Rural Tenancies and Holdings
Modern farms and estates are dynamic and diverse businesses contains agricultural, residential and commercial land, encompassing a multitude of different overlapped tenancies, holdings and occupancy rights. We have the expertise to help you navigate this confusing legal framework when contentious issues arise. Where there is an issue with a tenant or occupier, often the first thing that needs to be determined before you can decide what to do, is to work out what sort of tenancy the tenant is occupying under. These are the main types of tenancy which you are likely to encounter:
Farm Business Tenancies
A farm business tenancy is a tenancy of agricultural land regulated by the Agricultural Tenancies Act 1995. Most agricultural tenancies granted after 1 September 1995 will be farm business tenancies. An agricultural tenancies granted before that date will be an agricultural holding (discussed below) and will have a greater level of protection.
A tenant under a farm business tenancy has no statutory renewal rights (unlike a business tenant) and no security of tenure other than some restrictions on termination notices.
The parties to a farm business tenancy are free to agree their own terms, but are constrained as to how they deal with rent reviews, compensation for improvements and fixtures.
We advise rural landlords and tenants on:
- Whether they are occupying under a FBT (as opposed to some other form of tenancy – the grazing of horses for example may not be sufficient for a FBT to arise).
- Rent review
- Compensation for improvement and fixtures
- The termination of FBTs
A grazing licence allows the grazier access to the owner’s land for the purpose of grazing their animals. Grazing licences are used by farmers and other landowners when they want to let land for a short period of time, perhaps just during the grazing season (April to October). Such a licence is useful if the land owner wants to keep the grass cropped and at the same time receive income from the land. It is also useful for a grazier who needs extra pasture for their animals during the spring and summer. There is however a danger of accidentally creating a FBT. Whether an arrangement is truly a licence, or is in fact a tenancy, depends on whether it satisfied the legal requirements for a tenancy or licence, which usually centres on whether exclusive possession is being granted. Avoiding this is important to avoid an intended grazier claiming to have a farm business tenancy and because there can be a tax advantage to landowners if the arrangement is truly a grazing licence.
An agricultural tenancy created before 1 September 1995 will be an ‘agricultural holding’ and will be governed by the Agricultural Holdings Act 1986. Many of these are still in existence. A agricultural holdings tenant has very different rights and responsibilities to a farm business tenant. The tenant of an agricultural holding has far greater protection. The parties have little freedom to choose their own contract terms and the tenant has security of tenure making it difficult for the landlord to obtain possession. Agricultural holdings benefit for succession rights meaning that they can also be inherited by close relatives of a deceased or retired tenant.
Whilst most agricultural tenancy agreements prohibit assignment, agricultural holdings are often created by a handshake and a conversation, or the written agreements have been lost. Unless the landlord can evidence a covenant prohibiting assignment, the tenancy will be freely assignable. If the tenant assigns it to a company, the tenancy could continue indefinitely as a company cannot die or retire.
We advise both landlords and tenants on:
- Whether the tenancy is a FBT, agricultural holding or something else
- Succession rights
- Other rights and obligations under the 1986 Act
- Preventing assignment
- Disputes as to the terms of the tenancy
Modern farms and estates often include residential property and the same issues will apply as to urban properties, but also with some additional issues unique to rural life. We are able to advise on contentious issues arising from all forms of residential tenancies and occupation arrangements including, not just assured shorthold tenancies, but also Rent Act tenancies, holiday lets, life tenancies and situations where there is no documentation whatsoever to guide us as to the legal basis of the tenant’s occupancy.
Most estates and farms are run as a business and often include rural business parks, as well a wide range of commercial operations, such as retail outlets, shooting clubs, hotels, pubs and paint-balling. Owners encounter the same property management issues as their urban counterparts, but with a few extra issues unique to the countryside. We are able to advise on a comprehensive range of commercial landlord and tenant issues including forfeiture, renewal under the Landlord & Tenant Act 1954, break notices, breach of covenant and dilapidations.
Mixed use Tenancies
Unless the demise of a tenancy is very restricted , on a farm of estate there is an increased likelihood of mixed use tenancies arising. These can bring into play complex overlapping of residential, commercial and agricultural property law. This requires specialist and bespoke advice to interpret and in order to understand the practical options available where there is a problem.
Licences to occupy
Licences to occupy are very short term occupancy agreements based on the premise that the occupier will not be given exclusive possession, thereby avoiding the occupier acquiring security of tenure. However the labelling of an agreement as a ‘licence’ is not conclusive and if the agreement is in fact a tenancy in all but name, the courts will declare it as such. Particular issues can arise where an occupier stays beyond the licence term or argues that his licence is in fact a tenancy with security of tenure. We can help interpret and defuse these situations.