‘Gerrof my land!’ Well, that might be easier yelled than actually achieved; it all depends why someone is on your land. Though more modest properties are generally held ‘in hand’ (that is to say, exclusively owner-occupied), as soon as you have more land than you can sensibly use, it usually makes sense to make some money out of it, by charging someone else to occupy it. It follows that if you are buying property subject to occupation by third parties, you need to be clear what the arrangement is. This article deals with agricultural tenancies only; a distinct but important class of occupation, with some occasionally, truly draconian legislation.
In order for an occupier to have an agricultural tenancy (and as with any lease), the tenant must have exclusive occupation of the land for a definite period of time. ‘Exclusive occupation’ is usually pretty obvious; a ‘definite period of time’ less so – especially as the term for agricultural tenancies is commonly expressed as; ‘one year from 25 March 2010 and then from year to year’. The theory being that the tenancy is automatically renewed for a fixed term of one year, each year, until terminated. Whether the occupation is for ‘agriculture’ is again a matter of fact: safe to say that, if your occupier appears to be growing either crops or cattle on your land, it is probably agricultural. Horses no longer qualify as agriculture, but using a field or two for them on a farm otherwise used for agriculture, is unlikely to pose a problem. Livery yards are more likely to be business leases.
If created before 1 September 1995, an agricultural tenancy will be governed by the old regime, under the Agricultural Holdings Act 1986. If created after that date, it will (most likely) be governed by the Agricultural Tenancies Act 1995 creating a Farm Business Tenancy (“FBT”). Both regimes have different rules regarding repairs, compensation and crucially, security of tenure (whether the tenant can remain in occupation even although the fixed term has ended) and termination.
1986 Act tenants have extremely strong security of tenure. They also have the right to two successions if the tenancy was created before 12 July 1984 – that is, the right to pass the tenancy on to future generations. Obviously, it is vital to know how many of these successions have been used, so you can make an educated guess at when you might get the land back! Although the landlord can serve a notice to quit on 24 to 12 month’s notice (ending on the anniversary of the commencement date) to try and get the land back, the tenant can serve a counter-notice and will usually retain possession in all but the narrowest of circumstances. However, should the tenant commit one of the ‘seven deadly sins’ (go mad or exercise bad husbandry, to name but two) the landlord can serve an incontestable notice and regain possession. If therefore, you want to get land back from a 1986 Act tenant in a hurry, your best option may be to try and buy them out. Two final points; 1986 Act tenancies are not recorded on Land Registry title registers, so you must make specific enquires of a seller regarding whether any land is subject to them. Secondly, if the tenant is a company (who tend not to die), you are officially knackered.
FBTs by contrast are considerably more benign. They reflect the increasing cross-over between agriculture and business and permit a degree of diversification by the (tenant) farmer, whilst still keeping an agricultural tenancy. They can be for a fixed length of time, or from year to year but, crucially, in either case, they can be terminated by the landlord giving 24 to 12 months’ notice, ending either on the last day or the term if a fixed term, or on the anniversary of the commencement date if from year to year … and the tenant must then leave. If you do not serve a notice at the end of a fixed term, the tenancy will continue from year to year, but can still be terminated as above. There are also no succession rights attached to them. Clearly, this is a dramatic improvement from the Landlord’s point of view.
Although 1986 Act tenancies may seem unduly harsh, they were considered fair recompense for farmers having kept us fed throughout the wars. Because they are so difficult to terminate, however, they will also depress the value of the land affected. Then again, a good tenant is a good income stream on land that might not otherwise be used. As ever, it is all about what you want to do with the land both now and in the future, as to what terms you will accept.
On a practical level, do be sure that the correct notices are served, so that the tenant knows to whom rent should be paid! This is where a good land agent is truly worth their weight in gold – well, that and telling farmers their rent is being put up, at rent review time.
About Elizabeth
Despite being one who feels the cold,
Elizabeth braved a move to Northumberland and has worked there as a
solicitor with the firm of Dickinson Dees
LLP, in the Agriculture, Farms and Estates Team, where she started life
as a trainee in 2003. As part of this specialist and nationally
renowned team, she works both for a number of larger estates and trusts
on an ongoing basis and also on one-off matters, covering the range of
rural property law, including; sales and purchases, sporting
rights,rights of way, easements and tenancies, to name a few. Outside
the office, she nearly managed to get sent to the North Pole, loves the
occasional hunt with the CVNNH and continues to try and break the 4-hour
mark for a marathon. She lives with her husband, a terrier and a very
silly basset.
She can be contacted through Dickinson Dees on 0191 279 9000
