If you are renting agricultural land or buildings, you are likely to be an agricultural tenant. There are two main categories of agricultural tenancy and each imposes different rights and responsibilities on both landlords and tenants. It is therefore important to understand the type of tenancy you have.
This brief guide does not cover tenancies tied to employment or agricultural workers occupying residential dwellings. Nor does it cover business tenancies.
Agricultural holdings (“AHs”) are governed by the Agricultural Holdings Act 1986. (“AHA 1986”). Save in a small number of cases where exceptions apply, you will most likely have an agricultural holding if:-
• Your agricultural tenancy began prior to 1 September 1995• The land is used for agriculture for the purposes of a trade or business • The tenancy is granted for a term of years or from year to year – this includes leases, licences to occupy
Farm Business Tenancies
Farm Business Tenancies (“FBTs”) are governed by the Agricultural Tenancies Act 1995 (“ATA 1995”). Save in a small number of cases where exceptions apply, you will most likely have an FBT if:-
• Your agricultural tenancy began after 1 September 1995
• All or part of the land is used for trade or business throughout the term of the tenancy
• The character of the tenancy is primarily or wholly agricultural or the landlord and tenant agree prior to the grant that the tenancy is an FBT
How Do The Tenancies Differ?
• Rent Review: under an AH both the tenant and the landlord have the right to a rent review every 3 years. Whereas under an FBT there is a bit more flexibility in that you can agree when the rent reviews are to take place – although the default statutory position remains every 3 years if you do not vary this.
• Compensation: under an AH you may be entitled to compensation equal to the increase in value to the holding made by the improvements when the tenancy ends for major long-term improvements e.g. planting orchards and erecting buildings, for short-term improvements e.g. applying fertiliser, liming and chalking of land and also, the value of growing crops. An FBT is a bit more transparent in providing for compensation where there have been any physical improvements (made with consent), and any other changes that increase the value of the holding.
• Renewal: if you have an AH, when the tenancy comes to an end, you have the right to request a new lease on expiration of your existing lease. Whereas if you have an FBT, you do not have a right to request a new tenancy when the your current tenancy expires. However an FBT does provide for a minimum of 12 months notice to be brought to an end.
• Succession: under an AH, there is the right for a close relative to apply for a new lease if you die or retire (subject to certain statutory conditions being met). Only two successions are permitted.
• Diversification: under an FBT, if both tenant and landlord followed the correct procedure prior to the start of the tenancy, you have the right to change the use of the land to a non-agricultural business.