Agricultural tenants’ rights differ considerably depending on the type of agreement and the legislation that governs the tenancy. There are two types of agricultural tenancies; the new style subject to the Agricultural Tenancies Act 1995 (more commonly referred to as Farm Business Tenancy (FBT)) and the old style subject to the Agricultural Holding Act 1986 (commonly referred to AHA Tenancies).
The reason for providing the key points is to allow tenants to understand the differences between the two, especially given the turbulent times in agriculture, understanding your tenants’ rights allows you to plan. For example, there have been several Environment Agency (EA) inspections throughout Cheshire, whose responsibility is it to pay for an extension to the lagoon or a drain around the silage clamp? We are hearing more about carbon sequestration, natural capital and bio diversity net gain, who do these belong to, the Landlord or the Tenant?
Below is a summary of the differences between a FBT & AHA:
| FBT | AHA | |
|---|---|---|
RENT REVIEW BASIS |
Market rent or RPI (it can be agreed between the parties) |
Productive & related earning capacity |
REPAIRS |
To be agreed between the parties |
Model Clauses |
DURATION |
To be agreed between parties |
Lifetime of Tenant |
SUCCESSION RIGHTS |
None |
Yes – if let prior to 8th July 1984 and meet certain criteria |
However as mentioned above the purpose of this document is in relation to tenancy issues in 2023.
Slurry and silage infrastructure
Under the Silage, Slurry and Agricultural Fuel Oil (SSAFO) Regulations it is the responsibility of the farmer, land manager or tenant farmer (unless you can prove it is the Landlords stipulation) to adhere the rules and regulations for storing slurry and silage.
The new grants for slurry storage under the farming investment fund meant that any new store would require at least 6 months’ worth of storage opposed to 5 months and by 2027 all slurry lagoons will require a cover (how this will work practically, no one really knows). These changes will come at significant cost and as soon as you build a new store or make substantial changes you will have to adhere to new rules opposed to if your infrastructure was built prior to 1991. So the question is who is responsible the Landlord or Tenant for such works?
No doubt both parties would prefer for the other one to be paying for any large investment in infrastructure and if it can be agreed to mutual benefit, then even better. The landlord would not be able to make a claim to the RPA under the slurry storage grant but could contribute towards the cost.
In relation to all the examples detailed it depends on the wording of the agreement and who is responsible for what.
FBT
As most agreements were produced since 1995 and in most circumstances are weighted in the Landlords favour, it is likely to be the Tenants responsibility depending on the wording. However this could have an implication when it comes to reviewing the rent. A fully equipped dairy farm would demand a high rent, but if the infrastructure is not sufficient and the Tenant undertakes the work as an improvement, this could be a bargaining chip when reviewing the rent.
AHA
In most cases AHA tenancies refer to the model clauses in relation to the repairing obligations, originally written in 1973 and then updated in 2015. The 1973 regulations are silent on slurry lagoons but state that “walls of open and covered yards, however constructed” (in case of silage pits walls) are to be repaired and replaced by the Landlord. The 2015 regulations also state the Landlord is responsible for walls and to repair or replace “slurry, silage and other effluent systems excluding anaerobic digesters (excluding removeable covers and tops).”
The silver lining for any AHA tenancy is that under section 11 of the Act, the Landlord has a duty to provide fixed equipment necessary to comply with statutory requirements. i.e. If you have an EA inspection and the lagoon is not big enough, it would be worth contacting your Landlord. However, if you have additional land to support the business and increased cow numbers off than back of this, this Landlord may only contribute to the infrastructure requirement of the main holding.
Natural Capital, Carbon sequestration & Biodiversity Net Gain
All items are similar regarding how they would be treated in relation to tenancy matters, but very different in relation to practical terms. It is worth noting that most tenancy agreements do not allow the planting of woodland without the consent of the Landlord and the land must be farmed in a good agricultural condition opposed to weeds growing everywhere.
Natural Capital is defined by DEFRA as the resources around us in terms of water, air, trees, soil, energy, wood and biodiversity. In simple terms environmental schemes moving forward will require farmers to enhance and provide access to them whilst producing food in a sustainable manner or “public money for public goods”. Practical examples could be footpaths, views or access to water ways etc. The question is whose rights do these belong to and who can benefit from them financially?
Bio-diversity net gain in this context is whereby developers look to secure land to purchase or acquire on a long lease to offset the loss of biodiversity from their development. Now any housing development must provide a biodiversity net gain of 10% (either on the site) or in this circumstance off site. If the landforms part of a tenancy can the Landlord just allow the land to be used for this purpose or does the tenant have the right to enter into an agreement and not sublet?
Carbon sequestration (or carbon farming) is whereby farmers use their land for soil and plants to absorb significant amounts of carbon from the atmosphere. Agreements are being offered to farmers for long term agreements but again who has the right to enter into an agreement to reap the benefit, and who could it come back to bite if the farmer is then obligated as part of his contract with a supplier to offset their carbon?
AHA
Under all AHA agreements, the tenancy must continue as “agricultural” for the duration of the agreement and therefore any change could result in a breach. There are also certain stipulations of not assigning or subletting. If the Landlord was to obtain planning permission for a change of use from agriculture a notice to quit could be served on part or whole depending on the agreement. The tenant is obligated to comply with the rules of good husbandry as part of the management of the holding. On the face of it those under an AHA may struggle to not breach their agreement.
There is also the issue of duration. If an agreement could be entered into with a 3rd party, AHA agreements roll on year to year basis and if the Tenant does not meet the terms of the lease, what could be the come back and how much is at stake financially for breaching this?
FBT
In most FBT’s the Landlord reserves the right to remove 10% of the holding per annum (sometimes for any purpose or on the granting of planning permission), this enables them to obtain the land back for what ever purpose and enter into schemes or agreements.
In more recent years the agreements will clearly detail that all rights of biodiversity net gain or carbon sequestration belong to the Landlord and any land on the holding can be used for this purpose. This is clearly an issue if a farm is then used for these and becomes unproductive. It is advisable to limit the amount of land to be taken for this change of use or to ensure it does not impact the productivity can provide some comfort.
In most cases when claiming subsidies, it is the occupier of the land that has the right to make a claim, however minerals belong to the Landlord but some say carbon is vegetation. Whatever the potential other usage or income maybe, will depend on the wording of the agreement and when silent will depend on the terms of the Act.
There are a number of changes proposed in the farming sector and all parties will want to maximise the income whilst not impacting the productivity of tenanted holdings. If you are concerned about your tenancy rights always refer to the agreement or seek professional advice.
We often find that in the finer detail of agreements or tenancy Acts can have huge benefits when it comes to tenancy matters.
Please contact us if you would like to discuss opportunities mentioned above or are concerned that your Landlord is not aware of their obligations.