Business Clinic: Will SFI options meet my tenancy terms?

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

Caroline Raspison, associate with Carter Jonas rural, outlines considerations for environmental options on tenanted land

See also: Business Clinic: how to decide investment priority for daughters’ enterprises

Q. I have a 1986 Agricultural Holdings Act (AHA) tenancy on Grade 4-5 land.

It makes most sense for me to reduce risk and guarantee an income by drastically reducing my arable acreage and planting up to 50% of my total acreage in Sustainable Farming Incentive (SFI) option IGL2/AHL2 (winter bird food).

Is this likely to cause an issue with my landlord in terms of the land having to be “farmed” or any other tenancy conditions?

The remaining 50% will be a mixture of permanent pasture, temporary grass and herbal leys for grazing livestock.

Herbal leys, temporary grass and IGL2/AHL2 will be grown in a five-year rotation in the hope of improving some of my poorest soils.

A. Whether on arable or grassland, many SFI and Countryside Stewardship (CS) options are fundamentally agricultural and are designed to run alongside active farming businesses.

The aim of the winter bird food options is to provide seeds to feed farmland birds and these are birds that thrive on farmed land.

The permitted use of rented land can vary from tenancy to tenancy. Under an AHA tenancy, the land use should be predominantly agricultural and it is very likely that your tenancy agreement will specify that the land should be used for agriculture. In addition, the “rules of good husbandry” apply, as defined in the Agriculture Act 1947.

Good husbandry

I see no reason why land managed under the vast majority of environmental scheme options cannot also be deemed agricultural and meet the rules of good husbandry.

These rules require arable land, for example, to be kept in a good state of cultivation and fertility and generally in good, clean condition.

The rules also refer to a “reasonable standard of efficient production”, which is particularly “of its time”, the rules having been written in the post-war era when domestic food production was of utmost importance.

Priorities have shifted since then, with a focus now on farming in an environmentally friendly way, as supported by schemes such as SFI and CS.

The latest Agriculture Act, introduced in 2020, has its own timely provisions in this vein.

New rules for tenants

The Act introduced a new rule allowing AHA tenants to challenge a landlord’s unreasonable refusal of consent to enter into schemes such as SFI and CS; a tenant can request that the matter is determined at arbitration or by third party determination.

So, in effect, landlords are required to grant consent to AHA tenants wishing to enter into schemes, unless they have good reason to refuse.

There is no equivalent provision in statute for tenants under farm business tenancies, despite the fact these are more likely than AHA tenancies to contain clauses specifically prohibiting tenants from entering into schemes without the landlord’s consent.

This is something the Rock Review (Baroness Rock’s independent report on the tenanted farming sector) has recommended is changed, to open up access to these schemes to all tenants.

Regardless of tenancy type, I would always encourage tenants and landlords to communicate about these schemes in the first instance, as more often than not, they are mutually beneficial.

In the absence of explicit consent from a landlord, providing the scheme option doesn’t damage the land or permanently alter the ability to farm it more “traditionally”, I wouldn’t consider to it to be in breach of the requirement to farm the land or breaching the rules of good husbandry.

Tenancy clauses specifically prohibiting a tenant from entering into a scheme without the landlord’s consent, however, need to be looked at carefully. If you are still unsure about any aspect of entering rented land into a scheme, you should seek further advice.  

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