Deadline approaches on agricultural tenancy consultation

11 Jun 2019

tractor ploughing field

DEFRA launched a consultation in April outlining possible plans for a radical shake-up of agricultural tenancy legislation in England and Wales, the outcome of which may make it easier for people to leave the farming sector and also create opportunities for new tenant farmers.

The main elements covered in the DEFRA proposals are:

  • That tenants with Agricultural Holdings Act (AHA) agreements who have no natural successor should have the option to assign their tenancy to a new, unrelated tenant farmer. The new tenant would be required to pay an open market rent on a 25-year tenancy. This would allow an exit route for older tenants seeking to retire, release the value of their tenancy and provide a route for new tenants to enter the sector. Under the proposal, the landlord could buy the interest in the holding from the existing tenant and regain possession but would be unable to reasonably refuse consent to the tenancy being reassigned.
  • Amending the succession rights on AHA tenancies to remove the minimum retirement age of 65, and the ‘commercial unit’ test applied to the prospective successor.
  • Widening the pool of relatives that qualify to succeed on the tenancy to include nieces, nephews and grandchildren.
  • Providing an incentive to encourage landlords to grant longer farm business tenancies (FBTs) of 10 years or more, so allowing greater security and encouraging tenant farmers to invest in their businesses. There should also be greater flexibility with regard to termination of the FBT in particular circumstances (such as non-payment of rent, death of the tenant for example), or in the case of planning consent having been granted on the land.

Martyn Dobinson, a partner and a member of Saffery Champness’ Land & Rural Group, comments:

“We welcome proposals and fresh ideas that would allow our tenanted farming sector the greater flexibility it needs if it is to remain vibrant. Ways must be found to encourage new entrants – the next generation – into farming. However, with such initiatives, we should not lose sight of the needs and rights of agricultural landowners or the potential impact on tax reliefs such as Agricultural Property Relief (APR).

“The Tenant Farmer’s Association has argued that landlords should only be able to obtain APR from inheritance tax where they let land for 10 years or more. That added security of tenure would certainly encourage new entrants to the sector and favour tenants who are likely to need to invest with a more long-term view to access subsidies under the new environmental land management schemes. But a tougher APR regime could equally result in a reduced stock of land available to the tenanted sector as landlords look to farm in-hand, use the land for other purposes or divest.”

The deadline for responses to the consultation is 2 July 2019.