An agricultural tenancy is a class of property occupation. There are two main types, full agricultural tenancies, also known as agricultural holdings act tenancies, and farm business tenancies.
Full agricultural tenancies
The majority of tenancy agreements made before 1 September 1995 are subject to the Agricultural Holdings Act 1986. These tenancies are often called 1986 Act tenancies, full agricultural tenancies or AHA tenancies. Landlords and tenants under a 1986 Act tenancy have the right to a rent review every three years.
Tenants are also usually entitled to compensation at the end of their tenancy for any major long-term improvements they have made, any ‘tenant right’, and short-term improvements including the use of any special system of farming that has benefitted the farm. This compensation amount is determined by the value of which the farm has increased due to these improvements.
At the end of the AHA tenancy, the Landlord can claim compensation from tenants for disrepair such as not repairing the farmhouse in line with the obligations on the tenant in the tenancy agreement. The compensation for improvements is often reduced by the compensation for damages so there is a balancing act to be undertaken at the end of the tenancy.
Full agricultural tenancies usually have lifetime security of tenure for the tenant. Those created before 12 July 1984 can also carry succession rights in certain circumstances and if the proposed successor meets certain criteria. There can be two tenancies granted by succession meaning that the grandchildren of the original tenants, for example, may be able to continue the family farming business.
Farm business tenancies
Most tenancies made after 1 September 1995 are subject to the Agricultural Tenancies Act 1995 and these are known as farm business tenancies. Both the landlord and the tenant have greater freedom to agree the terms between themselves.
The requirements of a Farm business tenancy are:
- At least part of the land must be farmed throughout the tenancy, and either;
- The landlord and tenant must have exchanged notices before the tenancy begins which confirms their intention for the tenancy to remain a farm business tenancy throughout, or;
- The tenancy must be primarily agricultural.
The landlord and tenant have the right to negotiate terms relating to rent and the duration of the tenancy, so long as these do not prevent a reduction in rent. There is no minimum duration for the tenancy, but a tenancy of more than 2 years will only come to an end when a written notice to quit is served which must provide a minimum notice period of 12 months.
Tenants under a Farm Business tenancy are also entitled to receive compensation for some physical improvements which they have made, subject to the landlord’s consent, to the farm at the end of their tenancy. Tenants can also obtain compensation for any improvements which have increased the value of the farm, such as obtaining planning permission, provided these are left behind or the benefit of the same is transferred to the Landlord at the end of the tenancy.
If you would like to discuss any points in this article further or are looking for legal advice relating to agricultural tenancies, please contact Spire Solicitors LLP Agriculture & Estates team on 01603 677077.