Agricultural Tenancies

Under UK law there are two types of agricultural tenancies. They are:

Agricultural tenancies which are subject to the Agricultural Holdings Act 1986;
Agricultural tenancies which are subject to the Agricultural Tenancies Act 1995.

Farm business tenancies were introduced with effect from 1 September 1995. They mark a radical departure from the regime which applies where a tenancy of an agricultural holding is protected under the Agricultural Holdings Act 1986 (AHA 1986). Whereas AHA 1986 was largely prescriptive as to the terms of an agricultural tenancy, Agricultural Tenancies Act 1995 (ATA 1995) by and large allows the landlord and the tenant to agree whatever terms they wish on almost all matters, save that there are mandatory provisions in relation to rent, compensation and removal of tenant's fixtures.

Agricultural tenancies made prior to 1^st September 1985

Any agricultural tenancies entered into prior to 1^st September 1995 are subject to the Agricultural Holdings Act 1986.

Under this act:

landlords and tenants can ask for a rent review every three years
succession rights apply to tenancies created before 12^th July 1984
compensation is to be paid to tenants for improvements made, (for example the erecting of buildings, silos or roads) and any “tenant right” (eg the value of crops when the tenancy ends)
landlords can claim compensation for damage or disrepair to the property

Agricultural tenancies made after 1^st September 1995

Tenancies signed after 1st September 1995 are subject to the Agricultural Tenancies Act 1995. These are commonly known as “Farm Business Tenancies”.

To be classified as a ‘farm business tenancy’, either the landlord or tenant or both must:

show that at least some of the land is farmed during the tenancy;
demonstrate that a notice had been signed by bother parties stating the tenancy would remain a Farm Business Tenancy throughout the period of the tenancy; and
the tenancy must be mostly agricultural in its nature

Both the landlord and tenant can negotiate their own terms and timings with regard to rent reviews. To receive compensation for improvements the landlords consent must have been gained before the improvements were made. Compensation can be paid for improvements made by the tenant which increase the property’s value.

As long as a minimum notice period of twelve months is given, landlords and tenants can negotiate their own notice periods for quitting the tenancy. The Act says nothing about repair, maintenance or insurance, so the parties are free to agree whatever terms they wish.

Due to the business nature of agricultural tenancies, it is imperative that bother landlords and tenants seek expert legal advice before entering into one.