How a written tenancy agreement can give certainty

It is still not uncommon for an Agricultural Holdings Act 1986 (AHA) tenancy to be based on a verbal agreement.

However, this can be relatively easily addressed. Lawyer Esther Round, an associate with Birketts, says: “Either party to an oral AHA agreement can serve notice on the other requesting that the agreement between them be written down.”

Getting a written agreement in place can give certainty to both parties. From a landlord’s perspective, it may be sensible in order to avoid the tenancy being assigned to a company, which survives in perpetuity.

See also: More on farm tenancies and rents 

“Once a lease is in the name of a tenant company then the tenant is automatically in a stronger position,” says Mrs Round. 

“On the basis that, unlike a person, a company cannot die, one of the landlord’s possible routes to recovering possession is removed and as a result the capital value of the landlord’s interest usually decreases.”

For a tenant, it gives certainty on the main elements of the tenancy. In many cases things may go along fine without a written agreement, especially where a long-standing good relationship has been built, says Mrs Round.

However, things can change when a new generation of the landlord’s family takes over or the farm is sold to a new owner with a different approach.

Section 6 notice

The type of notice needed to start the process of getting a written agreement in place is referred to in section 6 of the Agricultural Holdings Act 1986.

There are nine key issues set out in the act which the tenancy would be expected to contain, says Mrs Round.

These are:

• Details of the holding and its extent
• Names of the parties to the agreement – the landlord and tenant
• The term of the tenancy
• The rent and when it should be paid
• Whether the tenancy can be sold, shared or assigned
• Liability for rates including drainage rates
• Power of the landlord to recover possession in case of a breach by the tenant
• An undertaking by the tenant that if harvested crops grown on the holding for consumption on it are destroyed by fire, the full equivalent manurial value of the crops destroyed will be made up by the tenant in accordance with the rules of good husbandry
• An undertaking by the tenant to insure all deadstock on the holding and all harvested crops grown on the holding for consumption on it against damage by fire (there are minor exceptions to this requirement).

If the parties cannot agree on one or more of those nine issues, the question can be referred to arbitration.

“The strategy will often be around the timing of a section 6 notice,” says Mrs Round. “As soon as a section 6 notice is served, a tenancy cannot then be assigned and so it is useful to do this if a landlord wants to prevent the transfer of their tenant’s oral tenancy to a third party.”