Claims disputes and maintenance obligations under the Agricultural Tenancies Act 1995

Claims disputes and maintenance obligations under the Agricultural Tenancies Act 1995

This fact sheet answers some questions which may arise in connection with farm business tenancies whether you are a tenant or a landlord. Please see our fact sheet entitled “Farm business tenancies under the Agricultural Tenancies Act 1995” for additional information upon farm business tenancies.

As a landlord do I have to go to formal arbitration in order to get a rent review?
First of all check the agreement which may – indeed should – cover the position. It if does not then you have the right to give at least one year’s notice that you want a rent review and that you want an arbitrator to carry this out. Then the rent will be assessed on the basis of an open market value.

I thought rent reviews took place at 3 year intervals?
In the first place both parties may agree upon the frequency of rent reviews. If they do not agree this in their tenancy agreement or the agreement is silent on the point the Agricultural Tenancies Act 1995 sets out a default position of statutory rent reviews at not less than 3 yearly intervals.

As a tenant can I get out of a fixed term tenancy before the end of the fixed term?
A fixed term agreement is binding but you may be able to negotiate in advance of the agreement if a break clause is incorporated in the agreement. If no break clause has been negotiated then you may be able to negotiate a surrender of the tenancy to your landlord.

Milk quota attaches to the tenancy so what happens when I leave?
If a tenant adds milk quota to a holding at his expense, and with the landlord’s consent, the tenant will be entitled to compensation at the end of the tenancy for the current value of the quota which remains attached to the holding. If the parties cannot agree to the amount of compensation either has the right to go to arbitration.

Note that any statutory entitlement to compensation for milk quota in respect of a holding occupied under the Agriculture Act 1986 immediately before a farm business tenancy began may not be carried forward into a farm business tenancy unless both parties agree.

What about tenant’s improvements which benefit the landlord after the tenancy is due to end?
The 1995 Act sets down that the landlord’s written consent has to be obtained for any tenant’s improvements in order for the tenant to be eligible for compensation. From the tenant’s point of view the consent should be obtained before the work is started since otherwise there is no right to arbitration. The Act does, however, say that in respect of “routine improvements” a tenant can carry out routine husbandry before seeking consent and without losing the right to arbitration if for any reason the landlord subsequently withholds consent. So DEFRA suggests that putting lime or fertiliser on the land which will continue to provide a benefit after a tenancy is due to end would fall into the definition of “routine improvements”.

What are the dispute procedures under the 1995 Act?
There is a flexible approach to the resolution of disputes (in contrast for example to requirements under legislation to go to the Agricultural Land Tribunal) and for smaller disputes the parties may go to mediation or use the independent expert rather than enter into the expense of a formal arbitration.

Who will be responsible for repairs to the farm buildings and maintenance work?
The answer is it is for the tenant and the landlord to agree before they enter in to the tenancy. The former “model clauses” which were imposed under the Agricultural Holdings Act 1986 are not imposed under the 1995 Act.

In summary the 1995 Act provides a flexible framework for farm business tenancies but in the interests of certainty and in order to protect your interests whether you are a prospective tenant or landlord you would be well advised to take legal advice and enter into a written agreement.

For further help and assistance contact Paul Slater, Partner on 01785 211 411, or email pslater@hmo.co.uk

Disclaimer

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. (50587)