Analysis: What tenancy reform might look like for farmers

Initial reaction to the government’s response to the so-called Rock Review into tenancy reform in England can best be described as “mixed”.

The NFU had a few warm words, welcoming the establishment of a new Farm Tenancy Forum and expressing hope that the reforms would help achieve a “more vibrant, accessible and resilient tenanted sector”.

See also: Defra’s ‘partial’ plans for tenancy reform in England ‘disappoint’

Chair of the 2022 Tenancy Working Group, Kate Rock, who wrote the original review, also welcomed the government’s “commitment to the tenanted sector” and its “willingness to focus on how the objectives of the Rock Review can be quickly and successfully delivered”.

But there are concerns too, with the Country Land and Business Association (CLA) warning that “many of the proposals have the potential to harm confidence in the tenancy sector… and reduce the amount of land available to would-be tenants”.

Meanwhile, the Tenant Farmers Association (TFA) accused the government of taking a “pick and mix” approach, and shying away from the more “radical, but proportionate” approach outlined in the Rock Review.

TFA concerns

Perhaps the TFA’s greatest concern is that the yet-to-be-established Farm Tenancy Forum will become just another talking shop.

“The last thing we need is a ‘review of the review’,” said TFA chief executive George Dunn.

“From the outset, the new forum must be about implementation rather than going over the arguments already considered by the Rock Review.

“It needs to oversee the establishment of a Tenant Farming Commissioner, inform the terms of reference for a Law Commission investigation into changes in legislation, and make sure tenant farmers have fair access in Defra’s new Environmental Land Management (ELM) schemes.”

But Defra farming minister Mark Spencer insists that the TFA’s concerns are unfounded.

In particular, he points to the appointment of renowned chartered surveyor Julian Sayers as the new co-chairman of the forum – “a hugely experienced guy” – and the fact he will share that role with a senior Defra official.

“It will no longer be a talking shop on the perimeter of government, feeding views in every now and again, but it will be an integral part of the department, with a minister in attendance on a quarterly basis.

“That changes the dynamic, but also changes its influence,” said Mr Spencer.

Delaying tactic

He also dismissed the TFA’s suggestion that holding a “call for evidence” this summer, to establish the responsibilities of the new Tenant Farming Commissioner, might simply be a delaying tactic.

“Establishing an ombudsman (commissioner), is a huge regulatory change,” Mr Spencer told Farmers Weekly. “The Scots are going down this route and we might be able to learn from their experience.

“It’s very easy to establish these extra regulatory roles and bodies, but it’s bloody difficult to get rid of them, so we have to make sure it’s right.”

As for the role of the new commissioner, the Rock Review called for someone with the ability to “tenant proof” emerging support schemes, police the behaviour of landlords and their agents, and improve the system of dispute resolution.

Mr Spencer said the new commissioner role was “a bit of an open book”, but pledged to look at all those things.

Code of practice

He also suggested the Royal Institution of Chartered Surveyors (Rics) has a big role to play in meeting these challenges.

“They have agreed to step up and establish a code of practice, so they should be holding their members to account and making sure they are performing in a professional and fair way,” he said.

This recognition by government of the need to achieve a better balance between landlord and tenant interests, and the willingness of Rics to take this action forward, have been welcomed by the TFA.

“It is good news that the government is keen to ensure that tenant farmers do not feel bullied and abused, by setting out standards of expected behaviour for all parties,” said Mr Dunn.

“I welcome the willingness of Rics to co-ordinate the drafting of that code of practice, which will speak powerfully to its land agency community.”

What does the government response say about ELM?

One of the primary aims of the Tenancy Working Group when set up in 2022 was to find ways in which tenants might gain better access to the emerging farm support schemes coming out of Defra.

Indeed, its first recommendation was that Defra must design all ELM and productivity schemes to be accessible to tenant farmers.

“Tenants should not need landlord consent to enter tenanted land into schemes, and landlords should not be allowed to enter tenanted land into schemes unilaterally,” it suggested.

Defra has been quick to point out that it has taken some steps to deliver on this, highlighting that tenants can already sign up to shorter, three-year Sustainable Farming Incentive (SFI) agreements without landlords’ consent.

But, while that provision exists for the SFI, both the TFA and Baroness Rock have expressed their “huge disappointment” that Defra has failed to provide the same degree of accessibility to the Countryside Stewardship and Landscape Recovery tiers of ELM.

Baroness Rock said this issue must be on the agenda for the first meeting of the new Farm Tenancy Forum, whenever that might be.

The Rock Review had recommended that tenants should be able to self-assess the extent to which they could take part in any of the various ELM schemes, based on the terms of their tenancy.

“The only radical bit was to suggest that tenants whose agreements were shorter than the timeframes envisaged by the ELM schemes should be allowed to enter them regardless, where they had an expectation that their tenancy would be extended anyway,” said Mr Dunn.

But Defra, in its response, said there would be many scenarios, particularly in Countryside Stewardship, where landlords’ consent would still be required, such as where there might be a permanent change of land use.

“If you are going to change the landscape in a way that is not reversible, it seems common sense that you have to have an agreement between the tenant and the landlord,” said Mr Spencer.

“This often is not a problem at all. But we can’t realistically have a circumstance where I could take a 10-year tenancy from a landlord of an arable field, and then change that arable field into a woodland without the permission of the landlord. That is common sense.

“So we’ve got to find a middle way – to encourage good relationships, to help tenants improve their environmental footprint, but at the same time have an eye on property rights and the right of any landowner to protect their holding for generations to come. I think we have got the balance right.”

Taxation changes could be key

The Rock Review made a number of recommendations around tax treatment, including providing incentives for investment in tenanted holdings, and adjusting agricultural property relief (APR) from inheritance tax to encourage longer term lets.

Some of these areas have already been covered by a consultation launched by the Treasury in March as part of the Budget, including whether to extend APR to include land entered into environmental schemes.

“The fact we’ve got the Treasury to look at it is a very positive step forward,” said Mr Spencer.

“Common sense tells me it’s the right thing to do, to encourage people into these schemes and not put barriers up in their place. I’m hopeful the Treasury will come to the right conclusion.”

The Treasury consultation is also examining the Rock Review recommendation that APR should only be available to landlords who are prepared to let holdings for eight years or more.

The TFA considers this to be the most important outcome of the Rock review so far.

“No doubt there will be opposition from groups representing landlords, landlords’ agents and some accountants who will want to perpetuate the status quo,” said Mr Dunn.

“However, with the average length of term on farm business tenancies now only three years, the taxation changes proposed by the Treasury are vital.”

The CLA takes a different view, saying it will “continue to argue that the industry requirements are for flexibility and that the proposed changes to APR are not the solution”.

The Treasury consultation closes on 9 June.