FCo Rural Estates Newsletter Spring 2022 - Flipbook - Page 20
7–D
iversification under AHA tenancies
The agricultural sector is entering an age of rapid change. Environmental
pressures, evolving trade arrangements, new technologies and the
withdrawal of direct subsidy combine to drive that change. However, the
strict provisions of historic Agricultural Holdings Act 1986 (AHA) tenancy
agreements create constraints for tenants.
James Maxwell
The straitjacket of “agriculture”
The definition of agriculture in the Agriculture Act 1947 is quite narrow:
“Agriculture” includes horticulture, fruit growing, seed growing, dairy farming and
livestock breeding and keeping, the use of land as grazing land, meadow land, osier land,
market gardens and nursery grounds, and the use of land for woodlands where that use
is ancillary to the farming of land for other agricultural purposes, and “agricultural” shall
be construed accordingly.
AHA tenants are usually restricted to using the holding for ‘agricultural purposes only’. So
many forms of rural diversification, from the rearing of young poults, donkey sanctuaries
or keeping horses for livery, risk being in breach of the tenancy user clause. Such
breaches (or alleged breaches) can be exploited by landlords by serving Case D notices
to remedy, which place the tenant in a vulnerable position if the breach is not remedied
by the notice deadline.
A proposed diversification may also breach an alienation covenant. For example, a
farm cottage assured shorthold tenancy (AST) instead of underletting to a farm worker
employed on the holding. A change of use may breach an alterations covenant (for
example, placing new caravans on the land).
All these diversifications therefore need the landlord’s consent for which the landlord
often demands a price. Unlike for commercial leases, there is no statutory implied
qualification that consent must not be unreasonably withheld.
Diversification licences
Often landlords are willing to consent to diversification through a formal licence authorising
the change of use. A well-drafted licence will pay attention to the following issues.
•
Licence fee: reserving a licence fee (separate to the rent) is often prudent. Without
this, the diversified use may not give rise to an increased rent when the statutory rent
review formula is applied.
•
Permitted use: it is important to define this precisely. We are all familiar with examples of
‘mission creep’ where, for example, consent to the use of one caravan for an agricultural
worker evolves into the occupation of several by people employed off the holding.
•
Terminability: it is important to define this tightly and, usually, to provide the consent
for a short period to maintain flexibility.
•
Remember that the principal source of livelihood test for AHA successions now takes
into account income arising from diversified activities to which the landlord has
consented in this way.
The tenant of an AHA tenancy usually only has a year-to-year tenancy so cannot underlet
for longer than a year. Whilst the tenant might be able to let a cottage out on a periodic
AST, a five-year lease of a commercial unit in an old barn is not legally possible (this does
not stop some tenants trying). Where commercial unit underlettings arise it may be more
sensible to surrender them out of the AHA tenancy and let them back to the tenant under
a business lease for a fixed term with underletting provisions.
20
Rural Estates Newsletter
Spring 2022