Controversy and opportunity with tenancy law changes
A consultation process by Defra and the Welsh Assembly with the farming industry closed on July 2.
It is some 25 years since agricultural tenancies were substantially updated by Government legislation which, among other things, brought in Farm Business Tenancies 1995.
Defra says it wants future policy and legislative frameworks to provide an enabling environment for current and future tenant farmers and agricultural landlords, removing any barriers that inhibit the sector’s ability to improve productivity, competitiveness, and sustainability.
The Welsh Government says: “We want to ensure tenancy law does not stand in the way of tenants' and landlords' ability to adapt to change, access new schemes, improve productivity and enable structural change. The need to address any legislative barriers must balance the need to provide fair protection to both parties and continue a flexible approach which maintains confidence in the tenanted sector.”
Among the proposed areas of change are:
• A new provision for an assignment of an Agricultural Holdings Act tenancy to become a term of 25 years at an open market rent. The idea behind this is that a tenant who wishes to retire could assign their tenancy to a third party in return for a payment of a consideration with the tenancy being converted to an open market rental level and the landlord first being given the opportunity to buy the tenant out.
• Changes to succession rights for Agricultural Holdings Act Tenancies. The idea here would be to allow tenants to retire earlier than the current minimum age of 65 and to remove all succession rights when the tenant reaches five years past the state pension age.
• Potential changes to the eligibility criteria for a future successor in terms of applying a more up-to-date commercial test and the possibility of extending succession rights to wider relatives.
• To allow variations to clauses in tenancy agreements which restrict future use. This would have to be subject to careful control but there may be cases where there will be uses available which can benefit both the landlord in terms of rental and the tenant in terms of profit.
• There is also a proposal to encourage longer Farm Business Tenancies for 10 years or more, provided there are better termination provisions to help landlords in the case of none payment of rent, death of a tenant or when the landlord has planning consent to develop land on the holding for none agricultural use.
The proposed legislation will be fairly controversial from the point of view of both landlords and tenants but there are opportunities here for both at a time when food security and care of the environment is becoming increasingly important on the Government’s agenda.
Steven Corfield is a partner and agricultural specialist at Shropshire law firm, FBC Manby Bowdler LLP.
