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All change for landlord and tenant - but not yet

Author: Farming and Rural Business Community

Published: 28 Apr 2020

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Readers will recall that a consultation paper was issued last April regarding the legislation governing agricultural tenancies.

In the light of poor productivity growth in UK agriculture, which has lagged behind that of our competitors for decades, the paper called for legislation to encourage older and less efficient farmers to make way for younger and more enthusiastic successors. Proposed changes have now been added on to the Agriculture Bill and referenced in the Budget. On 18 March a summary of the consultation responses and proposed legislative changes was also published.

One of the key proposals in the consultation was that 1986 Act tenancies were to become assignable, subject to a 25-year term and a pre-emption right for the landlord. There were considerable concerns on this issue, with some feeling that such a move would lead to a reduction in the area of land available to rent, with landlords preferring to buy out the tenant and take land back in hand rather than assenting to the assignment. On behalf of the ICAW the committee drafted a response to the consultation expressing reservations on that point. Other respondees contributed in similar vein, since that suggestion has not made it to the Agriculture Bill, although it will no doubt be the subject of continuing discussion within the Tenancy Reform Industry Group.

Other changes which are to be implemented will be more generally welcomed. The Bill contains clauses encouraging retirement by removing the minimum age at which a retirement succession claim can be made and possibly removing succession rights where tenants are well past retirement age (with corresponding amendments to the rules on council farms), removes restrictive clauses which can inhibit diversification or expansion on the part of the tenant, makes changes to the rules on arbitration and, perhaps most significantly, removes the “commercial unit” test which can block a succession where a prospective tenant has a commercial unit elsewhere.

Surprisingly, one of the suggestions in the consultation which might have appeared non-contentious has also been left out of the Bill. It was expected that the rules defining which family members might be eligible for succession would be expanded to include nephews, nieces, grandchildren and cohabitees, reflecting more general changes in society in recent years. This has also been omitted from the Bill and will doubtless also be subject to further discussion within the industry in future.

Whilst the watered down reform will be disappointing for many (the TFA still believe further reform is needed) it is possible that it will maintain balance in the relationship between landlord and tenant. We had expressed concern that the original proposals might have had unintended consequences, possibly even reducing the size of the tenanted sector as landlords chose to take land back in hand, rather than risk seeing it let to an outsider for the next 25 years, even if that means buying out the tenant. Having regained possession, it also seems unlikely that a landlord would risk re-letting, not knowing what further problems a different government might make in this area, when he could simply take it back in hand or farm it with contractors (and of course enjoy the fiscal advantages of farming in hand).

David Missen
Consultant, Larking Gowen

The views expressed are the author’s and not ICAEW’s.

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