Agricultural Holdings: Changes to succession rules are now in effect
Under the Agricultural Holdings Act 1986 (AHA 1986), an agricultural tenancy that commenced before 12 July 1984 will usually qualify as an AHA tenancy.
An AHA tenancy allows for two succession tenancies to take place after the original tenancy. A potential successor can apply for a succession tenancy upon the death or retirement of the previous tenant within specific timeframes.
If the potential successor makes a valid application for a succession tenancy to the Tribunal within three months of the death of the tenant or one month from the day after notification is given by the tenant of their retirement to the landlord, it will be for the Tribunal to consider whether they are entitled to a succession tenancy. As part of this, the Tribunal must determine whether the potential successor meets the relevant tests of suitability and eligibility under the AHA 1986.
On 1 September 2024, changes to the succession rules surrounding the tests of suitability and eligibility came into force in England and Wales. This was the final element to be implemented under the Agriculture Act 2020, as part a phased approach to align the criteria with modern farming practices and agricultural policies.
Changes to the rules: Eligibility
The Commercial Unit Test has been scrapped. Previously, a potential successor could not separately occupy another commercial unit of agricultural land. This is no longer part of the succession rules on the basis that it was considered unfair to entrepreneurial tenants.
With the changes now in effect, the potential successor must demonstrate eligibility for a succession tenancy by satisfying both of the following tests:
Close Living Relative Test
The potential successor must be a close living relative of the previous tenant (i.e. a spouse, civil partner, child, sibling, or a person treated as the previous tenant's child where the deceased tenant had married or entered into a civil partnership).
Principal Source of Livelihood Test
The potential successor must show that they derived their only or principal source of livelihood from agricultural work on the holding in at least five of the last seven years of the previous tenant's tenancy.
In addition, the condition that an outgoing tenant must be aged 65 or older before a potential successor can apply for succession on retirement has been abolished, and there is now no minimum age.
Changes to the rules: Suitability
If the potential successor satisfies the Eligibility Test, they must prove that they are suitable to become the tenant of the holding and the Suitability Test has been bolstered.
Previously, the potential successor had to show suitability to succeed the tenancy by demonstrating – in summary – that they had sufficient training and experience, and were of suitable health and financial standing, to take on the tenancy and run the holding.
In addition to the above suitability requirements, the potential successor must also now demonstrate that they are suitable to farm the holding “commercially to high standards of efficient production and care for the environment”.
On this basis, it is now considered that a potential successor must be able to show that, if the tenancy was available on the open market, a prudent landlord would be willing to shortlist them for the tenancy.
Key takeaways
The changes to the succession rules should be encouraging to landlords, in that potential successors must now follow a more rigorous process to demonstrate their suitability. The changes also allow opportunity for more progressive tenants to succeed tenancies of holdings.
It is important to note that the changes must be considered alongside other statutory requirements for succession under the AHA 1986 which have not changed. In particular, the strict statutory time periods for succession applications and service of notices still apply. Landlords and tenants should therefore not delay in taking legal advice in the event of death or retirement of a tenant.
Future Tribunal cases surrounding these new succession rules are likely to provide further clarity on the application of these changes, and those involved in agricultural land will want to keep an eye on developments.
Please do not hesitate to contact Helena Taynton or your usual Charles Russell Speechlys contact if you have any queries. This insight is not a substitute for legal advice on the specific circumstances of your situation.
