Prepare carefully for rent review process, warns NFU

Rent Reviews should be a two way process and tenants need to be prepared.

The NFU’s Robert Sheasby suggests some advice ahead of negotiating

With Lady Day just past those tenants who received a rent review notice last spring will have either settled their rent for the next three years or be very close to reaching a settlement.

A large number of rent review notices have been served over the past year and a tenant in receipt of a rent review notice for either this Michaelmas (29 September) or Lady Day 2009 (25 March) need not necessarily panic just yet, but must ensure they are prepared ahead of the rent negotiation.

The first thing is to check that the notice has been correctly served, and served in time. There must be a minimum of twelve months notice provided, there is some evidence of landlords not providing the proper notice period, which provides the tenant with a stronger negotiating position if required.

Next check what type of agreement the review is for is it an Agricultural Holdings Act 1986 (AHA ’86, traditional succession tenancy) or for an Agricultural Tenancies Act 1995(ATA ’95 FBT’s).

The rules surrounding how rents are calculated are very different under these two pieces of legislation and consequently a rent reviews under the AHA’86 will produce a very different rental value to land let under the ATA’95.

Be Prepared

Like any business matter it pays to be prepared, almost always your landlord will be represented by a chartered surveyor or agricultural valuer, unless you have an in depth knowledge of the legislation it may well pay to get your own professional advice.

Re-read your tenancy agreement, for many it may not have been read since the last rent review or possibly since the day it was signed. Make sure you know exactly what your agreement says about the rent review process, on occasion it can vary and the worst mistake would be to negotiate without knowing on what terms you should be settling the rent.

Budgeting

The second step, particularly important for AHA’86 is to check your budgets, carry out a whole farm budget, this will enable you to calculate a net farm income, the point at which the rent is calculated. NFU members who subscribe to the Legal Assistance Scheme can get help with this through Callfirst and tenants first advice service.

Do not overlook the current volatility in the market place, cereal prices are changing on a weekly basis, yields that can be achieved and the ability of the land to support stock for example, input costs seem to continue upwards with fertiliser and fuel costs leading this, these figures must be accurate in the budget – an error here could lead to an inaccurate basis for negotiating the rent, it pays to double and triple check these figures in your own budget and the budgets of your landlord.

Without knowing what are termed the ‘productive capacity’ and the ‘related earning capacity’ for the land it will be hard to calculate what rent ought to be properly payable.

The NFU is always happy to explain the review process to its members and provide information from the rent database, based on reported rents.

Do not forget that the rent review is not just an opportunity to settle the rent it is also an opportunity to talk about all aspects of the tenancy agreement.

This could provide the chance to discuss consent for a diversification, the prospect of landlord investment, the right to make a tenants improvement, or enter an agri-environment or other type of scheme.

alk about all aspects of the tenancy agreement, this could provide the chance to discuss consent for a diversification, the prospect of landlord investment, the right to make a tenants improvement, or enter an agri-environment or other type of scheme.