Tenancy agreements that give landlords unfavourable rights or leave tenants with significant liabilities are becoming more commonplace, according to the TFA.
The issue has been made worse by landlords’ agents using standardised agreements when drawing up new farm business tenancies.
This “one-size-fits-all” approach to drawing up agreements is lazy and dangerous, according to TFA chief executive George Dunn.
“Any additional cost incurred at the beginning of an agreement to ensure it is drafted on a bespoke basis for the circumstances of each case would be dwarfed by the potential expenses incurred in trying to unpick matters at a later stage when it was found the agreement was not fit for purpose,” he added.
“By the time tenants realise the impact of certain clauses in their agreements it is too late to do much about them,” said Mr Dunn.
“It is vital that tenants seek advice about the terms of their agreements before they are signed.”
Four examples of common clauses to look out for
- Sub-letting clause This clause is commonplace. It is a relic of the pre-Farm Business Tenancy Act era and has lost a lot of its relevance. The clause prevents third-party stock from grazing tenanted land to avoid sub-tenancy situations. However, grazing sheep to clean up left over pasture is good practise and an inability to do so can jeopardise the flexibility of tenants to farm efficiently.
- Contemplation clause This provision gives landlords considering taking legal action the scope to bill tenants for expenses incurred. Under these clauses, landlords can charge thousands of pounds for sitting down with a barrister or lawyer to explore their options – even if no action is actually taken.
- Subsidy clause Some tenants sign agreements contractually obliging them to sign up for all future grants and subsidy schemes. This is dangerous as it reduces flexibility and can tie farmers to irrelevant schemes that may prove to be more effort than they are worth. These are particularly concerning when looking past Brexit, as the government may make subsidies less attractive to dissuade producers from taking them up.
- Breach clause Some of these clauses can make tenants liable to pay one year’s rent if they are in breach of agreements. However, not trimming hedges in time or incorrectly filling in a form could constitute such a breach, leaving tenants dangerously exposed to hefty charges.
Tenants seeking to take on new land need to go through agreements with a fine-tooth comb to weed out potentially problematic clauses, said Philip Meade, director at Davis Meade property consultants.
“Taking the time to check through the terms of tenancy agreements is vital. Tenants need to be assured their tenancy agreements fit with their plans, match their aspirations and protect their investments,” said Mr Meade.
“Nine out of 10 agreements will never have an issue, but it’s that small proportion signing up to these deals that could prove extremely costly, especially over the lifetime of a 20-25 year tenancy.
“It’s usually not a case of sinister intentions from landlords – these clauses often just haven’t been thought through or been adequately tailored to the situation.
“When I suggest making changes landlords are invariably fine with removing a troublesome clause,” Mr Meade added.