Flexibility needed for tenanted sector growth, survey reveals
© I|Stockphoto.comJohnFScott Increasing the use and flexibility of our land occupation markets is critical for the future commercial success of agriculture as a creator of value, says the Central Association of Agricultural Valuers (CAAV).
That flexibility would create opportunities for progressive and new farming businesses and for managing change, it maintains.
The organisation’s annual survey reveals a further year of low activity in the let sector, with most new lettings being of bare land.
See also: Six of the most common challenges for tenant farmers
There was a net loss of 3,652 acres in the area of let land in 2022, compared with an average annual gain of 35,000 acres between 1996 and 2003.
“In all parts of the UK, the tenanted sector will only grow if owners who do not want to farm directly themselves see letting land as an attractive and normal option for them to adopt,” says CAAV secretary and adviser Jeremy Moody.
The association’s Agricultural Land Occupation Survey 2022 covers decisions made where tenancies were granted or ended and where other occupations changed in that year.
“Despite the differences in tenancy law between Scotland and that in England and Wales, all parts of Great Britain show low levels of activity, indeed stasis, in the let sector,” says Jeremy.
“With the sector’s sensitivity to the policy environment, it remains to be seen whether the delinking of payments from land and farming in England will come to unlock letting opportunities and the effects any other policy changes might have.”
The survey commentary refers to the potential role of the tenanted sector in addressing farming’s productivity challenge, interacting with environmental expectations and discussions of changes in tenancy law.
These include the prospect of a new Land Use Tenancy in Scotland and recommendations to the government made for England by Baroness Rock’s Tenancy Working Group, which came at the end of the survey period.
It also raises the question whether emerging public goods options might provide an alternative to letting.
Key findings of the 2022 survey
- Little previously vacant land was newly let
- There was no significant loss of let land to environmental uses
- Most new or re-lettings were of bare land
- Continued slow decline in number of 1986 Act (AHA) tenancies
- Seven 1986 Act (AHA) successions were recorded in 2022, typically on larger, equipped holdings
- Two‐thirds of the 1986 Act tenancies that ended with no successor were re-let as farm business tenancies (FBTs), for an average length of 10.68 years
- FBT lets and re-let terms in 2022 ranged from six months to 60 years
- The average agreed length for all FBTs was 3.66 years, a slight rise, while for those running for more than one year it was 5.46 years
- Larger and better equipped holdings are generally let for longer FBT terms – holdings with a house and buildings were let for an average of just under 10 years
- 7.6% of new tenancies were of whole, fully equipped farms with a house
- Tenants perceived as new entrants secured almost 11% of all lettings
- New entrants tend to be offered longer tenancies, with 71% of all lettings to new entrants being for more than five years
- Fresh lets were marginally outweighed by losses from sales and let land being taken back in hand in 2022
- 2,774 acres of previously vacant possession land were newly let on FBTs – much lower than the already low range of the past 10 years
- Sales to sitting tenants remain at very low levels
Outlook
Farming across the UK faces a more challenging and commercial environment. In addition, there is increased focus on climate change mitigation, biodiversity and the management of soil and water.
With little change in the let land sector shown by its recent surveys, the CAAV is considering how this can be addressed.
Taxation is one tool and the organisation points to the success of income tax relief in the Republic of Ireland for letting farmland for more than five years (see panel – Ireland).
This is showing strong and continuing signs of success in attracting retiring farmers (of any age) to let out their land to an extent that merits serious attention in the UK, it says.
Housing, whether for the older farmer or the new one, is another area which requires attention, and the CAAV is contributing to the work of Defra’s Agricultural Productivity Task Force on both of these fronts.
The interaction of the tenanted sector with emerging public money for public goods policy, as well as other environmental initiatives and opportunities, will also play a part in how land is occupied.
Contract farming agreements (CFAs)
The 2022 survey saw 20 returns for new CFAs, covering 3,667 acres with an average unit size of 183 acres. This is equivalent to about 10% of the area let on farm business tenancies (FBTs) in that year.
The average term of agreements was less than two years, while the average size of the contract area was 183 acres. Areas generally ranged between 150 and 200 acres.
Average term length in years of new FBTs granted in 2022 |
|||
| All FBTs | FBTs more than one-year term | FBTs more than five-year term | |
| 2013 | 3.17 | 4.65 | 10.84 |
| 2014 | 3.53 | 4.93 | 10.26 |
| 2015 | 3.83 | 5.31 | 13.16 |
| 2016 | 4.48 | 5.94 | 13.42 |
| 2017 | 3.97 | 4.98 | 10.7 |
| 2018 | 2.9 | 4.14 | 9.73 |
| 2019 | 3.21 | 4.75 | 11.84 |
| 2020 | 3.24 | 4.83 | 11.5 |
| 2021 | 3.03 | 4.67 | 11.54 |
| 2022 | 3.66 | 5.46 | 12.45 |
| Source: CAAV Agricultural Land Occupation Survey 2022 | |||
Scotland
Changes in let land occupation in Scotland were also at a low level, with the country’s let sector both limited and sustained by the incentive that Basic Payment gives for claimants to stay in place, says the CAAV.
Bare land lettings also dominated here, accounting for 67% of lettings in 2022. Just 8% of lettings included a dwelling, with the remainder land let with buildings.
Thirty-six tenancies were reported to have been let in the year, covering 8,559 acres. Seven of these were modern limited duration tenancies.
There were five successions to existing tenancies on 1,153 acres and two voluntary assignations on 320 acres.
Nineteen tenancies ended where the land was reported as not being re‐let, covering 8,724 acres, with six taken in hand, three put on grazing agreements and five put on CFAs. Five were sold, one of which went to the sitting tenant.
Ireland
The island of Ireland’s tenancy system was dismantled entirely over a century ago, says the CAAV, with owner‐occupiers succeeding each other over generations and with very low turnover by sale.
However, not all of those owners are now farming and there has been a rise in purely seasonal arrangements for grazing, with an informal adaption of the older conacre (short-term seasonal lets) approach.
This is used on about 30% of the agricultural land area of Northern Ireland.
“It is widely seen as a hindrance to good land management with conacre takers lacking the confidence to invest in liming, biosecure fencing and other improvements and environmental management of someone else’s land,” says the survey.
That has now led to official support for a revival of tenancies, both north and south of the border, and promoted by the Gilliland Agri‐Food Land Experts Group Report of October 2016, which implicitly looked at promoting lettings of five years or so.
The CAAV and its local association, the Northern Ireland Rural Valuers Association (NIRVA), have created a model tenancy agreement and supporting clarification on tax, agricultural support and other legal issues.
“The Land Mobility initiative has started work on breaking the log jam, promoting agreements between landowners and new farmers. However, these initiatives are in their earliest days,” says the CAAV’s Jeremy Moody.
The Republic has also been trying to promote a more open land occupation market with tenancies.
Alongside an established Land Mobility programme, its measures have included substantive income tax reliefs on farmland rents, rising with the length of term, where land is let at arm’s length for at least five years.
The essential insight behind this is that the real productivity gains come from enabling land to be used by the “trained”.
The indications are that this measure has been strikingly successful in attracting landowners, including retiring farmers, to let rather than use seasonal arrangements, the CAAV says.
“This has seen the continuing recreation of a new let sector in Ireland since 2015 from a standing start.
The latest data suggest that perhaps 8% of the Republic’s farmland is now let on arm’s length tenancies of at least five years.”
About the survey
The annual survey is drawn from all 27 of the local associations of the CAAV across England and Wales as well as other bodies.
It summarises the decisions taken about land occupation in the year from 1 November 2021 to 31, October 2022.
It shows the choices made about new lettings and what happened where tenancies under both the 1986 and 1995 Acts came to an end.
It covers a total of 64,468 acres, including 35,290 acres subject to new FBTs; 3,667 acres subject to new contract farming arrangements; 15,912 acres on new grazing agreements and 1,954 acres on which succession to 1986 Act tenancies took place.