BM Rural Outlook - Flipbook - Page 17
14 | Rural Outlook Issue 21
Estate Management | 15
Levelling the
(playing) field
Reforms aimed at boosting agricultural productivity,
encouraging investment and levelling the playing
field for landowners and tenants were introduced
in November 2020 under the Agriculture Act 2020.
While these changes have provided opportunities and
challenges for the sector, they are unlikely to lead to a
major shake-up in farm tenancies in the short term.
The Act introduced a number of changes
that will help new, forward-thinking
farmers enter the sector and could
tackle some of the problems that have
beset the industry since the Agricultural
Holdings Act (AHA) of 1986. However, it
avoided a number of controversial issues,
suggesting further reforms are likely.
Soil health has also
suffered, with shortterm tenants being more
concerned with immediate
profitability than with the
long-term health of the land
Around a third of the agricultural land in
this country is let under an agricultural
tenancy. The AHA, which enshrined rent
controls, security of tenure and wideranging succession rights, was seen to
be very much in favour of the tenant,
resulting in a tightening of supply as
landowners baulked at the possibility
that they could be releasing three
generations’ worth of land at below
market rent.
The Agricultural Tenancies Act (ATA) of
1995 saw the pendulum swing back the
other way.
The introduction of the far more flexible
Farm Business Tenancies (FBTs) meant
landowners could offer short-term
tenancies at a proper open market rent
and without the risks posed by security
of tenure and succession issues.
Although FBTs allowed land to be let
more easily, providing opportunities for
new entrants, they have also led to a
lack of investment, both in machinery
and infrastructure, as tenant farmers
are reluctant to spend money on land
in which they might no longer have an
interest within a few years.
Soil health has also suffered, with shortterm tenants being more concerned with
immediate profitability than with the long-
• Some AHA landlords were discouraged
from investing in their holding because
any interest payments by tenants on
that investment could be lost in the
next rent review
term health of the land, and the overall
effect of this lack of investment has been
a decline in agricultural productivity.
In response to these concerns around
productivity, DEFRA consulted the
Tenancy Reform Industry Group (TRIG),
an advisory body of experts and
stakeholders from across the industry, on
possible changes to the tenanted sector.
The key challenge facing TRIG was
striking a balance between giving
tenants security and the confidence to
invest in the land and giving landlords the
necessary reassurances and returns to
encourage them to let land on a longterm basis.
The TRIG report and recommendations
published in October 2017 highlighted
a number of barriers to productivity.
It pointed out:
• Succession provisions in the AHA
could prevent skilled farmers from
taking over a holding
• Older tenants with no successor had
limited ways of realising value from
their agreement so that they could
retire and leave the farm in the hands
of a more productive new tenant
• Some landlords were discouraged
from offering longer-term FBTs
because there was no quick way to
remedy breaches of agreements
such as non-payment of rent
• Some tenants were prevented from
accessing grant schemes that could
boost productivity and improve the
environment because of restrictive
clauses in agreements that were
often decades old.
The recommendations fed into a DEFRA
consultation in 2019 and then into the
2020 Act, which focused on ways to
support productivity improvements,
help new entrants into the industry
and smooth the way for environmental
improvements and better, more
sustainable, farming practices.
As a result, Schedule 3 of the
Agriculture Act included:
• Provisions for a tenant to go to
arbitration over disputes relating to
restrictive tenancy terms around
statutory improvements or grant
schemes – which should help
encourage diversification and innovation.
Reforms to succession rights, including:
• removing the minimum age at
which a tenant can retire and
hand over to a successor – aimed
at encouraging farmers to hand
over to a younger, perhaps more
commercially minded, generation
• removing the commercial unit test –
to encourage the handover of holdings
to established, productive farmers
• replacing the ‘suitability test’ for
succession with a more demanding
‘business competence test’ – to ensure
successors are qualified for, and
capable of, productive farming
• amending the ‘principle source of
livelihood test’ to include college
training – encouraging those who are
looking to take over a farm to obtain
the necessary skills without finding
themselves outside the rules.
Wide-ranging changes to the arbitration
procedure for rent reviews, including
changes to encourage landlords to invest in
cases where the tenant is contributing.
The Act is expected to increase
the industry’s productivity to some
extent, particularly with regard to AHA
tenancies. Perhaps the most positive
change is the proposed business
competency test, which aims to ensure
successors are competent enough to
“farm the holding commercially to high
standards of efficient production and
care for the environment”.
The overall impact of the changes is likely
to be limited, however, firstly because
a number of more controversial TRIG
proposals failed to find their way into
the Act. Most notably these included a
proposal that tenants should be allowed
to assign an AHA tenancy if they had no
successor and another that would have
removed the right to succession once
a tenant was more than five years past
retirement age.
Secondly, and crucially, these reforms do
little to solve the underlying problem that
the vast majority of FBTs are short-term
agreements, often for an initial term of
three to five years. Indeed, one of the few
TRIG proposals related to FBTs, which
would have allowed landlords to serve
shorter notices to quit for a breach of
tenancy, but only where the tenancy was
for longer than ten years, did not make it
into the Act.
Tenancy legislation is not the only cause
of the problem, of course. There are
many other reasons why landlords are
reluctant to let land on a long-term basis,
including the fact that longer tenancies
can cost more to set up as they require
registration with the Land Registry and
can risk incurring Stamp Duty Land Tax.
“Perhaps the most positive
change is the proposed
business competency test,
which aims to ensure
successors are competent
enough to “farm the
holding commercially to
high standards of efficient
production and care for
the environment.”
Overall, it is clear that more needs to be
done to achieve the aim of increasing
productivity, boosting investment and
making it advantageous for landlords to
commit to longer-term tenancies. TRIG is
set to continue its deliberations and we
may well see an Agricultural Tenancies
Bill at some point in the future.
In the meantime, tenants will need to
put more thought into their succession
plans – taking professional advice where
necessary, and landlords need to be aware
that imposing unreasonable conditions on
tenants could see them facing arbitration.
As always, advice for both prospective
tenants and landowners is to seek
professional guidance before entering
into a new agreement.
Harry Broadbent-Combe
h.broadbent-combe@
batchellermonkhouse.com