5 September 1997

Caution changes to confidence

When Farm Business Tenancies arrived in Sept 1995, they marked the biggest change to the law on renting land in nearly half a century. Out went traditional-style tenancies; in came flexibility and freedom of contract. Now, two years on, FW considers the successes and failures of the change. Our FBT Special runs over the next three pages and on pages 40-41. Edited by Tim Relf

"ENCOURAGING" is how the Country Landowners Association describe the last two years.

Chief legal adviser Anita Symington says after an initial spell of "watching and waiting", people are becoming more confident.

Private and institutional landowners are using FBTs, attracted by the new freedom of contract and flexibility. "More land is coming into the letting market and new entrants are getting more opportunities."

The CLAs survey one year into the new era showed 12.5% of the land let under FBTs had previously been farmed in-hand. And 9% and 13% of holdings let by institutional and private landowners respectively went to new entrants.

The relationship between landlord and tenant has been simplified. The need for short-term arrangements to avoid security of tenure has gone, says Mrs Symington.

One disadvantage of FBTs, however, comes with their tax treatment, says the CLA. If land is farmed in-hand or under a share or contract arrangement, landlords benefit from roll-over and retirement relief from capital gains tax. Not so, under an FBT.

Reg Hayden, national chairman of the Tenant Farmers Association, says his mood is one of "guarded optimism".

The upturn of land available in the rented sector has been encouraging. After initial caution, landlords now seem more confident about letting for longer terms.

"The National Trust, the Crown Estate and the Duchy of Cornwall have set good examples by offering an initial term of between five and seven years, followed by a long-term tenancy up to retirement where the tenant has proved his worth."

Contrast this, he says, with private and institutional landlords, who are "still more interested in money than principles.

"While generally high rent levels are making life difficult for the new entrant, this will change as rapidly-falling farm incomes bring reality back into the marketplace.

"But it is not a perfect piece of legislation and scope remains for improvement."

FBTs for livestock holdings are still too short. And too many landlords are seeking to maximise returns by letting the land and buildings on an FBT, while putting the house on an assured shorthold, says Mr Hayden. "Possession of the farmhouse may be on a knife-edge."

Ian Brown, chairman of the NFU tenants committee, says the Act is one of the few pieces of legislation toward which the whole industry worked together.n

Anita Symington, Country Landowners Association: Encouraging.

Reg Hayden, Tenant Farmers Association: Guarded optimism.