdings,’’ suggests Ms Burton.
A number of key areas of reform have implications for farm landlords and tenants – and could help ensure both parties know where they stand in relation to one another.
For the first time, disagreements relating to landlord’s consent and variation of terms can be referred to arbitration or a third party.
This could prove particularly useful where outdated clauses in tenancy agreements prevent diversification activities or environmental land management, Ms Burton advises.
“This was possible by agreement before but this change assists those who might have met resistance before and sets the tone, in addition to providing a route for dispute resolution where parties cannot agree.’’
It may assist tenants with diversification, Environmental Land Management (ELM) scheme requirements, and with accessing public money for public goods and government grants.
When a tenant agrees to make payments towards improvements made by the landlord, these
investments will be disregarded during rent reviews. The
aim of this change is to unlock potential investment from landlords.
“This matter was not formalised or considered at arbitration before and the idea is therefore to encourage landlord and tenant investment in long term tenanted holdings,’’ says Ms Burton.
The so-called Commercial Unit Test, which was widely regarded as a very antiquated test to determine eligibility for succession, has been abolished.
Ms Burton says this opens the door to the prospect of qualifying successors who may already operate an efficient, larger farming business of scale to take on the farming of the holding where they may have been prevented from doing so before.
Amendments have also been made to the criteria around suitability for succession – by introducing consideration for the capacity of the successor to farm the holding ‘commercially to high standards of efficient production and care for the environment’.
Previously, only the agricultural experience of a successor applicant was taken into account but business management, training and skills have been added, while age has been removed as a consideration and replaced with character.
Existing standards around succession are arguably low. This mean there are benefits to refining criteria to distinguish between forward-thinking commercial agricultural tenants looking for growth and those with a more environmental focus.
The abolition of 65 as the minimum age at which a retirement notice may be given will encourage earlier retirement.
As a result, there will be opportunities for young, commercially-minded successors to enter
the industry at the right time rather than at a time dictated by the ageing legislation, says Ms Burton.