Business Clinic: Can we ask tenant to change way they farm?

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Here Duncan Sigournay, partner and head of Thrings agriculture team, advises on a landlord’s options for encouraging a tenant to move to a regenerative approach.

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Q. Our land has been tenanted under an Agricultural Holdings Act (AHA) agreement by the same tenant for 40 years.

The soil condition and biodiversity levels are poor, and ideally we’d like to phase out artificial inputs.

Do we have any rights to require the tenant to adopt a more regenerative approach, or is it entirely up to the tenant to decide?

If we switch him to a farm business tenancy (FBT) – which he’s open to – would that give us more leverage?

Presumably ideas of “good husbandry” have evolved since the 1980s? What if he refuses to change his practices?

Is our only option to offer him a rent reduction as an incentive? If so, any thoughts on what is reasonable?

A: As always, the starting point is to check your tenancy agreement.

You need to establish what, if any, express obligations it places on the tenant in respect of the matters you are concerned about.

Having said that, given its AHA status it is likely to be silent on the issue of soil condition etc.

In the absence of any express provision within the tenancy there will be an implied covenant at common law which imposes on a tenant to use and cultivate the land in a good and husbandlike manner.

If a tenant breaches this covenant, then a landlord could potentially sue for damages to recover the value of damage to the landlord’s interest caused by the bad husbandry.

Good husbandry

Alternatively, a landlord of an AHA tenancy could instead look to statute.

The parts of the Agriculture Act 1947 that deal with good estate management and good husbandry have been incorporated in to the AHA.

That would entitle the landlord to look at things such as how permanent pasture is being managed or how arable land is being cropped and its effect on the fertility of the soil.

However, the rules around good husbandry would not entitle a landlord to insist that a more regenerative approach be adopted by the tenant.

In addition, a landlord could potentially consider seeking a certificate of bad husbandry from the First Tier Tribunal which would be a pre-cursor to serving a so-called “Case C” notice to quit.

That notice asserts that the tenant is not fulfilling his responsibilities to farm in accordance with the rules of good husbandry.

Such an approach should only be used as a last resort when all other avenues have been explored.

Start with discussion

As with most landlord-tenant issues the starting point ought to be a discussion between the parties.

This is promoted by the Agricultural Landlord and Tenant Code of Practice for England, which was published last year and endorsed by all the major farming organisations.

There may be ways to encourage your tenant to adopt more regenerative practices.

Typically, a tenant would want something in return for such an accommodation to your demands – that could be through a rent reduction or a more favourable rent review than the tenant might otherwise be entitled to.

You would need to speak to a land agent or other suitably qualified professional for such advice.

If the tenancy has succession rights a landlord may be prepared to offer an uncontested succession in return for certain land management measures being introduced into the succession tenancy.

Modern FBTs, on the other hand, are far more likely to include references to soil condition and land management plans.

Ultimately it will be down to negotiation as to how far such measures go and how regularly such plans are to be reviewed.

As landlord one might look to include a specific break clause within an FBT based on non-compliance with certain land management practices or deterioration in soil condition.

The agreement would need to set out the parameters of such a provision and agree how such matters are to be measured and monitored.

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