Farm Tenancies Explained
Generally speaking, farm tenancies are differentiated between those granted before 1st September 1995 which are ‘agricultural holdings’ and those after which are ‘farm business tenancies’. Each give the landlord and tenant different rights and responsibilities.
Agricultural Holdings
Agricultural holdings are governed by the Agricultural Holdings Act 1984 and generally have modest rent, they provide greater statutory protection to the tenants and grant succession rights to the tenants, provided they meet eligibility and suitability requirements. Succession rights are incredibly important to a farm as they allow future generations to continue under the tenancy and maintain an income from the farm. Succession rights can be crystallised on death or retirement of the tenant or also by agreement with the landlord. If there are no successors named, an application can be made to the Lands Tribunal.
Most agricultural holdings will have an end date or may be on a ‘year to year’ basis. Either party can serve a ‘notice to quit’ in order to end the contract which can have a notice period of up to 12 months. A tenant can be entitled to compensation if a notice to quit is served by the landlord. There is also compensation available for landlords if the tenant has allowed the holding to fall into disrepair.
Farm Business Tenancies
Farm business tenancies (FBT) are a more formal agreement and for it to be am FBT, they must meet certain statutory and business requirements. For example, it must be a working farm for the purpose of trade or business. If an FBT falls into one of several exceptions, there can still be succession rights as there are under an agricultural holding.
Grazing Licence
A grazing licence allows access to the landlord’s land / farm in order to graze animals. Grazing licences are used when farmers or other landowners want to let land for a short period of time. A landowner may find a grazing licence useful if they want to keep the grass cropped and at the same time receive income from the land. It is also useful for a grazier who needs extra pasture especially during the spring and summer months.
This is only a very brief overview of the issues surrounding types of agricultural tenancies. Far more detail and interpretation issues can arise when parties delve into the nitty gritty of the law. For example, when the holding is not a working farm or if the agricultural activity was abandoned part way through the tenancy. Commercial considerations include what tenancies allow certain tax exemptions and if the holding is producing a certain turnover
Like any business, record keeping is essential. Firstly, a copy of the agreement should be held in a safe place and all dealings pertinent to the agreement should be recorded. Even knowing the responsibility of each party can be difficult to decipher in certain written agreements.
A solicitor can assist by advising you in relation, but not limited, to:
- What type of tenancy you have
- Your rights and responsibilities
- How to end a tenancy
- How to name a successor
- Commercial interests
