1 September 1995

High figures reflect profitable industry

HIGH rents offered for land let on farm business tenancies reflect the current profitability of farming, says Bidwells partner, Peter Pemberton. "It is not the new legislation and tenancies which are driving up rents but rather the inherent profitability of the agricultural activity," he says.

"Plenty of people are talking in the £100 to £120 range," points out Mr Pemberton. "And for irrigated potato or sugar beet land, this could rise to £200/acre-plus."

Potential tenants are taking the view that subsidies are relatively safe for at least three years, he says. And firm rents have also resulted because much of the land is being taken by existing farmers looking to expand, adds Bidwells associate, Jeremy Procter.

"In a competitive market-place, they will probably be able to pay more than new entrants," says Mr Procter.

"High rents are being offered by potential tenants to ensure they get the land," continues Mr Pemberton. "But some fail to appreciate that if the agreement is for a fixed period, they will be unable to terminate the tenancy before the end of that period."

So it is important for potential occupiers to consider the long-term affordability of the rent.

Similarly, though landlords may wish to maximise their income from the land, this may then force the occupant to make the asset sweat, he points out, and it may be left in poor heart as a result.

Such factors are contributing to the preference for agreements of between three and five years, says Mr Pemberton. "Beyond five years occupiers are uncertain as to subsidies and income levels. And while landlords are keen to secure a fixed rent for a three to five year period, they are wary about locking into an agreement for longer."

"There are still a few potential problems to be ironed out," says Mr Procter. "Rent reviews and tenants improvements are the two most contentious areas."

The tenant may be discouraged from making an improvement for which he feels he may get inadequate compensation. And the landlord may not wish to pay compensation for an improvement which he might not use, he says.

A good mutual understanding between owner and occupier is vital. &#42