I have now completed my first month at Woodfines and what a busy month it has been. I cannot begin to describe the variety of the work we are dealing with in the Commercial Property department and no day is ever the same. I am starting to learn about agricultural land and so, I thought I would share a brief insight into agricultural tenancies.
As agricultural land is expensive and a large amount of land is required to be viable, approximately one third of all agricultural land in England and Wales is rented under agricultural tenancies. So how do you decide whether a tenancy is agricultural and what type of tenancy it is?
Step One: Is the tenancy agricultural?
To be an agricultural tenancy, the land under the tenancy must be substantially agricultural; this would include for instance, land used for growing crops or grazing animals. Interestingly, where the land is used for a purpose incidental to a non-agricultural business (such as a riding school) or for grazing horses in connection with a business whether on or off the premises, then a tenancy over this land will not be agricultural and will instead constitute a business tenancy under the Landlord and Tenant Act 1954 (for further information see Brian Hall’s previous article).
Additionally, the agricultural land must be let in the course of a trade or business, the tenant must not be an employee of the landlord and the tenant must be granted exclusive possession.
Step Two: When was the tenancy granted?
If all of the above factors are satisfied, there are two main types of tenancy governed by two different Acts of Parliament which allow tenants to use the agricultural land without being the landowner.
The tenancy will either be an agricultural holding under the Agricultural Holdings Act 1986 (AHA 1986) or a farm business tenancy under the Agricultural Tenancies Act 1995 (ATA 1995). The general rule is that if a tenancy was granted before 1st September 1995 then it will be an agricultural holding. As there is no limit to the length of time for which a tenancy can be granted, there are still numerous tenancies under the AHA 1986 in existence. Alternatively, if the tenancy was granted on or after 1st September 1995 then it will be a farm business tenancy under the ATA 1995.
To determine when the tenancy was granted and therefore what type it is, the relevant date is the date on which the tenant was entitled to go into possession of the land.
Step Three: Does the tenancy come under an exception to the rule?
Of course, as is the case with most of the law, there are exceptions to this general rule. These are stated in s.4 of the ATA 1995.
Excepted tenancies include those known as succession tenancies. These tenancies are entered into in circumstances of either the death of a sole or sole surviving tenant, or the retirement of a tenant who has a yearly tenancy. Other types of excepted tenancies include, but are not limited to, those that are an implied surrender and re-grant of an AHA tenancy or those which contain express agreement that the AHA 1986 will apply.
If the tenancy falls into one of these exceptions then, despite being granted on or after 1st September 1995, the tenancy will be a tenancy under the AHA 1986 rather than a farm business tenancy. If you think you have an excepted tenancy, then legal advice should always be sought.
Step Four: If the tenancy does not fall within a s.4 exception
If the tenancy is not excepted then in order to be a farm business tenancy it must be in oral or written form and at least some of the land must be farmed commercially throughout the length of the tenancy. Additionally, the tenancy must be either primarily or fully agricultural, or there must be a notice confirming that the use of the land was primarily or fully agricultural at the commencement of the tenancy and that it will remain to be a farm business tenancy.
It is important to ascertain what type of tenancy you have because the rights and responsibilities of the landlord and tenant differ under an agricultural holding when contrasted to a farm business tenancy.
For further information or advice on agricultural land and tenancies, please get in touch with a member of our Agriculture Commercial Property team on 01767 680251.