Farmers Weekly‘s Business Clinic experts offer free advice on legal, finance, tax, insurance, farm management and land issues.
Here, Thrings partner Duncan Sigournay gives some advice on tenancy succession within a farming family.
Q My father took the tenancy of a holding in 1955 on a verbal agreement. A formal agreement subsequently made on 1 February 1958 was signed by the agent and my father.
My brother and I started farming with my father when we left school in the early 1980s. We are now in partnership with him. On the 1983 rent increase agreement, my brother and I signed as joint tenants.
The new land agent has always presumed all of us are tenants and addresses official correspondence – for example rent demands – to the three of us.
How do my brother and I stand for succession to the tenancy when my father dies? Would we qualify for a three-generation tenancy? We are aware that a short-term tenancy is more profitable from the landlord’s point of view.
A The 1958 tenancy agreement would, on the face of it, be governed by the Agricultural Holdings Act 1986, which would mean it will benefit from succession rights.
Those rights would potentially enable two successions to take place subject to the respective applicants satisfying eligibility and suitability criteria set out in the 1986 Act.
If the evidence pointed towards your father being the sole tenant, then potentially either you or your brother could apply to succeed on your father’s death.
Indeed it is possible to succeed during your father’s lifetime subject to him satisfying certain criteria concerning his age or mental/physical incapacity.
I would just add that there is a stricter test for an applicant on a succession or retirement situation than where the application arises on the death of the tenant.
If such an application were made during your father’s lifetime, but was unsuccessful, that applicant could be precluded from reapplying for a succession tenancy.
It would not prevent another applicant coming forward at a later date. In any event, careful consideration would need to be given as to the most suitable or preferred applicant.
The apparent adding of you and your brother into the tenancy could have significant ramifications.
The fact that the new land agent has treated you and your brother as joint tenants along with your father is not in itself conclusive evidence that the three of you are tenants. Further research into that particular aspect will be required.
However, I have been involved in cases where a course of dealings between the parties, including rent reviews and surrenders of small parcels of land from the holding, were sufficient evidence of a change in tenants even though there was no formal document transferring the tenancy to the new tenants.
If it can be shown that you and your brother became joint tenants with your father in the early 1980s, then the issue of succession rights will not arise until the death of the last surviving tenant.
At that point there might be an argument raised by the landlord that one of the two succession events available has already been used up when you became joint tenants.
However, even in that scenario there would still be one potential succession left assuming there was a qualifying applicant available.
I would reiterate that although the tenancy may have succession rights, that does not in itself mean that succession by a “close relative” is guaranteed.
I would always recommend a full review of the current situation, including an assessment of any potential applicants.
The review might reveal some potential weaknesses that could be overcome before an application is required, thereby increasing the chances of ultimately succeeding.
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