Changes to farm tenancy succession – what you need to know

Currently, a person wanting to succeed to an Agricultural Holdings Act 1986 (AHA ‘86) tenancy must be both eligible and suitable, for which there are several tests.

Eligibility first requires the potential successor to be a close relative of the retiring or deceased tenant – this means they must be a child, spouse or civil partner, or someone treated as a child of the tenant.

See also: Tenants’ rights if asked to quit land planned for development

In order to further prove eligibility, the applicant’s only or principal source of livelihood (in income or benefits in kind) during five of the past seven years must be derived from their agricultural work on the holding in question.

It could also be on another agricultural unit of which the holding forms part, unless they have the landlord’s written agreement otherwise.

This is known as the “livelihood test”.  

They must also not occupy separately a commercial unit of agricultural land – the “commercial unit” test.

What is changing?

One test is being withdrawn while another is being strengthened. From 1 September 2024, the commercial unit test will no longer apply.

This stipulates that the applicant for succession cannot be in occupation of another agricultural unit capable of supporting two full-time agricultural employees.

This was a capricious and unfair test, says Tenant Farmers Association chief executive George Dunn, because while some families could circumvent it by good planning, others fell foul of it through an unexpected death or sudden incapacity of the existing tenant.

Either of these could precipitate a succession application way before it would reasonably have been expected.  

“It discriminated against some potential successors who had gone out and been entrepreneurial – exactly the sort of person a landlord would want as a tenant,” says Mr Dunn.

However, in exchange for losing the commercial unit test, the suitability test is being tightened.

Suitability at present involves being able to show that the applicant has sufficient training and experience to take on the tenancy and run the farm, as well as suitable health and financial standing.

The change to the suitability criteria means that the bar will be set at a level where the potential successor must demonstrate that if the tenancy was available on the open market, they are of a standard that a prudent landlord would be willing to shortlist them for the tenancy, says Mr Dunn.

“It’s important to note that this refers to a ‘prudent and willing landlord’ and not the landlord in question,” he says. “It’s not about proving you are the best candidate, simply that you would make the shortlist.”

Demonstrating suitability in this respect includes showing that a potential successor will be able to run the farm commercially and to a high standard, with care for the environment, and with or without other land.  

Budgets and cashflows will be needed to support this, with bank and personal references helping too, says Mr Dunn. “You have to approach it as if you were applying for a tenancy on the open market.”

However, the age of the applicant must be disregarded, as must any offer of rent.

Livelihood test challenges

Regardless of the change next year, landlords and their agents are asking for ever more detail to satisfy the livelihood test and applications are taking a lot longer than they used to, says Mr Dunn.

Given the further strengthening of this test from September 2024, he urges tenants and their families to use the time to make sure things are in place to enable them to make the best case.

“We’re finding that landlords are routinely being very difficult on succession. There is an increased lack of willingness,” he says.

“We have a lot of cases on at the moment, in terms of the amount of information they are asking for on tests, particularly on the livelihood test.

“There are some very long applications for private information, for example, bank and credit card statements to show income and expenditure over a seven-year period. It can be very intrusive.

“However, it is up to the applicant to prove their eligibility and the tribunal is often willing to agree to what is being asked for by the landlord.”

As a result, Mr Dunn advises collecting and keeping good evidence, for that crucial seven-year period, of income (including benefits in kind) and day-to-day spending to support the applicant’s lifestyle.

“If the applicant has other (non-farming) income, or there is other income coming into the household, it should be directed to savings, or for investment into a property for retirement, for example, and not used for day-to-day living costs.

“Landlords have always been difficult about succession, they don’t want another generation taken up. As time has gone on and people see farm business tenancies (FBT) working very well for landlords, agents are taking a hard line.”

Mr Dunn stresses how important it is that notice is served for applications to succeed. “You’ve got to make that application to have a chance of a tribunal hearing, though things do not always go to a full hearing.”

Things can get stuck at a technical level, the tribunal is there in the background while the parties produce their evidence, he says.  

Succession on the death of the tenant or retirement

On the death of a tenant, anyone wanting to take on the tenancy must apply to the First Tier Property Tribunal (“the Tribunal”) within three months following the date of death.

In the meantime, the tenancy is held by the personal representatives of the deceased.

The applicant must then satisfy the tribunal of their eligibility and suitability.

Landlords will usually serve a notice to quit within three months of being notified of the tenant’s death, in order to prevent the tenancy remaining in the deceased tenant’s estate.

The passing of the Agriculture Act 2020 allowed for a tenant to serve a notice to retire at any age.

Where a successor wants to take on the tenancy in such cases, they must satisfy the livelihood test and if this fails, they may not submit a further application on the death of the tenant.

Landlords and tenants can agree a succession without a tribunal application, however, Mr Dunn cautions that if such agreement is made, it should be professionally checked and documented.