5 June 1998

Little change in rent levels – TFA

By Robert Harris

MOST Lady Day rent reviews have resulted in no change or a small reduction, according to the Tenant Farmers Association.

Increases are generally confined to farms which have not been reviewed for several years, or where capital improvements have been made, says Reg Haydon, TFA chairman.

"There have been very few increases. In many cases, landlords are waving notices."

Matthew Bush of FPD Savills agrees. Average increase for arable farms was 11%, half last years rise. Dairy farm rents rose just 5%, a quarter of the 1997 increase, he notes. Typical rents are now low to mid £50s/acre for arable and about £60/acre for dairy.

Many landlords have not acted upon notices, although some have served protective notices, reserving the option to review rents next year should farm incomes pick up, says Mr Bush. And fewer than usual are serving notices for reviews next year, he adds. "The prospective rent rises are judged to be insignificant and would not justify professional fees."

Ralph Crathorne of Strutt and Parker reckons the company survey shows 12 review procedures, mainly in the dairy sector, have been postponed until next year.

Reviews have been agreed on a further 72 farms, mainly arable holdings. The overall increase was 15%, half last years level, with rents reaching about £56/acre. Livestock and dairy settlements were lower. The sample excludes capital improvements, or reviews which took place more than four years ago.

This is only the third time in 20 years that rents have risen above a level which might be expected from analysis of net farming income, he adds (see graph).

"The value of farm cottages and houses continues to rise. There is also increasing acceptance that the rent formula entitles a landlord to the share of potential economies of scale where farmers are expanding in the locality. And there is some optimism that the bottom of the farming profitability cycle has been reached.