One Year On: Agricultural Holdings Act 1986 succession after the Agriculture Act 2020 reforms

As we mark the first anniversary of significant changes to the Agricultural Holdings Act 1986 (AHA) succession regime, it's time to reflect on the impact of these reforms. On 1 September 2024, tenant farmers and their families celebrated the removal of the commercial unit test, a long-standing, and long-criticised barrier to tenancy succession, while landlords cautiously embraced the introduction of enhanced suitability criteria. In this edition of Field Notes, we delve into the implications of the Agriculture Act 2020, lessons learned from the first year of the new regime, and what these changes might mean for the future of succession applications under the AHA.

The Commercial Unit Test: A Barrier Removed

The commercial unit test was a contentious criterion that disqualified succession applicants if they occupied a separate "commercial unit" of agricultural land. While seemingly logical, it often resembled a Kafkaesque legal fiction. Defined as land capable of producing a net annual income equivalent to the average earnings of two full-time adult male agricultural workers under competent management, the test failed to account for actual farming enterprises and the economic conditions at the time they were established. Instead, it focused on hypothetical scenarios – the farming enterprise “competent management” might establish accounting for current economic and other relevant considerations – and notional productive capacity, calculated using Units of Production Orders (UPOs), applying a per-hectare or per-animal figure.  UPOs didn’t always properly reflect the current market conditions either – theoretically issued annually, they were inconsistently issued, at least over the final decade before abolition. 

In practice, this test risked disqualifying the family members most involved in farming, especially those who were farming with commercial success, who had been able to diversify or expand their operations. Critics rightly argued that the test was arbitrary, ignoring actual farming operations and income in favour of theoretical calculations.

The Impact of Abolition

The removal of the commercial unit test was hailed as a long-overdue reform. Tenant groups argued that it was an outdated barrier, out of step with modern farming practices where multiple holdings and mixed business structures are common. Landlord organisations, however, expressed caution, warning that widening the pool of potential successors could entrench long-term tenancies and reduce landlords' ability to reclaim holdings.

Enhanced Suitability Criteria: A Shift in Focus

While applicants have always needed to demonstrate suitability to succeed to a tenancy, the reforms have clarified these criteria. The focus has shifted towards the applicant's ability to farm commercially, their business management skills, production standards and environmental considerations. The key question now is whether a prudent and willing landlord could reasonably be expected to have regarded the applicant as being amongst the candidates to whom they would have been willing to grant the tenancy, had the applicant applied for it as part of an open competition.

One year on: observations and changes

Firstly, the process has been simplified. Applicants no longer face the technical, arbitrary hurdle of the commercial unit test and perhaps have more clarity about what “suitable” looks like. Suitability is coming under greater scrutiny than it used to. Livelihood has always been crucial and is still the primary focus for most applicants and respondents.  

Secondly, despite predictions, we haven't seen a surge in retirement succession claims. Death successions occur out of necessity and have always been a bit more flexible, allowing tribunals to treat applicants as eligible even if they don’t, strictly speaking, quite make the grade. The removal of the commercial unit test was expected to impact retirement successions more significantly. While some advisers anticipated an increase in applications from families who had previously written off their chances, this hasn't yet materialised visibly in practice or data. Suitability changes don’t appear to have made a difference to application numbers either way. 

Thirdly, there's a potential cultural change. For some tenants, the removal of the commercial unit test may have lifted a psychological weight, signalling recognition from policymakers that AHA succession remains an important part of the tenanted farming sector. This confidence may encourage the next generation to commit to farming careers, knowing their involvement in a wider farming operation which encompasses land other than the subject holding won't automatically disqualify them from making a succession application.  The increased focus on commerciality and business acumen prompted by the changes to the suitability test is indicative of a shift that favours a particular type of modern, commercially minded AHA tenant.  In some ways, that shift is in keeping with the wider policy shift away from government “support” or “subsidy” of the wider sector. 

Looking Ahead

While the reform simplifies succession applications and certainly removes an arbitrary hurdle, tipping the balance slightly in favour of prospective tenants it hasn’t yet led to a major spike in applications – and I’m not convinced it will.  The livelihood condition remains crucial and the source of most contention. 

For landlords, succession without the commercial unit test underscores the importance of careful estate planning and open conversations with tenants. For tenants, the suitability amendments highlight the importance of business planning and a commercial focus as an integral part of succession planning. 

If you need advice on AHA succession, whether as a landlord or as a prospective tenant, the team here at Charles Russell Speechlys would be delighted to help.  Please contact Maddie Dunn to discuss how we can help you. 

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Field Notes is Charles Russell Speechlys’ weekly agricultural law blog, sharing plain-English insight into the legal and policy issues affecting agriculture, agricultural land and rural business life. From hints and tips on avoiding agricultural disputes, pitfalls to keep an eye out when planning for tenancy or family agri-business succession, to the latest agricultural legislative or policy changes and the most interesting farm-related court decisions, Field Notes makes the complex more understandable, always grounded in the realities of life on (and off) the land.

Field Notes comes out every Wednesday. Previous editions of Field Notes include:

• Cheltenham: Where Clarkson Meets Covenants
• Arbitration Act 2025: what it means for farmers, landowners and rural disputes
• Renters’ Rights Bill: what rural landowners need to know 
• Nature-friendly practice or unnatural risk: beavers, natural nuisance and measured duty, the rule in Rylands v Fletcher
• Adverse possession and estate administration: insights from Nazir v Begum