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An Overview of Agricultural Tenancies

Wednesday, 28 August 2013

The rules relating to tenancies being used for agricultural purposes are different from those for other properties. These rules give the tenant certain rights such as compensation, and regulate how the landlord can treat the tenant in relation to rent reviews, notice and arbitration over disputes arising from the tenancy agreement.

There are two different types of agricultural tenancy: known as 1986 Act Tenancies, entered into before 1 September 1995, and Farm Business Tenancies (FBTs), entered into after 1 September 1995. The latter recognise the increasingly business-like nature of farming and are far less onerous.

Farm Business Tenancies

Farm Business Tenancies require that the tenant’s activities are primarily agricultural with at least part of the land being farmed, i.e. used to breed livestock or grow crops, during the tenancy. Tenants can diversify but this must be permitted in the agreement and appropriate notices exchanged with the landlord.

Landlord and tenants have the freedom to negotiate their own rent reviews provisions. In the absence of specific rent review arrangements either party can demand a review every three years and a reduction in rent cannot be precluded. Parties have the right to ask that an independent expert carries out the rent review, but, unless stated in the agreement cannot then demand arbitration on that decision.

An important element of agricultural tenancies is the tenant’s right to compensation at the end of their tenancy for any improvements. This is only effective provided the tenant has sought consent for the improvement. Farm tenants can also get compensation for any benefits which have added value to the holding such as getting planning permission. An upper limit on compensation can be agreed between the landlord and tenant.

Both landlords and tenants also have the right to use an arbitrator in any dispute over the tenancy agreement instead of going to court, though other forms of mediation could also be considered.

Landlords and tenants can also agree whatever maximum notice period to quit they wish but the minimum notice period must be 12 months.

1986 Act Tenancies

The major difference between 1986 Act Tenancies and Farm Business Tenancies is that the former generally give the tenant lifetime security of tenure. They also have succession rights which mean the tenancy can be passed on to a successor when the tenant dies or retire, although only two tenancies of succession can be granted. It is possible to serve notice on a tenant and attempt to remove them from the holding but this is very difficult to do unless they have committed one of the ‘seven deadly sins' (going mad or exercising bad husbandry are two examples). Then the landlord can serve an incontestable notice and regain possession. 

For 1986 Act Tenancies at least three years must pass from either the previous rent review or the start of the tenancy before either party has the right to a rent review.

The tenant is also entitled to compensation for major long term improvements, short term improvements and ‘Tenant right’ which includes the value of growing crops, the cost of husbandry and compensation for any disturbance a notice to quit causes. The landlord, however, can also claim compensation for any cost of disrepair to the holding.

For more information about agricultural tenancies or specialist advice regarding entering or terminating agricultural tenancies contact Peter Gourri today by email  or telephone 0207 611 4848.

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