Tenancy term lengths stifled in cautious sector
© Adobe Stock The lengths of tenancy agreements in England and Wales have been adversely affected by uncertainty around Brexit and future farm policy.
The average term for all lettings is up slightly on the year but has not yet recovered from the lows of 2018, according to the Central Association of Agricultural Valuers’ (CAAV) agricultural land occupation survey for 2019.
Meanwhile in Scotland, private landowners need to be encouraged to let land to turn the tide on the extremely limited opportunities for new entrants in the sector, the report says.
See also: Why farm tenants are criticising National Trust landlords
Term lengths
In England and Wales, the variety of tenancy term lengths offered continues to be showcased.
During 2019, farm business tenancy (FBT) lengths reported ranged from one month to 48 years (the latter going to a new entrant). In 35 cases, the letting was for less than one year and there were 24 periodic tenancies running from year to year – the highest figure since 2013.
For many years, the agreement length across all types of letting – from short-term seasonal grazing and cropping of bare land to whole farm tenancies – has averaged between 3.5 to 4 years.
However, in 2019, the average was just 3.2 years, up slightly from 2.9 in 2018.
Excluding lettings of less than a year, the average changes to just over 4.75 years (2018: 4.14), and jumps to 10.1 years for lettings of fully equipped farms, with a house and buildings (2018: 7.5 years).
Lettings of more than 200 acres averaged 7.5 years, up from 5.16 the previous year.
Over the past decade, the shortest average terms were recorded in 2018 and 2013 (3.17 years), closely followed by 2019.
The longest average terms were seen in 2016 (4.48), 2012 (4.12) and 2017 (3.97).
Since the comparative highs of 2016, both landowners and tenants appear to be cautious about committing to longer-term arrangements ahead of post-Brexit changes to trade and support, says Jeremy Moody, CAAV secretary and adviser.
“A 10-year tenancy let in autumn 2019 would run until autumn 2029, and so potentially see the complete removal of basic payment and many other changes to markets and rules,” he says.
Letting sector
Where tenancies end, the land is generally re-let, as seen in 83% of cases where an Agricultural Holdings Act tenancy ended, and 91% of cases where an FBT ended.
The increased use of FBTs since the 1995 reforms has succeeded in growing the tenanted sector in England and Wales, with half of it now covered by FBTs.
In 2019, new entrants took 32% of the lettings to a new occupier (2018: 23%), and 23% of lettings to new entrants were for more than five years (2018: 32.5%).
In comparison, just 10% of other tenants received lettings of more than five years.
Private owners are the main source of lettings, rather than institutions or public sector bodies.
See also: Scottish tenant farmers tell of upheaval at being forced out
Scotland
Letting activity has remained very low in Scotland, with just 11 lettings to new entrants reported in 2019.
Only 7% of all lettings included a dwelling, and the average term length was 3.6 years.
The key to increasing the number of new lettings is to find what will encourage a private landowner (such as a retiring farmer) to see letting land as a practical and useful option, says Mr Moody.
The more opportunities there are, the more open the market is to new entrants.
Currently, the sector is challenged by area-based subsidies – which appear to inhibit change and tend to increase rents – Scotland’s complex and changing legislation, and a political climate in which the Scottish government’s review group described being a landlord as a “high risk, low reward” activity, he says.