Farm business tenancies under the Agricultural Tenancies Act 1995

Farm business tenancies under the Agricultural Tenancies Act 1995

Agricultural tenancies created after the 1 September 1995 are likely to be farm business tenancies under the Agricultural Tenancies Act 1995. In essence this Act permits the landlord and tenant to agree as they wish on virtually all matters. There is no minimum size of holding and no minimum length of term. There is a limited number of mandatory provisions which relate to :

1. Rent (Part II)
2. Compensation (Part III)
3. Removal of tenant’s fixtures (Section 8 of the 1995 Act)

Under a farm business tenancy there is no long term security of tenure but a tenancy for more than 2 years will only come to an end when a minimum 12 month written notice is given (Section 6 and 7). So, even a fixed term tenancy must be ended by notice.

Tenancies which came into effect before 1 September 1995 are protected by a different piece of legislation, the Agricultural Holdings Act 1986 which imposes a much more greatly regulated framework.

Assuming that a tenancy is a farm business tenancy under the “new” legislation then the following principles will apply. Please note that as with much legislation the devil lies in the detail and what follows sets out the general position. It will always be wise to take legal advice before taking any steps with regards to a farm business tenancy.

Pre-commencement exchange of notices:

A failure to exchange notices might lead to the tenancy falling out of the farm business tenancy category and being governed by other legislation such as the Landlord and Tenant Act 1954.

Does there have to be a written tenancy agreement?

No but a failure to have a written agreement can lead to uncertainty if there is no written agreement then default conditions will apply under the legislation.

If I am the landlord and my tenant fails to pay rent can I get the farm land back?

The 1995 Act does not deal specifically with this but there may be a right to forfeit (or end) the tenancy. As a land owner you should take legal advice before entering into a tenancy with a view to safeguarding this right.

As a tenant if my landlord relies upon an agreed break clause can I get compensation for disturbance because I have to move farm?

The 1995 legislation does not provide you with such a right. Before entering into an agreement you should consider negotiating on this.

Will I have to give up my farmhouse at the end of the tenancy?

The answer (unless a new tenancy is agreed) is likely to be yes.

What about rent reviews?

You either agree this in advance or the 1995 Act allows for an open market rent review every 3 years of the term.

As a tenant can I assign the tenancy to someone else or sublet?

If the agreement does not bar this then in law it will be possible for you to assign or sublet all or part of the holding. The agreement, however, may say differently.

What about tenant’s fixtures?

A farm business tenant may remove any type of fixture or building providing he makes good the damage.

If a fixture or building falls within the definition of “Tenant’s Improvement” to which the landlord agreed in writing the tenant has a choice of either leaving it behind and receiving compensation for it or removing it as a fixture.

In summary the 1995 legislation created a flexible framework in contrast to the legislation of a decade before nonetheless whether you are a prospective tenant or landlord of an agricultural holding you would be well advised to create certainty and protect yourself by taking advice and entering into a formal written agreement.

For help and assistance contact Paul Slater, Partner, on 01785 211411, 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)