A major review of agricultural tenancies could lead to significant modernisation of the current legal framework. The Law Commission project was announced last year as part of its 14th programme of law reform. Days later, England’s first commissioner for the tenant farming sector was appointed.
No clear start date has yet been given, but what we do know is that the project – which has been widely welcomed - will look at readdressing the balance between the interests of landlords and tenants and security of tenure for agricultural tenants.
It will also look at barriers to investment and diversification; and improving opportunities and economic growth for new entrants. It will also focus on supporting sustainable farming practices.
The outcome could have a significant impact: 45% of holdings in England are wholly tenanted or mixed tenure; and a third of all agricultural land in England is tenanted.
The current position
A comprehensive overview is long overdue – the existing legal framework dates back to 1995 (for post-1995 tenancies) and is widely considered to be inflexible, stifling and unfit for modern farming and agricultural tenancies.
The present system comprises two types of tenancies in England and Wales. Tenancies that commenced on or after 1 September 1995 are Farm Business Tenancies (FBTs) and governed by the Agricultural Tenancies Act 1995. They have less security, but more flexibility than tenancies that began earlier.
Pre-1995 tenancies under the Agricultural Holdings Act 1986 have greater succession rights than under the 1995 Act.
A crucial question for the Law Commission will be: are FBTs working as effectively as intended? The 2023 Rock Review on agricultural tenancies suggested that they are not, and they should be brought into the 21st century.
What are the problems?
Several problems with the existing legal framework have been identified within the sector, the 2023 Rock Review and the Law Commission itself. Among the key issues are:
Lease terms – It’s not uncommon for tenants to misunderstanding lease terms, fail to follow termination clauses and to dispute clauses relating to rent review.
Length of tenancies – The short-term nature of many FBTs discourages tenant investment and business viability. The average length of an FBT is less than 4 years – hardly long-enough to undertake long term activities of real substance.
Tax incentives – Existing legislation and tax incentives do not (as the Rock Review pointed out) align with government policy of farmers delivering long term environmental benefits.
Diversification – Tenant farmers can be restricted from adopting sustainable practices or diversifying income streams. The Rock Review recommended extending existing AHA protections, for instance ‘no unreasonable refusal of scheme entry’ to FBT tenants.
Landlords – It can be a challenge maintaining landlord confidence and willingness to continue to let land – while also balancing tenant protections and improving the landlord-tenant relationship.
New Entrants: There are concerns at the lack of sufficient support for new entrants to the tenanted sector.
What does this mean?
The new Commissioner Alan Laidlaw said he wants to see “a flexible, functioning, well-supported sector that’s ready to meet the changing needs of the land and the people who manage it”. We would hope the Law Commission will successfully identify what changes ought to be made to achieve this vision, but the project is likely to be a lengthy process.
Once we have more information about the project, we will be ready to contribute with our experiences and those of our clients.
Now is a good time to review your own tenancy arrangements. If you have any queries or concerns regarding agricultural tenancies, it is important to take early legal advice.
How we can help
The specialist Agriculture and Rural Affairs team at mfg Solicitors advise and represent tenant farmers and agricultural landowners. Please contact Alexandra Phillips at 01905 610410 or email her at alexandra.phillips@mfgsolicitors.com.