Agricultural tenancies: back to basics
A Tale of Two Tenancies
If you’ve ever sat in a farmhouse kitchen while a tenant farmer discusses their lease, you will know that not all agricultural tenancies are created equal. In England and Wales we’re dealing with two very different beasts: the Farm Business Tenancy (FBT) and the Agricultural Holdings Act tenancy (AHA). Understanding which you are dealing with matters enormously.
The Old Guard: AHA Tenancies
Agricultural Holdings Act tenancies are the legal equivalent of a vintage Massey Ferguson: robust, dependable, typically valuable to the tenant, getting rarer but still very much in evidence. Created under the Agricultural Holdings Act 1986 (and its predecessors), new AHAs (as opposed to succession tenancies) could only be granted before 1 September 1995. If your family has been renting on the same holding for generations, there is a good chance an AHA is involved.
The hallmarks of an AHA tenancy are security, statutory control and (depending on when granted) succession. Tenants enjoy lifetime security of tenure, meaning that so long as they comply with the lease, farm the land properly and pay the rent, they cannot simply be removed at the end of a fixed term (and, in fact, AHAs are typically annual periodic tenancies, rolling on from year to year). Perhaps more significantly, AHA tenancies can pass down through the family, with up to two successions available to close relatives who meet the eligibility and suitability criteria. This has kept farms in the same families for decades – an upside for tenants but hugely restrictive from a landlord perspective.
Rent reviews under an AHA operate on a three-year cycle, with rents assessed by reference to the productive capacity of the holding rather than the open market, resulting in a lower rent than Farm Business Tenancies.
The “New” Model: Farm Business Tenancies
Enter the (now not so new) Farm Business Tenancy, introduced by the Agricultural Tenancies Act 1995 to “rebalance” the agricultural lettings market. The philosophy here is flexibility and increased contractual freedom. FBTs can be granted for any length of term, from a single season to multiple decades, and when the term ends, the tenancy can be brought to an end too. There is no automatic security of tenure and no statutory succession rights.
Rent reviews under an FBT default to the open market rental value, and the parties have considerable freedom to structure matters as they wish.
For landlords, this predictability has been transformative. For tenants, however, the trade-off is clear: flexibility for the landlord often means vulnerability for the tenant.
Why It Matters
Knowing which regime applies is not merely academic. It affects everything from rent negotiations to diversification projects, from end-of-tenancy compensation to long-term succession planning.
So what next?
Watch this space! The Law Commission included a project to examine the law governing tenancies of agricultural land in its 14th Programme (announced last year). While work on the project has not yet commenced, we understand that within the project the Commission aims to address concerns such as the lack of security of tenure and the barriers to investment posed by short-term tenancies. The review will explore whether the current laws strike the right balance between tenant security, opportunities for new entrants, and landlords' interests. While it's too early to predict the outcome, there is potential for reform that might shift towards a more regulated regime, akin to the AHA, reflecting trends in other rental sectors.
