Radical shake-up of agricultural tenancies proposed

Plans have been put forward for a radical shake-up of agricultural tenancy legislation in England and Wales, with a key aim being to improve productivity growth by making it easier for people to enter and exit the industry.

Consultations have been launched concurrently in England and Wales and will run for the next 12 weeks. The deadline for responses is 2 July 2019.

The papers set out options that ministers hope will create opportunities for new entrants, who they say will bring new skills, ideas and innovation to the sector.

See also: How the Agriculture Bill will affect new farm tenancy agreements

The proposals are broadly based on the work of the Tenancy Reform Industry Group (TRIG), which made a series of recommendations to government back in 2017.

Assignable AHAs

Key ideas include enabling tenants with Agricultural Holdings Act (AHA) agreements, but without a successor, to assign their tenancy to a new third-party tenant farmer.

Industry experts estimate there may be 1,000 to 1,700 older AHA tenants currently “stuck” on their holdings without a successor, because they have limited means to retire and leave their farm.

The new tenant would be required to pay an open market rent and their tenancy would last for 25 years.

The idea is this option would allow an older tenant who wants or needs to retire to unlock the financial value of their tenancy, while at the same time unlocking land for new entrants.

Landlords would have the right to buy out the tenant’s interest to regain possession of the holding, but could not reasonably refuse consent to the tenancy being reassigned.

FBT security

Another idea in the consultation is to incentivise landlords to offer farm business tenancies (FBTs) of 10 years or more, by agreeing shorter termination procedures in specific circumstances, such as non-payment of rent, death of the tenant, or when the landlord has planning consent.

Longer FBTs would give tenants greater security and therefore the confidence to invest, it says.

Farm minister Robert Goodwill said: “We are seeking views on how we can open up more opportunities for the next wave of tenant farmers, breathe new life into the sector and step up farming productivity.

“We are exploring a number of options to reboot the sector, such as encouraging earlier succession planning and having more flexibility in current tenancy agreements.”

Tax frustration

George Dunn, chief executive of the Tenant Farmers Association (TFA), said the two consultations contained some radical proposals.

These include major changes to the rules surrounding tenancy succession that would massively simplify the process.

But he added: “While we are really pleased to see these suggested changes to legislation, it continues to be a source of frustration that we are not able to look at possible changes to the taxation framework within which agricultural tenancies operate.

“For example, the TFA has argued that landlords should only be able to obtain Agricultural Property Relief from inheritance tax if they are letting their land for 10 years or more, rather than for tenancies of any length as is currently the case.”

How to respond in England

For more information, visit Defra’s consultation website.

How to respond in Wales

For more information, visit the Welsh Government’s consultation website.

Consultation proposals

  • Changing AHA succession rights, including removing the minimum age of 65 on retirement applications and the commercial unit test applied to possible successors
  • Extending the category of close family relatives eligible to succeed to include nieces, nephews and possibly grandchildren
  • AHA tenants given right to assign tenancy to third party in certain circumstances
  • Introducing short notices to quit for longer FBTs
  • Introducing new resolution mechanism that deals with cases where restrictive AHA clauses restrict the tenant or landlord from entering new land management schemes or developing the business.
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