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Agricultural tenancy legislation - modernising and updating?
Presumably to give the farming community a well-deserved break from worrying about Brexit, DEFRA has opened a consultation to run from April to July with the aim of ‘modernising and updating agricultural tenancy legislation’.
The consultation is at an embryonic stage and outlines that it is seeking to ‘remove barriers to productivity improvements’ and to ‘facilitate structural change in the tenant farming sector’. However, in spite of its premature and sweeping intentions, we are given an indication as to what this may mean. There are already fourteen proposals for change, some of which are outlined in detail and evidently have an agenda in mind: to give tenants more security.
For example, currently, tenancies caught under the Agricultural Holdings Act 1986 (AHA) can be passed under succession rights to close relatives, subject to further criteria, on two occasions at most. DEFRA is proposing a new provision so that, on one single occasion only, the tenant can assign their tenancy to a new tenant altogether – one that is not subject to the succession rights. The landlord is afforded a pre-emptive right to stop the assignment, but only in exchange for buying out the departing tenant.
Any negotiation stance for this pre-emptive right will depend on the circumstances. One instinctively worries at the difficulties facing a landlord seeking to exercise that pre-emptive right, now that a tenant has a broader scope for passing on their tenancy. Any assignment of the tenancy is likely to be for a fee – the landlord would surely, at the very least, have to match that. In addition, although unclear at this stage, this could allow for an AHA tenancy to pass on a third occasion.
We are at a premature stage; however, it provides a reminder to landlords and tenants of agricultural property, whether under the AHA legislation or otherwise, to encourage succession planning and organisation for the current generation in the short term and future generations in the long term. Most immediately, it should encourage a dialogue between landlords and tenants. What are each party’s intentions, now and in the future? What are each party’s options? Does the written agreement reflect the day-to-day running of the farm? Is there even a written agreement? If not, should there be one?
We consider these issues, and more, daily for our clients. If you have concerns about the issues raised in this article, please contact me to discuss on 01206 217629 or firstname.lastname@example.org.