Many farm tenants have yet to begin talks with landlords on obligations to provide investment for extended slurry storage to meet NVZ requirements.
Traditional tenancies under the Agricultural Holdings Act 1986, all those starting before 1 September 1995, usually contain an obligation for the landlord to provide capital equipment required to meet statutory obligations.
However, many have yet to recognise their liability and with tenants often reluctant to rock the boat, they are left unable to afford the investment alone.
The picture is mixed but a significant number of tenants and landlords are keeping their heads down, says TFA chief executive George Dunn.
“For some tenants it seems too big an issue but realistically yesterday was the time to start planning. For others, this will make them get out of milk, especially where other investments are needed.”
Negotiations can be lengthy, but once landlords and tenants have settled, schemes take at least a year to go through planning, tendering and building. Advisers are concerned when things are left any later, there will not be the skilled capacity to make a good job of all installations in the run up to the January 2012 deadline.
Some county council landlords have been suggesting to their tenants they will not insist on the dairy only clauses contained in their tenancy agreements in an attempt to evade their obligations, but such tactics will not work, says Mr Dunn. “Landlords such as The National Trust and the Crown Estate are beginning to have talks with tenants but the position of others like the Duchy of Lancaster and the Duchy of Cornwall is not yet clear.”
Those in newly designated NVZs must complete a calculation by 30 April 2010, showing existing capacity, whether there is a need for additional storage and how they plan to provide it.
The landlord’s obligation is not always clear cut. Where a tenant has land in addition to the core tenanted holding, the landlord can argue the need for extra storage arises from production on the additional land. In these cases the landlord may only be liable for a proportion of the investment necessary.
Also, when it is not envisaged the holding will remain a livestock holding in future the landlord can argue against providing the investment. There must also be a history of the holding being used for its current livestock system. A history of tenant investment on the holding can cloud the issue, says Mr Dunn.
Where no progress is being made through the normal landlord/agent channels, the tenant can serve a formal notice on the landlord under Section 11 of the Agricultural Holdings Act 1986, requiring him to fulfil the statutory obligation. If this also receives a negative response then the tenant may apply to the Agricultural Land Tribunal, although this is likely to cost each side anything from £10,000 and these costs are rarely recoverable from the other side.
“When discussions break down, inform the landlord or his agent in writing that you plan to serve a formal notice, building in say a four-week timetable for them to respond before serving the notice,” suggests Mr Dunn.
Agent Philip Meade, Davis Meade Property Consultants, Oswestry, acts mainly for tenants and says most landlords he deals with are taking a fairly pragmatic approach, realising they will have to contribute a substantial proportion if not all of the investment. However, a couple of his cases look likely to be decided by the Agricultural Land Tribunal.
“A couple of landlords are digging their heels in, claiming they do not have to pay for anything, when it is clear they have an obligation,” says Mr Meade.
Tony Rimmer, Rostons, Cheshire, has a couple of cases where talks began three years ago and all is now in place. “It depends on the landlord, some use stalling tactics and then it can take 12 months to get nowhere.”
He points out many landlords have served rent review notices in the past few years and the issue of NVZ investment can help to move things along, with tenants resisting rent increases unless slurry facilities are improved.
Farm Business Tenancy (FBT) agreements do not have a statutory fallback requiring landlords to invest for NVZ obligations, although there could be a contractual obligation and some may be willing to meet or share the cost of extra storage, says Mr Dunn.
“In general the tenant will be liable for investment on an FBT but this can provide an opening for discussion of other issues, for example on extending the term when the tenant is willing to invest in the holding.”