An introduction to Agricultural Tenancies and Notices to Terminate
There are two main types of agricultural tenancy, each governed by a different statutory regime:
- Agricultural holdings governed by the Agricultural Holdings Act 1986; and
- Farm Business Tenancies governed by the Agricultural Tenancies Act 1995.
It is important to identify the type of agricultural tenancy as the two statutory regimes give the landlord and tenant different rights and responsibilities. The most significant differences relate to freedom of contract and security of tenure.
Agricultural Holdings under the Agricultural Holdings Act 1986 (“the 1986 Act”)
- Written or oral agreement created before 1 September 1995; and
- Land used for agriculture and for a trade or business.
Rights of succession under the 1986 Act
The 1986 Act provides for statutory succession to agricultural holdings by close relatives who meet the statutory conditions automatically in tenancies entered into before 12 July 1984. Tenancies entered into after this date will only carry rights of succession if the tenancy agreement provides. Only two successions are permitted.
A close relative can apply to exercise succession rights in either of the following circumstances:
- On death of a sole or sole surviving tenant. Close relatives can apply to the Tribunal for a new tenancy.
- On retirement of a tenant of a yearly tenancy. The retiring tenant must give the landlord a retirement notice, nominating a close relative as their successor and giving the date of succession. The successor can apply to the Tribunal for a new tenancy.
Applications for succession
The applicant for a succession tenancy must meet the statutory conditions. These relate to their suitability (in terms of their experience and health, and the views of the landlord) and their eligibility in terms of the following:
- Close relative. They must be a close relative of the deceased or retiring tenant.
- Livelihood. They must have derived their only or principal source of livelihood from agricultural work on the holding for at least five of the seven years preceding the original tenant's death or retirement.
- Occupancy. They must not be the occupier of a commercial unit of agricultural land. This is a unit capable, when farmed under competent management, of producing a net annual income of at least the aggregate of the average annual earnings of two full-time, male agricultural workers aged twenty or over.
Applications for succession are frequently contested on the basis the applicant does not fulfil the above grounds. If the parties are unable to agree if the applicant is entitled to a succession tenancy of the holding, the First Tier Tribunal (Property Chamber, Agricultural Land and Drainage (ALD), shall determine the application.
Termination of 1986 Act tenancies
The 1986 Act gives security of tenure to a tenant of an agricultural holding by restricting the circumstances in which it is possible for a landlord to terminate the tenancy. It achieves this by the following means:
- Converting most tenancies into yearly periodic tenancies, which are therefore subject to the common law requirement for termination by notice to quit; and
- Restricting the circumstances in which a notice to quit will be effective.
The 1986 Act also extends the common law notice period for a yearly periodic tenancy by requiring termination on at least 12 months' notice from the end of the then current year of tenancy in most circumstances. In addition to these statutory requirements, the landlord must also comply with any contractual restrictions on the service of a notice to quit, so should check the terms of the tenancy agreement before giving notice.
The 1986 Act creates the following two classes of notice to quit an agricultural holding:
- Unqualified notice. A notice that is not based on any of the cases for possession in Schedule 3 to the 1986 Act (Cases) (set out below). A tenant can challenge an unqualified notice by serving a counter-notice on the landlord. If they do so within the deadline, the notice to quit has no effect unless the landlord obtains Tribunal consent to its operation. The 1986 Act restricts the circumstances under which the Tribunal can give consent.
- Case notice. A notice based on one or more of the seven Cases, which is generally the landlords preferred choice. A Case notice is sometimes called an incontestable notice to quit. Although the tenant can contest the reasons stated in some Case notices by arbitration or contest the validity of a Case notice at common law, they cannot serve a counter-notice compelling the landlord to obtain Tribunal consent to its operation.
The seven Cases are: (A) smallholdings; (B) Non-agricultural use; (C) Certificate of bad husbandry; (D) non-agricultural use; (E) irremediable breach; (F) insolvency; (G) death; (H) Ministry Certificate.
Caution is required when a holding includes dwellings such as a farmhouse, cottages or converted barns, or when a tenant has sub-let dwellings, or when the tenant is not residing in the farmhouse, as other statutory regimes could protect a residential occupier.
Farm Business Tenancies under the Agricultural Tenancies Act 1995 (“the 1995 Act”)
- Granted on or after 1 September 1995; and
- All or part of land farmed for a trade or business, and the tenancy is primarily agricultural
A farm business tenant enjoys no renewal rights under the 1995 Act, and no security of tenure other than the restrictions on termination notices.
Tenants under farm business tenancies do not enjoy any long-term security of tenure. However, the 1995 Act affords a degree of statutory protection to tenants:
- For fixed term tenancies in excess of two years, the landlord must give at least a year's notice to terminate the tenancy at the end of the fixed term.
- Where a fixed term tenancy has become periodic (i.e continued beyond the fixed term), the landlord must give at least 12 months’ notice to expire at the end of a year of a tenancy.
- Fixed term tenancies of less than two years shall expire by effluxion of time (i.e no Notice to Quit is required).
- For tenancies of a period shorter than a year (i.e monthly or weekly tenancies), the notice period is equal to a term of the tenancy (i.e one month for a monthly tenancy).