Set to stand your ground?
With Lady Day fast approaching and more rents up for review on Apr 6, Mike Stones looks at how best to get a satisfactory result
BE prepared, be reasonable and dont be intimidated.
Agricultural valuer John Hop-kinson is clear about how tenants, who do not have agents to represent them, can present a better case during rent reviews under the 1986 Agricultural Holdings Act.
"Tenants are good at identifying a fair rent, but some are less good at preparing a well-reasoned case to support their view," says Mr Hopkinson of chartered surveyors Berry Bros and Hopkinson of Bingham, Notts. Although he believes tenants should be represented by an agent during rent revisions, there are things people can do to help themselves.
To prepare for the review, first study your tenancy agreement, he advises. Has the landlords agent got the tenancy termination date right? Is the description of the holding still accurate?
Under the Agricultural Holdings Act 1986, tenants must be served notice of any rent review at least 12 months before the relevant date. Rents may rise only once every three years, so if your landlord won an increase two years ago, there should be no change this year.
Mr Hopkinson detects a rise in the number of notices currently being served for debatable rent rises. The suspicion is that, with tenants income more likely to fall than rise, landlords are keen to get reviews in sooner rather than later.
The next step is to find out if any rent memoranda accompany the tenancy agreement. "It may be that variations of the tenancy could affect the level of rent increase. Those include such factors as tenants improvements to buildings or increasing the cultivated area."
But it is also important to be reasonable. That means striking a balance between recognising what you can afford to pay and avoiding the temptation to stone-wall negotiations. "During the past two to three years rents have been rising. But how will the trend towards lower cereal prices affect profitability?" asks Mr Hopkinson.
To answer such questions keep well ordered, accurate, up-to-date records of farm accounts to use in negotiations with the landlords agent. And, remember, tenants as well as landlords can act on a landlords notice.
"Tenants could seek a reduction in rent if they could prove the circumstances warranted it," says Mr Hopkinson. Any improvements to the holding, such as putting up a new grain store or modernising a milking parlour, even if they were made without the landlords consent, could be justification for no rent increase or even a cut.
Not enough tenants think of negotiating changes to the status quo, he says. For example, if tenants are under pressure to agree rent rises, are there any concessions that could be won? Perhaps the landlord will put the tenants son on the tenancy, avoiding the need to rely on a succession application.
And stone-walling rent negotiations never pays. "A common pitfall among some tenants is hoping problems will go away by stalling rent discussions with landlords agents. Often that results in increased costs if the case has to be referred to arbitration," he warns.
Dont be intimidated
Intimidation by landlords agents is rare these days, says Mr Hopkinson. "The intimidation, which was common 25 years ago particularly on some large estates, hardly ever happens now." But he sometimes encounters problems arising from the unrealistically high expectations of non-farming landlords who have little or no farming experience.
Negotiating rents under a Farm Business Tenancy is an unknown quantity, concedes Mr Hopkinson. Although the first reviews conducted under the terms of the FBT will not come into effect until about Sept 98, notices of review may have to be given this September, so it is important to make decisions soon, he says.
"We have to assume that when entering an FBT, all we have learnt about revising rents under the Agricultural Holdings Act is to a great degree irrelevant. So it is essential to take advice.
"Current messages from the market reflect expectations that area aid and cereal prices will fall," explains Mr Hopkinson. Those revisions could take 12 months to filter through to AHA rent revisions, he adds.
Meanwhile, those tenants without agents, about half of the total, should be confident of reaching a rent agreement that is fair. "An amicable solution can be reached provided both parties are prepared to be reasonable. Most landlords and agents are quick to recognise the benefits for everyone of a well run and well managed estate." *
Agricultural valuer John Hopkinson says that tenants can be confidant of reaching a fair agreement.