End of farm tenancy – tips on what to watch out for
© MNStudio/Adobe Stock End of tenancy issues for those with longer-term tenancies under the Agricultural Holdings Act (AHA) 1986 will vary, depending on the terms of the tenancy agreement.
However, even with a written agreement there can be grey areas. Agricultural lawyer Peter Snodgrass of Shakespeare Martineau says tenants can expect some landlords to push boundaries to bring tenancies to an end, or during end-of-tenancy negotiations.
See also: Top tips on avoiding dilapidations disputes for tenants
Areas to pay attention to include:
Case B notices to quit
When properly drafted and validly served, these allow a landlord to recover possession of land or buildings when they have planning permission for an alternative non-agricultural use of that land and/or the buildings.
The case of Kirkby v Baker in 2020 concerned a landlord’s attempt to use a Case B notice to quit on the grounds of permitted development under the planning rules (rather than the landlord having applied for and obtained planning permission) for a non-agricultural use.
The tenant challenged this and won, with permitted development rights found not to be grounds for service of a Case B notice.
However, Peter believes the point to notice is that a ground for possession that had hardly been used before was researched and tried out by the landlord’s lawyer.
“Where planning is needed and a Case B notice is likely, or has already been served, the tenant can get involved in the planning process and explain to the council the impact of the loss of the land, holding or building on their business if planning is granted,” says Peter.
He also warns tenants to be aware of “try-on” Case B notices, where the new use may not be truly non-agricultural, for example horse-grazing for a livery business, or a wildflower scheme including livestock grazing.
Tree planting is another use for which landlords may seek to terminate a tenancy. Case B notices cannot usually be used, as tree planting does not require planning permission.
However, there is another route, which would (among other things) require that the landlord is acting fairly and reasonably in seeking possession.
A special area is the provision of land for biodiversity net gain, which obliges developers to achieve a 10% biodiversity uplift in association with their sites from January next year.
If land associated with a site is included within the “red line” of a planning application, it may be argued in future that this land is effectively part of the consented planning, and therefore enable a valid Case B notice, suggests Peter.
Planning granted
“It is sometimes tricky to judge at what point a tenant should get involved in the process,” he says.
“Each situation, the characters and the history, are different, and advice should be taken. But generally, if a landlord is going for planning, it’s best to talk to them about it.”
Once planning is granted, however, all is not lost. In one case in which he was involved, the grant of planning consent meant the tenant faced losing both land and his home.
However, the tenant took the planning decision to judicial review and won on the grounds that the impact on their business had not been taken into account, as it should have been. The tenant remained in occupation.
Statutory compensation
When an AHA tenant loses land because planning permission has been granted for a non-agricultural use, the tenant is entitled by law to compensation from the landlord, equivalent to five or six years’ rent on the land lost.
Tenant’s improvements are also compensated, subject to satisfying the tests in the Agricultural Holdings Act.
Retirement
Some tenants without successors or coming to the end of the final generation of a succession tenancy may, for a variety of reasons, want to retire before the full term has run.
Whether this might lead to a surrender payment to the tenant will depend on the circumstances and how the landlord will benefit from recovering possession of the land and buildings, says Peter.
“Some landlords may simply not be interested, others will be.
“But whatever you do, don’t burn your boats by serving a tenant’s notice to quit because then you have lost negotiating power over the value of an early surrender – or giving up the tenancy at all.”
Whatever the circumstances of an AHA tenancy ending, read the tenancy agreement very carefully and check for any clauses it may contain on repairs and dilapidations.
These will guide the obligations on both tenant and landlord.
If an AHA tenancy agreement does not make clear who is responsible for a repair, then what is known as the model clauses apply.
These are regulations that apply to all AHA 1986 tenancies. They can also apply to farm business tenancies (FBTs) if they are expressly mentioned in the written agreement.
They set out the obligations on both landlord and tenant to maintain, repair and insure fixed equipment, including buildings.
This does not preclude landlords and tenants from negotiating and agreeing repair provisions outside of the model clause provisions.
Where the model clauses and the agreement conflict, the written agreement takes precedence.
Where the model clauses apply, there is an option for the tenant to apply for a building to be declared redundant, which removes any repairing liability on the tenant.
“This would be in specific circumstances where the building is clearly no longer suitable for modern agricultural uses,” says Peter.
“A good example would be small brick and tile buildings, expensive to repair, but of little use in modern farming.”
Consent
A further end-of-tenancy consideration is to look for any landlord’s consent for tenant’s improvements or “deals” done, for example on buildings. These might be diary notes, letters, or more formal documents.
Where a tenant’s building remains at the end of a tenancy, even if there was a technical defect in a compensation claim, there may be an opportunity in some cases to negotiate a payment to the tenant, says Peter, if it was clearly unfair in all the circumstances for the landlord to simply take it over for no consideration.
Counterclaim
It is also important for the tenant to consider whether they may have a counterclaim for any breaches of the landlord’s obligations.
The tenant would have to show their loss caused by the years of disrepair, because of the landlord’s failure to repair.
“It’s quite common to counterclaim against the landlord and the sums involved are offset against what a tenant might owe for dilapidations.”
Dilapidations
For a longer article focusing on dilapidation questions, go to Top tips on dilapidations for tenants
Land-use question at tenancy end
The question of whether a tenant must reinstate pasture to arable sometimes arises at the end of a tenancy.
For an obligation to exist requiring reinstatement of pasture to arable, there would have to be a clause in the tenancy agreement requiring the tenant to maintain certain fields as arable, says Peter.
“If there was no such clause (and in many tenancies there is none), then no reinstatement would be necessary. The model clauses 2015 do not impose this restriction.
“Sections 14 and 15 of AHA 1986 provide for some flexibility for tenants where there are restrictive clauses in the tenancy agreement, but these work in the tenant’s favour.
“It is usual to have an ’agriculture only’ clause, but that would not of course prevent changing from arable to pasture.”
Farm business tenancies
These are usually contractual terms with a fixed end point, so the tenant cannot normally contest a notice to quit on an FBT.
Conversely, unless the tenant is in breach of the agreement, the landlord cannot force them to leave before the term ends.
“However, if the landlord wants the tenant to leave before the term ends, then it’s a matter of negotiation and any premium paid to the tenant to surrender will be related to what the landlord hopes to get out of that early surrender,” says Peter.
Regarding repairing obligations and dilapidations, FBTs by their nature offer freedom of contract.
“But if the tenancy agreement is silent on this, then the implied terms on a tenant are to not to commit waste or damage to the land and buildings, beyond wear and tear.
“For example, they must not trash the holding by using non-approved chemicals, create any other pollution, or damage fences and gates.
“Unless the tenancy agreement provides for anything further, buildings must be kept wind and watertight.”
It is advisable to engage early with the landlord once an FBT tenant knows the tenancy is ending, says Peter. “For FBTs, arbitration is costly and often inefficient.”
Housing challenges of farming retirement
A lack of housing and pension provision prevents a good number of tenants from retiring when they might wish to, or when it might be best for health or other reasons to do so.
Peter Snodgrass, who is secretary and a trustee of the Addington Fund, points out that the charity is keen to hear from anyone in this position.
The fund buys houses to rent at affordable rates to retired farmers, or those who, for other reasons, have had to leave their farming homes.
It takes pains to try to ensure that these are in a suitable area that fits with the person or the family’s needs.