These days, horses play an important role in the farming community. In terms of tenancies of fields (with or without buildings) any use which involves horses has an effect on a landlord’s legal position. Depending on a number of factors, the precise arrangements put in place can produce widely different results. Bedfordshire commercial property solicitor Brian Hall explains.
For example, if a farmer has a field down to grass which can be used for horses and there is a demand for paddock space, what type of tenancy agreement should the landowner use? As with many legal questions, the answer is “it depends”.
The first question to ask is whether the tenant’s horse will have exclusive use or whether the field is to be shared with the landlord’s horse(s).
In this case, if there is a sharing arrangement for grazing, then it is a fairly simple arrangement and can be dealt with by a licence. If however, the tenant’s horse(s) will have exclusive use, matters become much less clear. In that case, the next question to ask is what will the horse or horses be used for? There are several alternatives and the answer will determine what type of tenancy needs to be entered into. The first three possibilities are:
a. the horse is used for agricultural business use, i.e. a working horse used for farming
b. the horse is there on a “grazing only” basis and there is no ancillary use of the land
c. the horse is to be ultimately bred for meat.
In each of these cases, one would use a Farm Business Tenancy (‘FBT’). It should be noted that landlords have to serve prior notice to confirm its status and that it will continue as an FBT during the whole term. The tenancy agreement also needs to include covenants requiring the tenant to conduct agricultural business so that any use in breach of the terms of the tenancy is ignored in judging whether or not it complies with the condition, so that the landlord keeps the arrangements within the friendlier FBT regime.
If the tenancy is to be made on the basis of a non-agricultural business use, e.g. livery, riding school, stud, etc or breeding for sport (but not as livestock for agricultural purposes), the tenancy will not be a Farm Business Tenancy, but a business tenancy under the Landlord & Tenant Act 1954 which has a different regime to a FBT. In particular, a business tenant has much greater security of tenure and careful consideration is required in terms of the length of the term and how important the need is to recover possession at the end of the contractual term.
Finally, if the land is to be on a private use basis – a typical example is a house with a large paddock where an arrangement is made with a neighbour to pay rent to keep his daughter’s pony on the land – a common law tenancy should be sufficient and the arrangements will be fairly straightforward.
Therefore, it can be seen that there may be a number of pitfalls because each type of tenancy has a different set of legal consequences. Care needs to be taken if arrangements develop or change, as such a change could affect the documentation. For example, if the arrangements start off as a grazing only arrangement, but the tenants then construct some stabling and agree with the landlord that other horses can be taken into the paddock for other people to use, the tenant then in effect starts running a livery set up. Alternatively, it may be that it is the landlord who puts stables on the land and charges an increased rent and/or livery charges. There are two possibilities here:
a. It becomes a recreational use, or
b. The use by the tenant for providing livery and stabling means that the tenancy should be converted to a business tenancy.
Our advice to anyone with grazing land or who uses their land for stabling horses belonging to others, is to make a formal arrangement ensuring that the correct form of tenancy is in place. This will help to avoid any problems in the future; in particular, to avoid a situation arising where it is not possible to recover possession or a payment to the tenant is required before possession can be obtained, it is essential that proper consideration is given to the circumstances surrounding the arrangements. It is always better to have them set out in writing, but clearly the correct form of tenancy is essential.