Rent reviews can be a scary time for tenants, particularly when they affect both home and business. But taking time to be prepared and to understand your rights can help you take control, writes George Dunn chief executive Tenant Farmers Association.
Here are some common questions asked of the TFA for both Agricultural Holdings Act (AHA) tenancies and Farm Business Tenancies (FBTs).
Should I have had notice for the review?
Chief executive Tenant Farmers Association
Q In nearly every case there is a requirement for notice of the review to be served by landlord or tenant at least 12 months and not more than 24 months before the review date.
This cannot be less than three years since the last rent change. Note that there are some FBTs that do not require notice or where more frequent reviews can occur.
Is there a difference between rent reviews for FBTs and AHA tenancies?
Q Yes – a big difference. FBT rents are usually set in line with open market rents for comparable holdings.
- Without a valid review notice there is no review
- FBT rents are not comparable with AHA rents
- Open market evidence can include reviewed rents on FBTs
- Budgetary evidence and comparable rents have equal importance in AHA reviews
- Don’t feel pressured to settle before the term date
- Make sure your investments are disregarded
- Always question any value suggested for the farmhouse
AHA tenancies consider factors including the tenancy terms, the holding’s character and situation, its productive and earning capacity, and rents paid on comparable holdings.
Do not accept any argument that seeks to use FBT rents in AHA rent reviews.
Are tender rents the only evidence that can be used in FBT rent reviews?
Q No. While recent case law suggests tender rents are a primary source of evidence, rents agreed during FBT reviews are a secondary source.
It is not unusual for there to be a small number of exceptionally high tender rents, while more widespread evidence of reviewed rents shows them at lower levels.
Evidence showing rent agreements at lower levels than tender rents is valid.
Are comparable rents more important than budgetary evidence for AHA rent reviews?
Q No. The legislation gives equal weight to budgets and comparable rents.
With falling returns across many sectors, budgetary evidence will not be beneficial to landlords’ claims and they will be more likely to press evidence of comparable rents.
I’ve been told I must agree before the term date or else it will go to arbitration. Is this correct?
Q No. The term date is the date by which the rent has to be agreed or by which one of the parties has applied for an arbitrator.
An application for an arbitrator does not mean that the rent will proceed to arbitration. It merely extends the time available for negotiation, so do not feel pressured to settle at an unsustainable level.
I have put a lot of money into the farm, can the landlord charge me a higher rent?
Q No. You are only required to pay rent for what the landlord has provided.
Can the landlord separate out a rental figure for the farmhouse within an AHA tenancy?
Q If the landlord is using a component valuation approach, looking at each aspect of the farm in comparison with comparable holdings, then this might be OK, depending on the individual values.
However, it is not appropriate to use residential rents as a basis for assessing such values. Neither is it right for a landlord to arrive at a split of a budgetary surplus and arbitrarily add on a figure for the farmhouse.
What should I do if a dispute arises with my landlord?
Q When a landlord serves a notice for a rent review, start to build a dossier of evidence including a budget for the holding, comparable rents on similar holdings and a schedule of tenant investment.
It may also be helpful to highlight areas where the landlord is not abiding by the obligations of the tenancy.
Seeking advice from the Tenant Farmers Association is a good place to start.
What can I do if I’m worried my landlord is playing for time so as to apply pressure?
Q Don’t panic. If the landlord wants to achieve a rent increase then he is responsible for setting out his case.
If the landlord presents his case late in the day, do not feel pressured to respond without taking the time to properly consider proposals.
If there is not sufficient time between receiving the proposal and the term date, then there is nothing to fear from the landlord having to make an application for an arbitrator.
This does not mean that an arbitration is inevitable – it merely extends the time for negotiations.