Farm rents beginning to fall, says Tenant Farmers Association

Farm rents are showing signs of slowing, which could allow tenants to argue for rent reductions this spring, according to the Tenant Farmers Association (TFA).

Defra statistics indicate average farm rents for Agricultural Holdings Act (AHA) tenancies are down about 4-5%, and falling by about 6-8% for farm business tenancies (FBT)

But there is a big difference between average rents and what land agents are quoting as market rents, said TFA chief executive George Dunn.

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“The average arable FBT rent, according to the Defra figures, is about £110/acre, whereas the land agents will be claiming market rents above £170-£200/acre,” he said.

“What the land agents are quoting is more what I would describe as the ‘froth on the beer’. Why wouldn’t they? Because that’s what they want to achieve for their landlord clients.”

Over the past five to seven years, Mr Dunn said there have been relatively few notices for rent reviews served by either tenants or landlords.

“We have been in a period of relative stasis,” he added.

Spring rent reviews normally take place at the end of March or early April.

Mr Dunn said given the prevailing circumstances in farming, including further falls in Basic Payment Scheme rates, there may be a case for rents to go down, but that will depend on individual circumstances.

The TFA is advising tenants who are considering triggering a rent review with their landlord to ensure they get their information right by talking to neighbours, land agents and feeding information into its rent data bank, which it can share between members. 

Points to consider

Within an AHA tenancy, the TFA said there are four areas to consider – the terms of the tenancy, the character and situation of the holding, the productive and related earning capacity, and rents on comparable units.

“AHA tenants should be focusing on robust budgetary evidence. FBT tenants have to look at what’s happening at comparables, because that’s all the legislation allows you to do – to look at market rents,” said Mr Dunn.

In certain situations, he said landlords may try to tempt tenants into accepting higher rents by offering some additional benefit, such as more land, a cottage or agreeing to a form of diversification.

But he added: “Members should bear in mind the deal they do on a new rent does not just affect their own business, it affects everybody.

“So, if an additional benefit is obtained for a higher-than-usual rent, it is important this is known when looking at other reviews.”