Surge in tenanted areas shows FBTs taking off

By Catherine Paice

DRAMATIC growth in letting of land is revealed in the Central Association of Agricultural Valuers latest survey, reflecting the increasing popularity of farm business tenancies.

The 1999 survey of tenanted farms shows a net gain to the sector of around 61,000 acres, more than the previous two years levels combined.

This takes the total net gain for the past four years to 170,000 acres, recouping over 70% of land lost over the four years preceding the introduction of FBTs in 1995.

Only 16,000 acres were lost to the let sector in 1999, the lowest figure ever recorded by the survey.

But, for the first time since 1992, most was sold with vacant possession when a tenancy ended rather than being sold to sitting tenants.

“This is most likely to be a reflection of sustained land prices and weakening 1986 Act rents,” says Jeremy Moody, CAAV secretary and adviser.

A record 664 units, covering over 77,000 acres, were let for the first time, ending years of heavy decline, adds president Andrew Granger.

“This would have been inconceivable without the reform of tenancy law in 1995.”

Average length of all FBTs was just over four years, although tenancies of more than five years were let for an average of 14 years.

Those holdings which included a house and buildings averaged 11 years duration.

For the first time, the survey highlights uptake by new entrants.

It shows they accounted for just under 10% of FBTs, representing almost 22,000 acres.

Average area was 90 acres, slightly higher than the overall average.

The Tenant Farmers Association welcomed the results of the survey, though it adds that FBTs have not been as beneficial to new entrants as had been hoped.

Rents are often double 1986 Act levels, due to the proliferation of short-term lettings.

And the gap is widening – TFA figures show 1986 Act rents fell 20-35% last year, compared with 10-15% for FBTs.

This excludes new entrants from the market, says TFA chief executive, George Dunn.

If landlords were encouraged to let for longer, perhaps 10-15 years, for example, it would make applicants think twice about exposing themselves to high rent risks, helping to reduce the FBT premium, he maintains.

In the forthcoming review of the legislation, the TFA will be calling for a change to allow landlords and tenants, by mutual consent, to use the provisions of the 1986 Act, rather than being tied to FBTs.

This could be especially useful where a landlord wished to move tenants up through the estate or replace land lost to development, chairman Reg Haydon told last weeks annual general meeting in London.

But junior farm minister Elliot Morley said the government was not convinced that there was a strong case for FBTs to be amended. But the review would be a chance “to look again”.

Julian Sayers, chairman of the countryside and policy panel for the Royal Institution of Chartered Surveyors (RICS) said he would be cautious about sitting down to unravel FBT legislation.

The chances of getting parliamentary time were slim and it might be better for the industry to work around the problem, he said.