Business Clinic: Landlord wants to end FBT early – what do we do?

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Polly Ridgway, legal director at law firm Thrings explains the circumstances in which a landlord may be able to end an FBT before the term is up, and what the tenant’s options are.

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Q: I’m a tenant farmer and my landlord wants to end the farm business tenancy. How can I defend myself and my business against this?

A: It’s a tough place for a tenant to find themselves in if their landlord is looking to forfeit the tenancy, so I understand your concern.

Forfeiture is a legal term referring to a landlord’s right to terminate a tenancy early. First, let’s look at what forfeiture is and the process behind it .

It allows the landlord to terminate a farm business tenancy (FBT) mid-term following an alleged breach in the agreement – for example, non-payment of rent, breaching the covenants, or the tenant becoming insolvent.

Whatever the case, there needs to be an express forfeiture clause in the FBT for them to be able to go down this route.

If the alleged breach is over non-payment of rent, the landlord needs to have made a formal demand for rent, and in any other case, the landlord is required to serve a statutory notice on the tenant (pursuant to section 146 Law of Property Act 1925).

If the latter notice is not served, the landlord loses the right of re-entry, but if it is, the process of forfeiture can progress through one of two ways – peaceable re-entry or through the courts.

Avoiding court proceedings would mean the process has to be peaceful, with no threat of violence, but if your tenancy includes rental accommodation, landlords cannot re-enter the property and take possession as it could lead to unlawful eviction.

Court option

Court can be an option for both sides. If the landlord goes through the courts and seeks a possession order, securing one will give more certainty to the forfeiture being successful.

However, the courts can also be an ally to you as a tenant, as you could also apply for relief from forfeiture which, if granted (once having considered your conduct as a tenant), would reinstate the tenancy, as if the attempt at forfeiture had not occurred, while awaiting a court order or hearing.

If the forfeiture related to, as an example, a breach of covenant but the tenant can evidence that the landlord had previously acknowledged the breach and not exercised their right to forfeit, the landlord would not be able to claim forfeiture for that breach.

Tenants could also defend against forfeiture if they can establish that the section 146 notice was invalid or if the correct legal procedures were not followed, so ensure your legal adviser is able to review any and all related correspondence in case they can establish a fault.

Forfeiture is a complicated matter and engaging with legal advice early in the process will put you in the best possible position to understand the circumstances around the alleged breach and the options available to you and your business.

Do you have a question for the panel? Outline your legal, tax, finance, insurance or farm management question in no more than 350 words and Farmers Weekly will put it to a member of the panel. Please give as much information as possible. Email your question to FW-Businessclinic@markallengroup.com using the subject line “Business Clinic”.