Want a Successful Succession? Plan Ahead

Many farms are run by several generations of one family and by several members of the family, so it is important to be aware of the complexities around succession, when someone retires or passes away.

Agricultural Holdings Act 1986 tenancies are common among farm tenants, and they provide quite a lot of protection to the tenant. This type of tenancy can allow for two successions; three generations of a family will, if they meet specific criteria, hold and run the farm, one after the other.

In order to succeed someone on their retirement or death, you would need to satisfy a series of suitability and eligibility tests, after making your application, on time, to the Agricultural Land Tribunal.

The suitability tests deal with your agricultural experience, age, fitness and finances.

The eligibility tests are trickier. Firstly, you must be the right type of close relative of the tenant.

Secondly, you must not have secure rights to another commercial unit of agricultural land. If you do, a Tribunal-appointed surveyor will decide if what you have amounts to a separate commercial unit. If so, your application could be in trouble.

Lastly, you must meet the livelihood test; you will need to show that you have earned your only or main source of livelihood from agricultural work on the farm for at least 5 of the previous 7 years. The percentage of income that must come from on-farm work varies according to the circumstances of your application.

Income derived from other sources can catch you out; if it comes from work that is off farm it can count against you. So if, like many farms, you diversify, an if this business provides more income than the farm, you could struggle.

Be aware you have just 3 months to make an application to succeed to the tenancy after your father passes away or retires. If you miss the deadline, you lose protection and the landlord will be entitled to serve notice to quit and recover possession of the farm.

This is a highly technical area and it is vital that you seek early professional advice so you run your farm business with an eye on your ability to satisfy this and the other tests when the time comes.

For further advice, please contact our specialist property solicitors in:

• Swansea: 01792 773773
• Cardiff: 02920 225472
• Carmarthen: 01267 234022
• Caerphilly: 02920 860628
• Cowbridge: 01446 771742
• Haverfordwest: 01437 764723
• Fishguard: 01348 873671

Welsh is spoken in JCP Solicitors’ Rural Practice Team.