More flexibility on Agricultural Tenancies

On 31st March, twenty years on from the introduction of the Agricultural Holdings Act 1986, the Government has laid proposals before Parliament to amend the Agricultural Holdings Act 1986 and the Agricultural Tenancies Act 1995.

The aim is to provide a more flexible framework for agricultural lettings and to remove some of the barriers to tenant farmers diversifying. Leading Property Specialists, Strutt & Parker welcome the proposals.

Six areas have been targeted for change:

End of Tenancy Compensation

The proposals will preserve a Landlord and Tenant's rights to end of Tenancy compensation where land is added to an existing Tenancy. Nick Watson Head of Strutt & Parker's Land Research Group says "This common sense approach will make restructuring of farms easier at a time when economies of scale are becoming more and more important to the industry".

Succession to Tenancies

Provided that Landlord and Tenant agree, a son wishing to succeed to his father's Tenancy will be allowed to take into account income from his agricultural work off the holding and income from non-agricultural work on or off the holding when demonstrating that he has made his livelihood out of the farm. Mr Watson commented "whilst this change has been proposed to encourage diversification, in practice many Landlords may be put off giving their Tenants' consent to diversify out of agriculture when faced with the prospect of a succession tying up the farm for another generation. Pro-active landlords have been working with farmers allowing diversification through the Landlord & Tenant Act 1954 without the need for legislation. I am concerned that the proposals may actually become a disincentive when the industry desperately needs access to income from other sources".


The proposals aim to apply the provisions of the Arbitration Act 1996 to all Agricultural Tenancies. Mr Watson says "running two systems of arbitration when in practice many farmers hold Tenancies under both codes, was unnecessary and we welcome the change which will simplify matters".

Rent Reviews

The proposal is split into two parts. Where land is added to a Tenancy under the Agricultural Holdings Act 1986 the rent review cycle will not be triggered provided that the rent for the original holding was not affected by the addition. The second part of the proposal will allow Landlord and Tenant to agree a rent review formula for Farm Business Tenancies provided that the formula is not upward only. It will also allow them to refer disputes as to rent to an Independent expert which is usually less costly than arbitration. "The proposals recognise that the industry is undergoing a significant change as farming incomes in many areas become more and more reliant on diversification and conservation and less so on production. Giving Landlords and Tenants the flexibility to agree a rent review formula that reflects this will be helpful".

Security of Tenure

Farm Business Tenants do not enjoy the same security as Agricultural Holdings Act 1986 Tenants. The drafting of both Acts has caused difficulties where Landlords and Tenants have agreed a succession or there has been a deemed surrender and re-grant of a Tenancy. In both cases, there has been confusion as to whether or not security under the 1986 Act is lost. The proposal would allow the parties to restructure a holding either by agreeing to vary the Tenancy in the knowledge that it will have the effect of a surrender and re-grant or by creating a new written Tenancy Agreement and the '86 Act will apply.

If succession to a Joint Tenancy can be achieved by creating a new written Tenancy Agreement or importantly, land can be added to a Tenancy by creating a new written Agreement, then Landlords may have the opportunity of restructuring holdings and at the same time achieving 100% Agricultural Property Relief without jeopardising their Tenant's security.

Amendments to the Notice Period Under the '95 Act

The proposals will remove the 24 month upper limit on Notices to Quit. This will provide Landlord & Tenant with much more flexibility to agree what would effectively amount to fixed term Tenancy.

Nick Watson comments; "Overall the proposals are good news for the industry. It is interesting that the Government have said that they recognise the need for a viable tenanted sector at a time when the RPA has still only paid 25% of Single Payment cheques to farmers. In most areas that is a much more pressing issue than these changes but we welcome them none the less".

Strutt and Parker, 05.04.2006

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