Farm tenancy rents rise by 30%

Rents reviewed last year rose by a third with Farm Business Tenancy (FBT) rents showing the largest increase.

Figures produced by Smiths Gore show 2012 had the biggest rise in rents of the past five years, with FBTs rising by an average of 44%.

Jason Beedell, partner at Smith Gore’s Peterborough office said a rise had been predicted but 30% was more than expected.

Average arable rents agreed in the year up to October 2012 saw the largest rise, at 38%, from £75 to £105/acre, livestock rents increased by 33% from £44 to £58/acre and dairy rents increased 18% from £75 to £88/acre.

FBTs rose more than standard Agricultural Holdings Act rents, which rose by 23%, but the sectors where the biggest rises occurred were the same.

Scottish tenants whose rents were reviewed were paying an average 18% more than the previous year. However, here livestock farmers saw the biggest rent increases from £24/acre to £34/acre.

While a regional difference in England was noticeable, this was sector-led.

Rises were down to a combination of competition in the rental market, with many farmers still looking to expand, and some rents having not been reviewed in a long time, said Dr Beedell.

George Dunn, TFA chief executive, said the Smiths Gore figures roughly mirrored the TFA’s own.

“Profitability remains robust and farmers are seen as being in a stronger position than previous years,” he said.

“Some tenants have agreed rent abatements with their landlords, so that they pay something short of the full rent, perhaps for the first year.”

There were a number of issues hanging over the agricultural industry which make establishing a suitable rent very difficult, said Mr Dunn.

CAP reform remained the biggest unknown for farmers, as it affected not only what they are set to receive in subsidies but also the future of agri-environment schemes.

Mr Dunn urged tenants not to look at percentage increases and rather to consider how their rents compare to the others when reviewing. He also advised farmers not to overbid on land tenders which sometimes became “ridiculously high”.

Some farmers were bidding in excess of £200/acre for extra land and then were not always able to spread their fixed costs as well as they might have thought, he said.

The survey was based on 717 rent reviews across England, Wales and Scotland.