Land acquisition and use

Legislation

Identify and summarise the enacted legislation addressing agricultural property transactions in your jurisdiction. Outline how farmland is typically held.

Most UK farmland is owner-occupied. The Agricultural Tenancies Act 1995 and the Agricultural Holdings Act 1986 (the 1986 Act) address Farm Business Tenancies and pre-1 September 1995 tenancies respectively.

There are several uses that fall under permitted development on agricultural land in The Town and Country Planning Order 2015. Generally, these apply to agricultural land in excess of five hectares and are known as Class A development. An extension of an existing building including excavation and engineering works such as drainage is permitted if it is reasonably necessary for the purposes of agriculture.  

Pre-1 September 1995 tenancies usually have lifetime security of tenure and leases granted before 12 July 1984 carry potential succession rights, which may mean up to two further generations of farmers can occupy the agricultural holding. Agricultural property transactions offer generous tax reliefs such as an exemption from inheritance tax after two years of ownership and self-farming. There are further opportunities for deferred capital gains tax.

There are some land designations including sites of special scien­tific interest, special areas of conservation and special protection areas that may affect the management or sale of agricultural land.

Non-agricultural land rules

Outline any rules related to use of farmland for non-agricultural uses.

Land must be used for agriculture in order to qualify for security of tenure under the 1986 Act. In the appeal of Howkins v Jardine 1951, a requirement in the tenancy agreement to use farmland for agricultural purposes only was upheld, meaning it was not sufficient for merely a substantial part of the tenancy to be used for agriculture to be protected by the 1986 Act.

Unfortunately, ‘open farm’ activities, such as school visits, are not considered to be agricultural use. This makes diversification problem­atic and so it is always necessary to carefully consider the scope of any agricultural tenancy.

Lending

What special rules are important to agricultural lending in your jurisdiction?

In addition to mortgages and debentures, farmers trading as a sole trader or partnership can create agricultural charges over farming stock and other agricultural assets under the Agricultural Credits Act 1928 (ACA 1928). Other agricultural assets include machinery, certain live­stock and crops but not a farmer’s bank account, entitlement to agricul­tural subsidies, land, leased assets or debts owed to the farmer. These are further defined under section 5(7) of the ACA 1928.

A farmer may only grant this unique charge to a registered deposit-taking bank. The majority of a farm business’ assets are fluctuating and it will need to dispose of them (and acquire new assets) on a continuous basis. The farmer is permitted to sell assets subject to a fixed and floating Agricultural Charge. However, the ACA 1928 requires, in relation to fixed charge assets, that the farmer must account to the bank in respect of the proceeds or any specified insurance proceeds. This does not give the bank any security over these payments. In terms of floating charge assets, the farmer must account to the bank in respect of the proceeds or insurance proceeds or reinvest in other agricultural assets. The newly acquired asset will become subject to section 7(1) (b) ACA 1928.

All agricultural charges must be registered with the Agricultural Credits Department in Plymouth within seven days of creation, other­wise it is void against any third party but still enforceable by the bank against the farmer. Registration constitutes actual notice of the charge to all persons.

Publicly controlled property

Describe any rules relating to public control of farm property in your jurisdiction. What enacted legislation governs them?

The government has the right to make compulsory purchase orders over agricultural land, usually because of a need for increased housing or infrastructure development. However, a compulsory purchase order should only be made where there is a compelling case in the public interest; where the land helps to deliver social, economic, and environmental change.

In most cases, but not all, the Acquisition of Land Act 1981 as amended by the Planning and Compulsory Purchase Act 2004 governs the procedure for compulsory purchase of land and acquiring authorities should be able to demonstrate close compliance with the compulsory purchase process and the Crichel Down Rules guidance for the best chances of success.

Compensation is not limited to the open market value of the land but may also include compensation for ‘disturbance’ or ‘injurious affection’. ‘Disturbance’ is based on the principle of equivalence (ie, an owner should be left no worse off than if his or her land had not have been acquired). ‘Injurious affection’ claims occur where land has been injuriously affected (ie, its value has been affected or physical damage caused).

Foreign ownership restrictions

Are there any restrictions on foreign ownership of farm property in your jurisdiction? What enacted legislation governs them?

There are no restrictions on foreign ownership of farm property in the UK.

Law stated date

Correct on

Give the date on which the information above is accurate.

20 December 2019.