Farm Business Tenancies are governed by The Agricultural Tenancies Act 1995 (ATA 1995) which was introduced to replace the old-style Agricultural Holding (under the Agricultural Holdings Act 1986. Some types of tenancy can fall within ATA 1995 even if the land is not used for what might normally be considered ‘agriculture’.
The regimes applied by the two Acts are mutually excluding so it is essential to identify correctly which form of tenancy is in operation. It should also be noted that if the tenancy is a farm business tenancy cannot be one which is protected under Part II of the Landlord and Tenant Act 1954 which governs other commercial tenancies.
What conditions create an Agricultural holding?
There are a small number of cases where exceptions apply, but you will most likely have an agricultural holding if:
- Your agricultural tenancy began prior to 1 September 1995
- The land is used for agriculture for the purposes of a trade or business
- The tenancy is granted for a term of years or from year to year and this includes leases, licences to occupy
What conditions create a farm business tenancy?
- The tenancy of agricultural land must have been created on or after 01 September 1995
- It must meet the ‘Business Conditions’ and either
- The ‘Notice Conditions’ or
- The ‘Agricultural Condition’
What are the ‘Business Conditions’?
All or part of the land must at all times during the tenancy be farmed for trade or business (not necessarily an agricultural trade or business).
What are the ‘Notice Conditions’?
Before the tenancy begins, the proposed landlord and tenant must agree that the tenancy is a farm business tenancy and exchange notices stating the tenancy is to ‘be and remain’ as such and that its character will at first be primarily and wholly agricultural.
What are the ‘Agricultural Conditions’?
That the character of the tenancy is primarily or wholly agricultural throughout the term of the tenancy.
Grazing Licences
A grazing licence allow the grazier to access land and graze livestock where this would otherwise be a trespass. A grazing agreement is not capable of being a tenancy if it is made in contemplation of the use of the land only for grazing or mowing (or both) during some specified period of the year such as summer time
A short term letting of land by way of a licence for grazing does not satisfy the definition of a tenancy as set out in the Agricultural Holdings Act 1986 (s2) however this does contain an anti-avoidance provision which ensures that the letting of agricultural land for an interest less than a tenancy from year to year or the grant of any licence to occupy land for use as agricultural land is treated as a tenancy.
Key Differences
Grazing licence – no exclusive possession, on expiry of the licence the grazier becomes a trespasser.
Farm business tenancy – exclusive possession, with a specific term, at a rent, agreement to when rent reviews will take place (default of 3 years if not varied), no right to renew on expiry but a minimum of 12 months notice to be provided to end the tenancy, if the correct procedures are followed prior to the start of the tenancy there is a right to change the use of the land to a non-agricultural business.
Agricultural holding – both tenant and landlord have the right to a rent review every 3 years, right to request a new lease on expiration of the existing lease, right for a close relative to apply for a new lease if you die or retire
There are, of course, exceptions to some of the above so it important to seek advice and ensure each situation is considered in its merits.
For any advice related to agricultural property do not hesitate to contact me on caroline.knowles-ley@cognitivelaw.co.uk or call on 01243 943203.
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