Over twenty years after the Agricultural Tenancies Act 1995 ('1995 Act') came into force and with it Farm Business Tenancies, many people are unclear as to the minimum notice period required under the Act to bring a Farm Business Tenancy ('FBT') to an end and the length of time for which an FBT must be granted before it can be terminated only by a minimum of 12 months notice, expiring either on a term date or on another date specified in a break clause.
An FBT granted for any period of up to 2 years will be a fixed term tenancy terminable on the term date or on whatever other terms the parties agree. There is no minimum length of notice required in order to validly exercise a break clause contained in a tenancy of 2 years or less. A break clause can therefore be incorporated which provides for short notice to be given of, say, 3 months at any time during the term or, if the parties wish to be more specific, following the grant of a planning consent or on the death of a tenant. Notice to be given by a tenant would be subject to the same considerations.
Upon the 2 year fixed term coming to an end, the FBT will expire by effluxion of time. No security is given to the tenant.
However, as soon as a tenancy is granted for a period of 2 years or more, although the tenant will still have no security once the tenancy is terminated, either the landlord or the tenant will have to serve a minimum of 12 months written notice on the other party in order to bring the tenancy to an end at the end of the fixed term tenancy. Failure to comply strictly with these requirements will mean the notice is invalid and the tenancy will continue.
Where the FBT contains a break clause allowing notice to be served, for example, after the death of the tenant or following the grant of planning consent, the notice can be given once the relevant event has taken place. As long as at least 12 months written notice is given, and any pre-conditions have been complied with, the tenancy will end on the date of expiry of the notice.
Where the FBT does not contain a break clause however, it can only be terminated at the end of or after the expiry of the fixed term by at least 12 months notice expiring on the term date or on an anniversary of the term date as applicable. This means that in some cases it could be nearly 2 years before the landlord can obtain vacant possession of its land and that will depend on when the fixed term is due to expire. Thus a landowner, obtaining planning consent in October 2016 for development of land let under a fixed term FBT of 5 years which commenced on 29 September 2013 and which did not contain a break clause, would not be able to terminate the FBT until 28 September 2018 even if 12 months notice was served in the period between October 2016 and early September 2017.
In a development scenario where most planning consents have to be implemented within 3 years from the date of grant, this timescale can lead to difficulties for the landowner.
Whilst there is nothing in the 1995 Act to prevent parties agreeing a surrender of an FBT, in order to retain flexibility a landlord is well advised either to grant short term FBTs of 2 years or less or to include one or more break clauses exercisable on 12 months written notice where a fixed term FBT is granted for a period of longer than 2 years.
This article was originally published in the December 2016 issue of Anglia Farmer.