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On 29 December 2014, DEFRA produced a summary of responses to their consultation on modernising the repair and maintenance of fixed equipment and end of tenancy compensation for Agricultural Holdings Act 1986 tenancies. This has been an ongoing challenge under the DEFRA Independent Farming Regulation Task Force review.
Currently, the maintenance, repair and insurance of fixed equipment on a holding under an Agricultural Holdings Act 1986 tenancy is governed by the Agriculture (Maintenance Repair and Insurance of Fixed Equipment) Regulations 1973, otherwise known as the “model clauses”. The regulations need updating as technologies need catering for within the former, that were not even thought of in 1988 (the last revamp). Also, the costs mechanisms are woefully out of date.
The consultation looked at (amongst others) responsibilities for: reed bed filtration systems; slurry, silage and effluent systems; heating and power generation systems; fuel tanks; insulation; livestock handling systems; flood banks and even fitted kitchens.
There are a huge range of farmhouses and holdings, with different sizes, types, age and classifications of farmhouses, buildings and equipment. The regulations need to cater for all of those.
DEFRA’s aim is to revoke the 1973 regulations and introduce new regulations. The new regulations will be precise in terms of defining liabilities, contain modern wording and be more user friendly.
The 1973 regulations are comprised of a long list of responsibilities. The new regulations may even be presented in a user friendly table form, similar to the presentation of responsibilities in an a repair and insurance schedule in a farm business tenancy.
Where there has been a shift of repair responsibility to the landlord under a tenancy, the landlord has one month to commence arbitration provisions to determine compensation payable by the tenant for the period that the latter had repair responsibility. This provision would also be consolidated in the new regulations. There may be a transitional period for time limits with the new regulations.
In relation to compensation at the end of the term of a tenancy, DEFRA wants tenants to be compensated for the application of soil improvers, digestate, manure and fertiliser (whether or not the tenant paid for it) but this will not include waste disposal materials.
DEFRA also wants to increase the compensation provisions for improvements arising from a tenant spreading manure on the holding, so that it will include more livestock sources of manure.
At the end of the tenancy, there will be a wider scope of compensation to be paid. The benefit is that the thought of compensation should encourage a tenant to farm sustainably in the last years of a tenancy.
DEFRA also wants to revoke the Agriculture (Calculation of Value for Compensation) Regulations 1978. These regulations have not been updated since 1983. They do not compensate for the value of input to the land at current market prices. The revocation would also benefit the parties because at present these regulations do not allow for flexibility in settlement of claims between parties.
There is some useful updating to come from DEFRA in summary. Let us hope it doesn’t take too long to appear. Likewise, the Cabinet Office Deregulation Bill may or not appear before 10 May 2015 and the General Election. That contains a provision amending the Agricultural Holdings Act 1986, allowing the parties to take expert third party determination as opposed to arbitration for certain disputes including fixed equipment and end of tenancy compensation.
For more information please contact Jonathan Thompson, Associate
T: +44 (0)20 7203 5295