Tenancy model promotes nature’s recovery and diversification
Trevethoe House Farm © Carter Jonas All new farm tenancies on the Crown Estate are to be environmental farm business tenancies with a minimum 15-year term, no open-ended break clauses for the landlord but breaks for the tenant.
The environmental farm business tenancy (eFBT) has come about following a review of rural strategy and was drawn up by Kevin Kennedy of law firm Burges Salmon.
It is hoped other landlords will adopt its principles as a framework for a more collaborative approach, allowing tenants to benefit from environmental measures and diversification opportunities.
See also: New landlord-tenant code of practice – what’s changed?
The Crown Estate
- A diverse portfolio of marine, urban and rural assets, with 550 farms and 330 tenants. The Crown Estate’s net revenues are passed to the Treasury
- One of the largest rural landowners in England, Wales and Northern Ireland, with almost 83,000ha across 30 estates. Uplands interests in Cumbria and throughout Wales make up about 24,300ha of this, while most of the remaining 58,700ha is Grade 1 and 2 arable land, with some dairy farms in Cheshire, Essex and Wiltshire
- The in-hand element is limited to Northumberland and Windsor
- One-third of the let land is on Agricultural Holdings Act tenancies, a further third on farm business tenancies and the remainder is upland commons in Wales and Cumbria
- The rural arm aims to be a leader in the delivery of the green agricultural transition and nature recovery
- The Crown Estate acquired the ability to borrow only since the current government came to power, and had been selling rural land holdings to help fund developments and investment in other property sectors
- It now plans to rebuild its rural holding, looking for mainly Grade 3 land. It bought the 1,011ha mainly arable Dissington Estate in Northumberland last year, and 202ha on Romney Marsh
Endorsed by the Tenant Farmers Association (TFA), each new eFBT will include a requirement to meet the Crown Estate’s target of having 15% of land in nature recovery.
Where existing Crown Estate farm business tenancies (FBTs) expire, new longer term eFBTs will replace them, says Paul Sedgwick, who has overall responsibility for the Crown Estate’s rural holdings.
Paul is deputy ranger at Windsor and managing director of the rural portfolio for the Crown Estate.
He says two eFBTs are already in place, with the tenants involved bringing forward nature recovery plans far greater than the estate’s 15% ambition.
Separate rent negotiations are likely for the main farmland and that in nature recovery.
“We accept that rents may reduce, indeed we are actively reducing them on land transitioning to nature recovery in order to drive better outcomes.”
Access to the Sustainable Farming Incentive (SFI) offer is expected to underpin an element of profitability on some of the nature recovery land.
However, its premature closure means the Crown Estate is considering how to address this until the SFI reopens (see “Rents challenge and impact of SFI closure” below).
The Dissington Estate, Northumberland, bought by the Crown Estate last year © Crown Estate
Rents challenge and impact of SFI closure
On the question of how rents would be arrived at for an environmental farm business tenancies (eFBT), the Crown Estate’s Paul Sedgwick says:
“We’ve had two attempts at this. The first one we will put in the unsuccessful category, which was trying to work out a blended rent between productive farmland and nature recovery land.
“We quickly moved on to the theory that having two separate rents is probably the best way of doing it.
“On the latest batch of FBTs that are moving onto eFBTs, we have agreed with the farmers rents for their arable and pastureland and then a separate rent around land that is transitioning to nature recovery.
“The aspiration around that rent differential is to make an acre of nature recovery more profitable than an acre of wheat.”
Sustainable Farming Incentive impact
“However, that underlying profitability on the nature land was underpinned by the farmers’ ability to claim SFI, so in the last month we’ve had to have a bit of a rethink about how we deal with this in the interim period before SFI [part] two comes out of the blocks.
“We are genuinely worried about that.
“There’s so much goodwill building within our farmers to do this transition into nature recovery, still producing lots of food, because we’ve gone on that journey with them about taking a financial hit to help deliver this.
“So we are going to have a think about how we deal with that short-term issue.
“We may have to use the [in-house] rural environment fund to help maintain that momentum, because the positivity around it has been really exciting and we just need to make sure that we don’t lose that.”
Three farms to let
Last week tenders opened for three eFBT lettings, the largest of these being a fully equipped 200ha holding at Swine, near Hull, with 1,000t of grain storage.
In Lincolnshire, Grade 1 bare land lettings offer 33ha at Gedney Drove End and 145ha with 4,000t of box potato storage near Holbeach.
The new format was launched at an event on 2 May, following four years of development and consultation, with the TFA involved for the past 18 months.
Longer lease terms are vital for investment and to enable genuine long-term change to a more regenerative farming system, says Paul.
“We think there is an urgent need to revisit the traditional land tenure model to find more modern ways of sharing in these future income streams – a partnership model built on trust and longevity rather than a landlord and tenant system that in many ways is adversarial and doesn’t align to future markets and opportunities. It needs to modernise,” he says.
“In a farming sector facing the total removal of subsidies, seeking to build on-farm diversification of income streams and a diversity of land uses will be critical, not only to the lasting resilience of our farming businesses but also to us.”
With its rural portfolio emitting 190,000t of carbon dioxide a year, the changes on farm will also help the estate in meeting its net-zero and carbon reduction targets.
Contractual revolution
TFA chief executive George Dunn describes the eFBT as a contractual revolution which could be a major driver towards a complete reimagining of the landlord-tenant system in agriculture.
“If the 1995 act [which brought in FBTs] could be described as a legislative revolution, the eFBT agreement is, to my mind, a contractual revolution,” he says.
“It contains mechanisms for defining measurements of biodiversity and carbon, including their baselines and metrics for determining uplift.
“The agreement has a focus on environmental enhancement and looks at the environmental condition of the holding, as well as its physical condition, at the beginning and at the end of the lease.”
Soil nutrient levels and soil structure, and how these might be improved, are addressed in the lease.
“This is the opportunity for landlords and tenants to be able put an architecture together which creates a long-term sustainable view for both the landlord and tenants – where rent is not just the only discussion that takes place between the parties, but we are able to exploit food markets, environmental markets and diversification markets,” says George.
Other landlords, including the National Trust, Church Commissioners, The Duchy of Lancaster, the Duchy of Cornwall and private estates have already shown interest in the eFBT.
“I think we could see a major tuning of the tide in which relationships develop going forward,” says George.
Value of environmental uplift to be shared
The agreement is explicit about working collaboratively with tenants to deliver environmental uplift, and that the financial benefit – if any – of that uplift should be shared appropriately between landlord and tenant, says George.
This is in contrast to most current FBT agreements, which restrict tenants to use the land for agricultural purposes only.
“Very few agreements I have seen would allow tenants to be involved in creating environmental outcomes through private markets.
“The eFBT agreement truly breaks the mould by making it clear within the agreement that the landlord fully expects the tenant to come forward with ideas for environmental enhancement, and provides a mechanism for those ideas to be tested, approved and taken forward.”
Open to diversification
Rural diversification is being scaled up across the Crown Estate’s farming interests, where 200 projects are ongoing or planned in a mix of landlord, tenant and joint initiatives.
Standard farm business tenancy agreements prevent tenants from taking part in diversified activities.
However, the environmental farm business tenancy (eFBT) agreement opens the door for tenants to present ideas to the landlord and includes a framework for these to be put into practice.
To help with this, a farm partnership book will be agreed by landlord and tenant.
This will address issues around diversification, local engagement, education and public access and how the benefits of those might be shared.
The Crown Estate provided seed capital for building conversion at The Piggery Farm Shop, run by one of its tenants © Crown Estate
Original FBT concept
FBTs were introduced by the Agricultural Tenancies Act 1995, allowing landlords and tenants freedom of contract, albeit with some statutory safeguards.
“Instead of being a liberating moment, the legislation ushered in a culture of short termism, restriction and transactionalism rather than long-term, flexible agreements built on collaborative and collegiate relationships, says George.
George says the threats to the future of the current landlord-tenant system include:
- The average length of term on all FBT tenancy agreements being between three and four years
- 85% of all new tenancy agreements being for five years or less
- Tenants being fully restricted to agricultural use only, with landlords reserving the right to all non-agricultural activity and natural capital benefits.
“Worse than that, the tendency is to produce agreements which will see tenants losing access to land completely, where their landlords wish to pivot more towards those environmental or non-agricultural uses,” he says.
The eFBT addresses some of the threats, he says, keeping food production at its core but balanced with nature and non-food uses.
“It breaks new ground, takes risks in a way in which previous agreements didn’t and is not afraid of identifying and articulating grey areas and avoiding binary answers to questions.
“To that end, in contract drafting terms, I’m pretty sure it will send shivers down the spines of many a lawyer and others writing agreements, who have been used to taking a conservative approach to drafting and I see that as a very good thing.”
The Crown Estate also wants to help tenants navigate to different types of food production systems while tackling some big national issues, especially in relation to net zero and the biodiversity crisis, says Paul.
“We could not see a way that landlords and tenants could partner to support and trial digital technology, measure and collect consistent data, and make meaningful and lasting changes across the other pillars of our strategy with a standard FBT.”
As a result, a “green book” accompanies each eFBT, setting out shared nature ambitions for the estate or farm.
Environmental plan
“Each estate has a bespoke environmental plan provided by a local ecologist, with farmer input,” says Paul. “This will become the norm across all our farms.
A farm partnership book or “pink book” with each eFBT sets out social aspirations such as community facilities, public access, local food and education.
Opportunities for the Crown Estate and its tenants will also come from emerging natural capital markets.
This means there is increasing pressure on businesses to report their impact on nature under the Taskforce on Nature Related Financial Disclosures.
Carbon, natural capital, nature recovery and biodiversity net gain all offer future income streams for both landlord and tenants, says Paul.
Lawyer Kevin Kennedy of Burges Salmon says that accompanying documents which sit alongside the eFBT such as the “green book” and the “farm partnership book” are a real departure.
They set out the shared aspirations of landlord and tenant, in contrast to the traditional approach of landlords setting out what the tenant cannot do.
Good husbandry and nature recovery
The good husbandry rules written in 1947 require tenant farmers to maximise the efficient use of their holding from a production perspective.
Outside the concept of the eFBT, questions now arise as to how some environmental measures sit with regard to the good husbandry rules for the tenanted sector generally. Clarity is needed on this, says George.
Nature fund for all farms
Available to all Crown Estate tenants is a rural environment fund of £20m.
Dubbed “the hedge fund”, it pays for nature recovery work such as hedge and tree-planting, wetland creation, dykes, margins and ponds.
Almost 300km of hedgerows have been planted in the fund’s first three years, including King Charles’ Windsor 6-9m wide hedgerows with standard trees.
A series of Jubilee woodlands planted in memory of the late Queen will add more than 800ha of woodland over the next decade.
This helps to increase woodland cover from 7% to 16.5% of Crown Estate land.
Over an initial five years, the fund equates to £4m/year across 81,000ha, says Paul.
This equates to about £49/ha which Paul argues most landowners of any size can afford as an investment into nature recovery.
Funding for hedge planting is available to both FBT and Agricultural Holdings Act Crown Estate tenants © Crown Estate
Question Time on eFBTs and tenancies in general
The launch day of the Crown Estate’s eFBTs included a Question Time session hosted by Farmers Weekly projects editor Johann Tasker.
Topics included whether food production was losing out to environmental measures and how good husbandry rules might be applied with regard to nature recovery work on tenanted land generally.
Listen to the Farmers Weekly Question Time podcast: Tenant Farmers Conference 2025.