Landowners and tenants must dig deep to discover important tenancy changes

Whether landlord or tenant farmer, if your tenancy is an old Agricultural Holdings Act Tenancy with succession rights you would be strongly advised to dig deep into the finer detail of the Agriculture Act 2020.

Whilst there has been much said publicly about the Bill’s new payments for farmers, little has yet been made of the way in which its contents will impact upon Agricultural Holdings Act, (AHA) tenancies. These changes have been included, following recommendations from the Tenancy Reform Industry Group.

To go into the intricacies of all the changes is not possible within this relatively short article and individual circumstances will determine the way in which a landowner/landlord or AHA tenant should react. Detailed professional advice is therefore essential.

That said, it is important to note what the major changes broadly are:

The removal of the Commercial Unit Test. Designed to assess whether a tenant had sufficient land and did not need to succeed to the tenancy, the results could be arbitrary, obscure, and discouraged economy of scale. That said, tenants had sometimes re-arranged affairs to ensure successors did not fall foul of this test. This change could present opportunity to reconsider business structures, making them more practical. Landlords likewise must be alert to the fact that previously ineligible tenants may now be able to succeed. A tenancy review should be undertaken by both parties to ensure everyone knows where they stand.

The Suitability Test. Successors must now show their ability to farm ‘commercially to high standards of efficient production and care for the environment’. This reflects the change of emphasis towards commerciality and the Government/public push to increased environmental standards, and away from the individual tenant. This seems to be a modernisation, which is in the overall interest.

The minimum age of 65 to serve a retirement notice. This has been removed making it easier for landholdings to be rearranged earlier.

Overall, landowners and landlords must recognise the need to consider the implications of the whole Act, examining the financial opportunities available for restructuring and where replacement BPS income will come from, thereby future proofing their businesses.