Agricultural Tenancy No Written Agreement

Many agricultural tenancies are not written agreements but oral agreements. It, therefore, may be very difficult to determine when they began and the terms on which they were originally agreed may be long forgotten. Under such circumstances, it is not uncommon for disputes to arise.

If, however, the tenancy was granted after 1st September 1995, it will be a Farm Business Tenancy (“FBT”) unless it falls into one of the exceptions under section 2 of the AHA 1986. The land must be at least partially commercially farmed throughout the term and must be granted as conditional on being an FBT and an agricultural tenancy. In this article, agricultural tenancy no written agreement, we take a look at the process and mechanism involved.

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For a free initial discussion on how we can advise you on an orally agreed agricultural tenancy, get in touch with us today. We will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.

Does an agricultural tenancy have to be in writing?

A Farm Business Tenancy does not need to be in writing, so it’s possible than many tenants may have one without even knowing. In the absence of a written agreement confirming that it is a Farm Business Tenancy, a tenancy could be created if the following conditions are met:

A tenancy of agricultural land which ‘begins’ after 1st September 1995 is a farm business tenancy if it satisfies:

The Business Conditions; and

The Agriculture Conditions.

For the purposes of Agricultural Tenancies Act (ATA) 1995, a tenancy ‘begins’ on the day on which the tenant is entitled to possession of the holding in accordance with the terms of the tenancy agreement.

What are the business conditions?

There are two elements to the business conditions:

• All or part of the land comprised in the tenancy must be farmed for the purposes of a trade or business. However, this need not be an agricultural trade or business, since the purpose of the ATA 1995 was to facilitate the use of agricultural assets by farm tenants for a more diverse range of commercial activities. The definition of ‘farming’ includes, but is not limited to, ‘any agricultural activity’.
• All or part of the land must have been so farmed since the beginning of the tenancy. However, it is not necessary that the same part or parts of the land should have been farmed for the duration of the tenancy. It is sufficient that there has been continuous farming activity throughout the tenancy, even though its location may have changed from time to time, perhaps according to the seasons.

What are the agriculture conditions?

The agriculture conditions provide that the character of the tenancy must be primarily or wholly agricultural, having regard to:

• The terms of the tenancy
• The use of the land comprised in the tenancy
• The nature of any commercial activities on that land
• Any other relevant circumstances.

Unlike the business conditions, this condition does not have to be satisfied throughout the duration of the tenancy. It only needs to be satisfied at the date when a challenge is raised.

Definition of an Agricultural business

The 1995 Act defines agriculture as including “horticulture, fruit growing, seed growing, dairy farming and livestock breeding and keeping, the use of land as grazing land, meadowland, 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”. Livestock includes “any creature kept for the production of food, wool, skins or fur or for the purpose of its use in the farming of land”.

What happens if a farm business tenancy agreement is not used for an agricultural business?

A lease can remain within the provisions of the ATA 1995 even if the tenant plans to change the use to non-agricultural business after the lease is granted, provided that the correct notices were exchanged before it started. This allows tenants to diversify away from farming.

The Act does not make clear how far diversification may go. In many instances, it will be a matter of opinion as to whether the land continues to be farmed. However, it has become clear that peripheral or additional business operations will not prevent a tenancy from being an FBT.  Any business (or other) activity than farming is likely to require the consent of the landlord in any event. If the tenant does intend to diversify, then the landlord’s permission will have to be sought.

What happens if the tenancy ceases to qualify?

The tenancy will become regulated by the Landlord and Tenant Act 1954 (LTA 1954). The main possible areas of difficulty will be those that the agreement has not covered because it was never intended to be a lease under the 1954 Act.

Farm Business Tenancy rent reviews

Landlords and tenants can negotiate their own rent levels and decide whether or not they want to have rent reviews. Either the landlord or tenant can demand a rent review every 3 years by law. However, landlords and tenants can agree on how often a rent review should take place – this agreement replaces the law. For example, you can agree on a rent review every 4 years. You must not preclude a reduction in rent in your rent review agreements.

Farm Business Tenancy compensation

As a farm business tenant, you’re entitled to compensation at the end of a tenancy for:

• physical improvements you’ve made to a holding (provided the landlord has given consent to the improvements)
• changes that increase the value of the holding (provided they are left behind when the tenant leaves)

You can agree in writing an upper limit on the amount of compensation, usually equal to the tenant’s cost in making the improvements.

What happens if there is a dispute?

Either side may apply the arbitration provisions of the Act on virtually any dispute under the agreement. Arbitration is time-consuming and expensive, but unfortunately, an application to the court is likely to be referred to arbitration as a matter of routine. If possible, the most efficient way to comply with the Act is to agree to the identity of an arbitrator in advance. Mediation may take place by agreement, but either party may still insist on arbitration. Note that the arbitrator must be qualified so that he is able to give a decision which is binding at law.

How We Can Help

Our team is well versed in dealing with all the various aspects of agricultural tenancies with or without a written agreement, and we are here to help in any way we can.

We will explain clearly the legal issues and provide open, honest and professional advice.

How to Contact our Agricultural Law Solicitors

It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of reducing risk, saving you money and ensuring you achieve a positive outcome.

To speak to our Agricultural Law solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

 

Authored by Ben Posted in News Tagged as