TFA accuses landlords of exploiting lump-sum scheme
© Tim Scrivener Farm landlords are exploiting the upcoming government-backed lump-sum exit scheme by slashing surrender payment offers to tenants, the Tenant Farmers Association (TFA) has claimed.
Surrender payments are offered by landlords to encourage farmers to give up their tenancies, enabling them to regain control of their assets. Fair payments are based on valuations of assets by land agents and agreed by the landlord and tenant.
But some land agents have advised clients to renegotiate surrender payments, knowing that the government’s pending exit scheme – which will offer a lump sum worth 2.35 times a farm’s average annual Basic Payment Scheme (BPS) payout – will act as an alternative financial incentive to quit, the TFA said.
In some circumstances, the TFA has heard of revised offers that are 50% below the original – a practice that the organisation said was immoral.
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TFA chief executive George Dunn reported that, during renegotiations, landlords were revising offers in the full knowledge of the upcoming exit scheme.
The lump-sum scheme is encouraging a lot of farmers to consider their futures and landlords are using this as an opportunity to get tenants out more cheaply, he said.
“We first heard of cases in the south-west of England, but numbers are increasing and spreading north and east across England,” said Mr Dunn. “We believe calls to us represent the tip of the iceberg.”
He said the surrender payment should reflect the value of the assets without including the exit scheme in calculations.
“Ultimately, a tenancy is worth what it is worth, regardless of what government schemes are available to the tenant at the time of surrender,” said Mr Dunn.
“When the BPS entitlements belong to the tenant, it is wrong for landlords’ agents to bring these into negotiations, as these are the assets of the tenants.
“These are available to tenants to use how they wish, be that to take part in the lump-sum exit scheme or otherwise,” he added.
However, the Country Land and Business Association (CLA) has rebuffed claims that there was a widespread exploitation of the exit scheme.
CLA chief surveyor Andrew Shirley urged caution in making assumptions that it was a major issue.
“The exit scheme is definitely not being used as a subsidy by landowners in general,” he said. “This is not something we are seeing, and is certainly not widespread.
“[Offers] could be withdrawn for a number of reasons. It is different with every estate, different with every tenant, and different with every agent,” Mr Shirley said.
Speaking more broadly about surrender payments, he said people should guard against eyeing landlords as “financial bottomless pits”.
“These negotiations are made in a free market. It is up to landlords to offer what they can afford and for the tenant to accept them if the deal is right,” he said.
Surrender payment deal cut by 50%
Farmers Weekly spoke to one farmer who had been affected. The farmer asked not to be named due to the sensitivity of ongoing negotiations, but said an original surrender offer had been withdrawn by the landlord.
“In its place, we got a revised offer that was 50% below the previous one,” the farmer said.
“[The revised offer] was made by the landowner in the full knowledge of the lump-sum scheme and calculated taking a potential payment into account.”
The new surrender payment, together with a projected lump sum from the exit scheme, totalled slightly less than the original.
“They didn’t even make up the shortfall,” the farmer said, who added that the landlord stood to make huge gains by ending the Agricultural Holdings Act agreement.
The farm has been in the family for generations and includes a succession clause. It would likely be replaced by a shorter-term farm business tenancy at double the rent with fewer guarantees, the farmer said.
What is the lump-sum exit scheme?
Farmers claiming under the Basic Payment Scheme (BPS) in England will be able to receive money in advance as part of a lump-sum exit scheme to help them leave the farm sector.
Details around the scheme, particularly over potential tax on payments are still to be finalised, but outlines suggest:
- Payments set at 2.35 times the annual amount of BPS received from 2018-20
- Eligible participants should have claimed BPS since 2015
- Requirement to surrender BPS entitlements and sell or let land
- Payment cap of £100,000
- Open for applications in the first half 2022
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